Who else has been wondering how the war on drugs has been going? Are we still winning? I could have sworn we were mere weeks away from finally eradicating the last of those damned cartels, confiscating their labs and ushering a new epoch of peace and sunshine for all.

Time for a Google search. From ABC news, this: “Mexican Drug Cartels Now Make Money Exporting Ore.“

Well … that’s great.

“Even back in 2010, the La Familia cartel would take ore from areas that were under concession to private mining companies, sometimes with the aid or complicity of local farmers and land owners, then sell the ore to processors, distributors and even, apparently, foreign firms,” ABC reported. Mexico estimates the cartels shipped out over 1 million tons of ore in 2010.

Yahoo News said the cartels are “ready to defend their mines at gunpoint.”

The drug business is going so well they are expanding into other businesses. I’m looking forward to the day that we see cartel internet start-ups, web apps and fast food chain restaurants. Perhaps we’ll finally see a Sinaloa IPO next year.

But why haven’t the governments beaten the cartels? Surely all the drug seizures I saw on Border Wars have put a dent in their business? “The average drug trafficking organization … could afford to lose 90% of its profit and still be profitable,” says Robert Stutman, a former DEA Agent. In the U.S., serious and casual drug users combined spend about $60 billion per year obtaining their fix.

The United Nations estimates that current drug interdiction efforts intercept approximately 13 percent of heroin shipments and 28 to 40 percent of cocaine shipments. The U.S. military says it intercepts about 33 percent of the drug shipments it has been able to track. No word on what it isn’t tracking.

Despite the billions of dollars spent to stop them, cartels are seeing windfall porfits. The U.S. drug marketplace has grown so competitive and efficient that cocaine is 74 percent cheaper than it was thirty years ago, according to the New York Times. All the while the expense for waging the drug war has increased exponentially in the U.S. while addiction and usage rates remain constant.

We know that prohibition of a good for which there is market demand can produce a black-market economy. But it seems under the right circumstances it can even create a parallel government.

The Zetas, one of the most powerful and brutal Mexican cartels, have figured this out. They have become so powerfull that one Mexican lawmaker has classified them as a “parallel government” in a 2009 interview with The Washington Post. “They practically own vast stretches of the pipelines, from the highway to the very door of the oil companies,” he said. In addition to their substantial drug and ore profits, the Zetas were allegedly responsible for the theft of around $1 billion worth of crude oil in 2009, much of which was smuggled to China and the United States.

According to the WaPo article:

“The Zetas earn millions of dollars by ‘taxing’ the oil pipelines — organizing the theft themselves or taking a cut from anyone who does the stealing, according to Mexican authorities.” Pemex, the largest oil company in Mexico, lost over $700 million in 2009 due to theft.

Sure sounds like a government. Of course, Mexico’s official government is panicking; the total tax income from Pemex accounts for 40 percent of federal revenues.

The Zetas of course are much more barbaric than a real government. A real elected government, for example, would probably never feed people to lions as a form of punishment, as Zeta leader Heriberto Lacanzo did. But if the scales were ever to tip against the elected Mexican government that could change quickly. The government has already been accused of atrocities like rape, murder, torture and kidnappings of allegedly innocent civilians in the course of the War on Drugs. If your government starts stockpiling ammunition or lions, watch out.

As the Drug War rages in Mexico, the lines between legitimate government and authoritarian cartel may become increasingly blurred as both sides ramp up militarization to assert control over disputed territory. Black markets create empires, empowering both the state and its adversary, while ordinary people are caught in the middle. Voters and elected officials should remember that the next time they decide to ban drugs, guns, abortions, pornography, new technologies or anything else people will still want no matter what the law says.