State of War

Mexico's hillbilly drug smugglers have morphed into a raging insurgency. Violence claimed more lives there last year alone than all the Americans killed in the war in Iraq. And there's no end in sight.

What I remember most about my return to Mexico last year are the narcomantas. At least that's what everyone called them: "drug banners." Perhaps a dozen feet long and several feet high, they were hung in parks and plazas around Monterrey. Their messages were hand-painted in black block letters. They all said virtually the same thing, even misspelling the same name in the same way. Similar banners appeared in eight other Mexican cities that day -- Aug. 26, 2008.

The banners were likely the work of the Gulf drug cartel, one of the biggest drug gangs in Mexico. Its rival from the Pacific Coast, the Sinaloa cartel, had moved into Gulf turf near Texas, and now the groups were fighting a propaganda war as well as an escalating gun battle. One banner accused the purported leader of the Sinaloa cartel, Joaquín "El Chapo" Guzmán Loera, of being protected by Mexican President Felipe Calderón and the army. After some time, the city's police showed up politely to take the banners down.

I'd recently lived in Mexico for a decade, but I'd never seen anything like this. I left in 2004 -- as it turned out, just a year before Mexico's long-running trouble with drug gangs took a dark new turn for the worse. Monterrey was the safest region in the country when I lived there, thanks to its robust economy and the sturdy social control of an industrial elite. The narcobanners were a chilling reminder of how openly and brazenly the drug gangs now operate in Mexico, and how little they fear the police and government.

That week in Monterrey, newspapers reported, Mexico clocked 167 drug-related murders. When I lived there, they didn't have to measure murder by the week. There were only about a thousand drug-related killings annually. The Mexico I returned to in 2008 would end that year with a body count of more than 5,300 dead. That's almost double the death toll from the year before -- and more than all the U.S. troops killed in Iraq since that war began.

But it wasn't just the amount of killing that shocked me. When I lived in Mexico, the occasional gang member would turn up executed, maybe with duct-taped hands, rolled in a carpet, and dropped in an alley. But Mexico's newspapers itemized a different kind of slaughter last August: Twenty-four of the week's 167 dead were cops, 21 were decapitated, and 30 showed signs of torture. Campesinos found a pile of 12 more headless bodies in the Yucatán. Four more decapitated corpses were found in Tijuana, the same city where barrels of acid containing human remains were later placed in front of a seafood restaurant. A couple of weeks later, someone threw two hand grenades into an Independence Day celebration in Morelia, killing eight and injuring dozens more. And at any time, you could find YouTube videos of Mexican gangs executing their rivals -- an eerie reminder of, and possibly a lesson learned from, al Qaeda in Iraq.

Then there are the guns. When I lived in Mexico, its cartels were content with assault rifles and large-caliber pistols, mostly bought at American gun shops. Now, Mexican authorities are finding arsenals that would have been incomprehensible in the Mexico I knew. The former U.S. drug czar, Gen. Barry McCaffrey, was in Mexico not long ago, and this is what he found:

The outgunned Mexican law enforcement authorities face armed criminal attacks from platoon-sized units employing night vision goggles, electronic intercept collection, encrypted communications, fairly sophisticated information operations, sea-going submersibles, helicopters and modern transport aviation, automatic weapons, RPG's, Anti-Tank 66 mm rockets, mines and booby traps, heavy machine guns, 50 [caliber] sniper rifles, massive use of military hand grenades, and the most modern models of 40mm grenade machine guns.

These are the weapons the drug gangs are now turning against the Mexican government as Calderón escalates the war against the cartels.

Mexico's surge in gang violence has been accompanied by a similar spike in kidnapping. This old problem, once confined to certain unstable regions, is now a nationwide crisis. While I was in Monterrey, the supervisor of the city's office of the AFI -- Mexico's FBI -- was charged with running a kidnapping ring. The son of a Mexico City sporting-goods magnate was recently kidnapped and killed. Newspapers reported that women in San Pedro, once one of Mexico's safest cities, now take classes in surviving abductions.

All of this is taking a toll on Mexicans who had been insulated from the country's drug violence. Elites are retreating to bunkered lives behind video cameras and security gates. Others are fleeing for places like San Antonio and McAllen, Texas. Among them is the president of Mexico's prominent Grupo Reforma chain of newspapers. My week in Mexico last August ended with countrywide marches of people dressed in white, holding candles and demanding an end to the violence.

In Monterrey, most were from Mexico's middle and upper classes, people who view protests as the province of workers and radicals. In all my time in the country, I had seen such people turn to protest only once: during the 1994 peso crisis, when Mexico was on the brink of economic collapse.

