Sasha Breger Bush, Guest Blogger
Passed in 2012, Colorado’s Amendment 64 legalized the growing and selling of marijuana on a recreational basis. With medical marijuana, recreational marijuana has helped lift the people of Denver out of the Great Recession by inspiring leagues of new small businesses, creating new jobs, boosting commercial real estate values, and increasing state and local tax revenues. It turns out that the local marijuana market is fairly recession-proof and is actually bolstering local resilience to global crisis.
As I’ve watched this novelty unfold over the past couple of years (with considerable delight, to be frank) and witnessed first hand the important benefits for our local economy, I’ve grown increasingly concerned about the possibility of legalization on the federal level. While state level legalization has—for all of its still considerable problems—motivated economic recovery and helped working and middle class folks earn more income, get better jobs and enjoy more robust public services, federal legalization risks these benefits leaking out of local economies into the pockets of Big Business.
As things stand today, the $2.3 billion legal U.S. marijuana market is the domain of small pot shops and grow operations, slightly larger local chains (with a handful of stores), a few inter-state mid-sized retail establishments with outlets in two or more states, and other generally smaller local businesses that provide inputs and services to the marijuana growing and retail firms.
In Colorado, a few different dynamics explain the structure of this highly decentralized and relatively competitive marketplace. First, state regulations work to limit the size of growing and retailing firms by regulating the number of plants that a single firm can grow, the amount of marijuana a single person can purchase and possess, and increases/decreases in firm space and capacity, among other constraints (go to this link and this link for the most recent state laws). Because the state has established residency requirements for marijuana firm ownership and operation, out of state ownership is effectively prohibited.
Second, and perhaps more importantly in the long-run, federal level illegality prevents larger businesses from outside of Colorado from engaging in growing and retailing, and even from providing certain services to Colorado marijuana firms. Federally insured banks, for example, cannot provide banking and financial services to the marijuana industry for fear of incurring federal penalties for violation of the Controlled Substances Act. Federal illegality has meant that Colorado’s pot revenues flow into local credit unions, and will soon support a network of local banking cooperatives.
I’m deeply worried about Colorado’s economic fortunes should federal level legalization occur. I fear that the local and decentralized marketplace will be replaced by a national or even international market governed by large multinational firms that whisk their profits away to other places, degrade product quality, and stymie innovation and employment. The evolution of the global food system is instructive in thinking about what may happen to pot in a fully legalized world.
Small and innovative firms will be bought out by ever-larger conglomerates seeking to add one more brand to their portfolio. Mass, centralized, industrial pot production will displace local artisanal and craft production. Indeed, rumor has it that Marlboro already attempted to patent the name “Marley” in anticipation of federal legalization. If we’re not careful, you’ll soon be able to buy Marley’s by the case at the Wal-Mart near you. If the Waltons are smart, they’ll probably be shelved right next to the Twinkies. Multinational input providers will displace local garden and hydroponics stores, providing cheap fertilizers and grow equipment at prices with which the mom and pop stores can’t compete. Round-up Ready AK-47 clones from Monsanto, anyone? Pfizer and GlaxoSmithKline will patent strains that have been pioneered by Colorado locals to treat various health problems. I can hear the drug commercials now: speak with your doctor to see if Canna is right for you! Don’t forget that the global financial system will also intervene—Visa and Mastercard will take 5% of every pot transaction, Goldman Sachs will develop an exchange-traded Global Marijuana Fund, and maybe we’ll be able to start trading “weed” futures on the Chicago Mercantile Exchange. If the rest of the world goes the way of Uruguay and Jamaica, then we can also look forward to Cargill and Archer Daniels Midland monopolizing the global weed trade and buying up all of the world’s pot storage facilities. Who knows? Perhaps the World Bank will even incorporate weed into structural adjustment programs, and start recommending marijuana exports to developing countries as a way to finance debt repayment.
If the food system is any indication, federal legalization of pot will impoverish vibrant, local marijuana economies. Local economic benefits will leak out to already wealthy and powerful MNCs. In a world where big monopolistic companies rule the formal economy, grey markets like Colorado’s marijuana market provide a safe-haven for small businesses and a stimulus to local economies.
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