I've traveled through most of Mexico's 31 states. I've written two books about the country. And yet I now struggle to recognize the place. Mexico is wracked by a criminal-capitalist insurgency. It is fighting for its life. And most Americans seem to have no idea what's happening right next door.

What happened in the four years I was gone? Fueled by American demand, dope was always there, of course. So was a surplus of weapons and gangs to use them. When I lived in Mexico, drug violence was a story, but not the story it is today.

I remember grander concerns back then: Mexico peacefully shedding 70 years of one-party authoritarian rule and dreaming of becoming a stable and prosperous democracy. But Mexico's one-party state, led by the Institutional Revolutionary Party (PRI), gave way to the control of a few parties, which were as inert and unaccountable as their authoritarian forebears. They bickered about minutiae in congress, and the hoped-for reforms didn't come. The PRI’s centralized political control was gone, but nothing effectively took its place. This vacuum unleashed new opportunities for criminality, and Mexico's institutions weren’t up to the new threats that emerged.

Most of the cartels that now battle for drug routes into the United States emerged in the Pacific Coast state of Sinaloa -- a mid-sized Mexican state with an outsized drug problem. Mexican drug smuggling began primarily among rural and mountain people from lawless villages who are known to be especially bronco -- wild. Marijuana and opium poppies grow easily in Sinaloa's hills. A narcoculture has evolved there, venerating smugglers and their swaggering hillbilly style, called buchon. Hicks became heroes. They moved into wealthy neighborhoods and fired guns in the air at parties. Bands sing their exploits; college kids know how they died. Sinaloa is that rare place where townies emulate hayseeds, and youths yearn to join their ranks.

These renegades have grown into a national security threat since I've been away from Mexico. One reason is that regional drug markets have changed a lot in the past few years. The Colombian government grew more successful against narcotraffickers who had taken over large parts of Colombia. Enforcement in the Caribbean also improved. Once-settled Mexican smuggling routes suddenly became the best way to move dope through Latin America and into the United States. Those routes were now up for grabs, and much more was at stake. Old gang enmities exploded. Mexico's cartels could not let their rivals take over new drug routes for fear they'd grow stronger. The gangs began vying for turf in an increasingly savage war with a constantly shifting front: Acapulco, Monterrey, Tijuana, Juárez, Nogales, and of course Sinaloa.

With war raging between Mexico's narcogangs, and with plenty of cash available from drug sales to Americans -- $25 billion a year, by one reliable estimate -- cartel gunmen began to grow discontented with the limited selection of arms found in the thousands of gun stores along the southern U.S. border. Instead, they have sought out -- and acquired -- the world's fiercest weaponry. Today, hillbilly pistoleros are showing signs of becoming modern paramilitaries.

Mexico's gangs had the means and motive to create upheaval, and in Mexico's failure to reform into a modern state, especially at local levels, the cartels found their opportunity. Mexico has traditionally starved its cities. They have weak taxing power. Their mayors can’t be reelected. Constant turnover breeds incompetence, improvisation, and corruption. Local cops are poorly paid, trained, and equipped. They have to ration bullets and gas and are easily given to bribery. Their morale stinks. So what should be the first line of defense against criminal gangs is instead anemic and easily compromised. Mexico has been left handicapped, and gangs that would have been stomped out locally in a more effective state have been able to grow into a powerful force that now attacks the Mexican state itself.

The first sign of trouble was Nuevo Laredo in late 2005. The Gulf and Sinaloa cartels staged street shootouts and midnight assassinations for months in this border city, which the Gulf cartel had controlled. One police chief lasted only hours from his swearing-in to his assassination. The state and municipal police took sides in the cartel fight. Newspapers had to stop reporting the news for fear of retaliation.

Enter Calderón, who took office in late 2006, determined to address the growing war among Mexico's cartels. He broke with old half-measures of cargo takedowns that looked good but did little to damage the cartels. Calderón wanted arrests. He also began extraditing to the United States the capos and their lieutenants -- more than 90 so far -- who were already in custody and wanted up north.

But when Calderón looked across Mexico for allies to help him escalate the war on the narcogangs, he found few local governments and police forces that hadn’t been starved to dysfunction. So he has had to rely on the only tool up to the task: Mexico's military. Calderón has also turned to the United States for help. The Merida Initiative, launched in April 2008, is a 10-fold increase in U.S. security assistance to a proposed $1.4 billion over several years, supplying Mexican forces with high-end equipment from helicopters to surveillance technology.

Fighting criminal gangs with a national military is an imperfect solution, but Calderón has scored some victories. He has captured or killed key gang leaders. Weapons seizures have been massive. Last November, the Mexican Army seized a house in Reynosa that contained the largest weapons cache ever found in the country, including more than 540 rifles, 500,000 rounds of ammunition, and 165 grenades.

The cartels have responded to Calderón's war with the kind of buchon savagery that so struck me upon returning to Mexico. In addition to fighting each other, the cartels are now increasingly fighting the Mexican state as well, and the killing shows no sign of slowing. The Mexican Army is outgunned, even with U.S. support. Calderón's purges of hundreds of public officials for corruption, cops among them, may look impressive, but they accomplish little. The problem isn't individuals; it's systemic. Until cities have the power and funding to provide strong and well-paid local police, Mexico's criminal gangs will remain a national threat, not a regional nuisance.

There's little reason to believe 2009 won't look a lot like 2008. And there's reason to fear it will be worse. The financial crisis is hitting Mexico hard. How long it can hang on is unclear. The momentum still favors the gangs, meaning the bloodshed will likely subside only when they tire of warring.

Americans watch this upheaval with curious detachment. One warning sign is Phoenix. This city has replaced Miami as the prime gateway for illegal drugs entering the United States. Cartel chaos in Mexico is pushing bad elements north along with the dope -- enforcers without work and footloose to freelance.

Phoenix -- the snowbird getaway, the land of yellow cardigans and emerald fairways -- is now awash in kidnappings -- 366 in 2008 alone, up from 96 a decade ago. Most committing these crimes hail from Sinaloa, several hundred miles south. In one alarming incident, a gang of Mexican nationals, dressed in Phoenix police uniforms and using high-powered weapons and military tactics, stormed a drug dealer’s house in a barrage of gunfire, killing him and taking his dope.

Phoenix is hanging tough -- for now. Its capable local police, so desperately lacking in Mexico, are managing to quarantine the problem. No one unconnected to smuggling has been abducted, police say, and no kidnapping victim has been lost in a case they have been asked to investigate. As a result, most Phoenix residents live blithely unaware that hundreds of people in the smuggling underworld are kidnapped in their midst every year.

Still, violence and criminality are moving north at a rapid pace, and Americans would be foolhardy to imagine capable police departments like Phoenix's going for long without cracking under the pressure. As one Phoenix police officer told me, "Our fear is, we're going to meet our match."


Reversal of Fortune

Vladimir Putin's social contract has been premised on an authoritarian state delivering rising incomes and resurgent power. But the economic crisis is unraveling all that. And what comes next in Russia might be even worse.

For the Western world, 1929 marked the start of the Great Depression. For the Soviet Union, it was a year that Joseph Stalin called the "Great Break" -- the ending of a short spell of semiprivate economic policy and the beginning of the deadly period of forced collectivization and industrialization. Often mistranslated as the "Great Leap Forward," "Great Break" is truer to Stalin's intentions and much more befitting their tragic consequences. The events he set in motion 80 years ago broke millions of lives and changed human values and instincts in Russia. It was, arguably, the most consequential year in Russia's 20th-century history. Now, 80 years later, and for much different reasons, 2009 could shape up to be a year of similarly far-reaching consequences for Russia's 21st century.

Today's Russia is not the Soviet Union, and Prime Minister Vladimir Putin is not Joseph Stalin. But just as historians view 1929 as the end of the revolutionary period of Soviet history, scholars will (and already do) define Putin's rule as a restoration that followed a revolution. Restoration -- of lost geopolitical influence, of Soviet symbols, of fear, of even Stalin's reputation -- has been the main narrative of the past decade. But as history shows, periods of restoration do not restore the old order; they create new threats. This is what Russia is today -- a new, much more nationalistic and aggressive country that bears as much (or as little) resemblance to the Soviet Union as it does to the free and colorful, though poor and chaotic, Russia of the 1990s.

The idea of a resurgent Russia has been at the heart of Putin's social contract, generating alarm abroad but admiration at home. Russians came to see themselves as winning again, first in international song contests and prestigious soccer matches, and then in a war last summer with their tiny Caucasian neighbor, Georgia. That conflict was presented and perceived as a victory against the United States, which has in recent years backed Georgia and supplied it with arms. It was the epitome of Russia's resurgence, its return at last to being a great power that could stand its ground and that was willing and able to confront the West militarily.

Russia's ambitions were backed by rising oil prices and swelling coffers. Money kept flowing in no matter what the Kremlin said or did. Local businesses and international corporations were scared into total obedience. Dmitry Medvedev, Putin's protégé and successor as president, even began lecturing the world on how to reorganize the global financial system. He dreamed Russia would become a new financial capital, and the ruble a new reserve currency. At last, Russia was feared by the West, which in Putin's book is equivalent to respect.

The financial crisis that erupted on Wall Street in 2008 initially heightened Russia's sense of resurgence. Putin boasted about the success of the past few years and gloated about U.S. distress in the same hawkish tones that Stalin used in 1929 to tout the transformation of the Soviet Union into an industrial superpower. "We did not have a crisis of liquidity; we did not have a mortgage crisis. We escaped it. Russia is a safe haven," Putin said. Then the economic crisis engulfed Russia, too.

In 1929, the Soviet Union was mostly isolated from the global shocks of the Great Depression. That is not true today. The current economic crisis has hit Russia hard, exposing its institutional weaknesses and the fragility of its success. The drop in the price of oil and the seizing up of capital markets are choking Russia's economy, which has relied on petrodollars and cheap credit. Economies have been hit all over the world, but nowhere, it seems, has the reversal been as dramatic as in Russia.

Confidence in the rule of a wealthy, heavy-handed Russian state has been shaken, and it is now a real possibility that the global economic crisis, as it persists and even intensifies, could cause Putin’s social contract to unravel. What is not clear, however, is what would take its place -- and whether it would be any improvement. The nationalist passions and paranoia that Putin has stirred up have poisoned Russian society in lasting ways. Now, 2009 could be a new "Great Break" for Russia, but the result might just be a country in upheaval -- broken.

Putin's social contract has been based on co-opting Russia's elites, bribing the population, and repressing the disobedient. A mixture of nationalistic rhetoric, rising incomes, and pride in Russia's resurgence won public support. Until now, money has been Putin's most powerful weapon. Rising incomes and a strong ruble (due to high commodity prices) have enabled Russians to enjoy imported food, holidays abroad, and foreign cars and technology. But even if the lives of ordinary people have not improved dramatically (49 percent say they have enough money for basic needs but struggle to buy much else), Russians at least felt that they had stopped sliding backward. Now things are looking bleak again.

The immediate response from Moscow has not been greater humility, but deepened bitterness and aggression. Predictably, Russia blamed the United States for everything, from the economic crisis itself to instigating the recent gas conflict with Ukraine. The anti-American hysteria in Russian state media is deafening. The hubristic tone of Russia's leaders is buoyed in part because the crisis is not yet starkly visible in Moscow. Restaurants may not be full, but they are still busy, and supermarkets are heaving with people.

In Russian homes and on the streets, however, the talk is of crisis. Stories of layoffs and reduced salaries, canceled projects, and frozen funding have replaced the chitchat about holidays abroad and new foreign cars. Slowly but surely, the truth is starting to set in: After eight years of economic boom, the growth of Russia's economy is now slowing.

Real incomes are dropping at the same time utility bills are going up. Inflation is forecast at 13 percent, and the ruble has lost more than 30 percent of its value since last summer. Given that half of all goods Russians buy are imported, the impact on living standards will be dramatic. The long-term risk is that the crisis will undermine private initiative and empower inefficient monopolies and opaque state corporations. The new economic model that could emerge would reflect the worst mixture of the private sector and public sphere: nationalization of debts and privatization of profits. This, on top of Russia's other chronic problems (which include dysfunctional public services, thriving corruption, and an aging, shrinking workforce), does not bode well for the country.

The sedation of Russian state television is wearing out for an increasingly disenchanted public. Trust in its coverage of the economic situation has declined dramatically as the pain of the crisis deepens. Only 28 percent of Russians now think the media are objective. And as financial resources become scarcer, it is likely that an increasingly desperate Kremlin will resort to greater violence and repression to maintain its splintering social contract.

This was vividly demonstrated in December during riots in Vladivostok, in Russia’s Pacific Far East. Street clashes with a broadly apolitical crowd -- most unusual in the generally complacent Putin era -- were sparked by a Kremlin decision to raise customs duties for used cars. The idea was to prop up Russia's struggling auto manufacturers. But because the importing and servicing of cheap, secondhand Japanese cars has long been a mainstay of Vladivostok's economy, Moscow's decision ended up depriving hundreds of thousands of people in the Far East of their livelihoods. When thousands of motorists blocked the main roads, the Kremlin could not rely on the local police force and had to airlift special riot police in from the Moscow region, 10 time zones west. The brutality with which these units dispersed the demonstrators shocked even the local police.

When protesters realized that state television failed to report the clashes, their rage, initially aimed against a particular economic measure, turned against the entire political system. Several Russian commentators drew parallels with the massacre of workers in Novocherkassk in 1962, an episode of Soviet history kept secret for many years. When the Soviet government raised food prices while cutting workers' salaries, people took to the streets. The Soviet government brought in an army unit from the Caucasus and opened fire on the protesters.

Whether the current Kremlin is prepared to open fire on its own people is unclear. Soviet hard-liners held their fire when thousands of Russians defeated the coup against Mikhail Gorbachev in 1991. But back then, the KGB and its communist patrons were disoriented and weak. Putin and his regime, on the other hand, are stronger and, most importantly, have more to lose.

What's even less clear is whether Russia's police or military would obey the orders to shoot if they were given. The Vladivostok protests and the government's violent response sparked an online debate in the chat room of Russia's Interior Ministry. One post read: "Dear colleagues, Russia is at a crucial junction. An economic catastrophe is coming. People's patience is coming to an end. Are we going to be the attack dogs of this regime?"

Another member replied: "I will never shoot at my own people."

The ministry hurriedly closed down the forum, citing "technical problems."

So far, neither Moscow nor St. Petersburg has seen anything on the scale of violence that recently erupted in neighboring Latvia or Lithuania, as well as Vladivostok. And they may not: The willingness to protest in Russia's two largest cities has been fairly muted. Seven decades of communism instilled in Russians a capacity to adjust to hardship and an unwillingness to make much fuss about it. Having lived through two massive currency devaluations in the 1990s that wiped out their savings, people have learned not to trust their government. The feeling is mutual: The servile Russian parliament has widened the definition of treason and scrapped jury trials for such crimes as "organizing mass riots." And because the potential for trouble is more severe in cities that rely entirely on just one industry or factory -- of which Russia has a few hundred -- the Kremlin is making sure that people do not get sacked, even if their salaries are delayed or cut.

The Kremlin is acutely aware that civil unrest in Russia could trigger the country's disintegration. The most alarming hot spots that could erupt into full-scale civil conflict are Russia's ethnic Muslim republics in the south, particularly Chechnya, Ingushetia, and Dagestan. After two bloody wars in Chechnya, Ramzan Kadyrov, a local strongman whom the Kremlin installed as president, has been more or less keeping a lid on things in recent years. A steady flow of money and complete carte blanche for Kadyrov to run his republic as he sees fit have removed much of the incentive for fighting. But if the money were to run out, this could change.

Even more than street protests, discontent among the Russian elite could destabilize Putin's regime. Moscow is ripe with speculation about a possible rift between Putin and Medvedev. Parts of Russia's elite seem well aware of the risks facing the country and fear the instability that could result from the concentration of power in Putin's hands. Some of his actions, including the energy war with Ukraine, are no longer in the interests of much of the elite, since cutting off gas to Europe also means cutting off Russian profits.

But the chances of a liberal renaissance as a result of Putin's social contract unraveling are highly unlikely. There is nothing more misleading than to portray Russia as a liberal-minded society suppressed by a nasty bunch of former kgb agents. The uncomfortable truth is, as Mikhail Khodorkovsky, the jailed boss of the Yukos oil company destroyed by the Kremlin, put it: Putin "is more liberal and more democratic than 70 percent of the population." And unlike late Soviet leaders who inspired the contempt of the population, Putin even now remains authentically popular.

Putin's most damaging and possibly longest-lasting legacy is that he has played to Russia's worst instincts. Rather than develop a sense of pride in Russia's victory over the Soviet Union in 1991, Putin has fostered feelings of past humiliation and defeat, and subsequently a longing for retribution. Many foreign responses haven't helped in this regard: American hawks who argue triumphantly that their old Cold War adversary is irrelevant have been of as much assistance to Putin as some of Europe’s appeasers.

At the same time, Putin has stamped out any nagging sense of unease and shame over Russia's bloody past, including Stalin's painful "Great Break." Indeed, these days Stalin is described in Russian textbooks as a successful manager who led the country's industrial transformation. Using state television, Putin has nurtured not only nationalism, but a new wave of anti-Americanism. In the 1990s, these feelings were mainly prevalent in the older generation of die-hard communists. Today, they are firmly grounded in a generation of Internet-savvy 16-year-olds.

When Putin came to power a decade ago, he stirred dormant nostalgia for the lost Soviet empire. "It is an illness," warned former liberal Premier Yegor Gaidar. "Russia is going through its dangerous stage." This danger is made all the more real by today's crises: an imploding economy, expanding economic hardship, and an increasingly desperate Russian state that must rely on repression and nationalism. Whether Russia recovers from the illness or succumbs to it may be as crucial to the world's security as it was in the year of the Great Break.