by George Penfold
BC dodged a major bump in the road to economy recovery recently, when Proposition 19 in California, a proposal to legalize marijuana, was narrowly defeated in the US mid term elections. If Proposition 19 had passed, it would have allowed individuals to legally possess 1 ounce (28.5 grams), and have 25 square feet of space dedicated for growing. It would have also allowed municipalities to permit commercial growing and sales, and tax both. The potential tax benefits to the state were estimated at $1.2 to $1.4 billion and that was, and – in the fiscal mess many jurisdictions at all levels find themselves – will continue to be a major force pushing legalization.
The implications of Proposition 19 for BC's economy?
Estimates of the economic value to BC of the illegal marijuana trade are in the $6 to $8 billion range, with about $4 billion in exports. That’s a lot of business; in fact it’s comparable in scale to the value of primary forestry sector and in softwood trade to the US prior to the recession.
The impact of legalization would have seen the street value for marijuana in California plummeting; some estimates were by as much as 80% to 90%. That would have made the street value in California about half of price currently paid to BC growers. Moving into other markets would be very difficult for BC product as it’s hard to imagine that in a legalized environment, California would not have become a major producer and supplier to other states. It’s also much easier to cross state lines than international borders. The BC industry would have been seriously hurt, perhaps fatally, had Proposition 19 passed.
Who benefits from BC's pot economy?
So what you might say, isn’t that a good thing of the BC pot industry goes bust? It’s only gangs that benefit anyway! Well, yes and no. It would hurt gangs. Exporting $4 billion worth of illegal product is big business, and by definition done by criminal elements. They would definitely have felt the pain. But, so would the legal economy.
Folks involved in crime also go to restaurants, get haircuts, go skiing and golfing, buy houses and cars, all the things that the rest of us do. They just get to pay for it in cash! And, it’s not just about gangs. A lot of marijuana is grown by our neighbours who have a day job and a room in the basement that makes them another $40k or more a year. And the contractor who does your home renovations during the day may be doing grow-op conversions for cash at night. There are also the legal “gardening” stores and other services that supply the industry. Most of that would be gone with legalization. Just the regional market would remain, and that’s only a small fraction of what is currently produced in BC.
Under the Proposition 19 radar, two other states – Arizona and South Dakota – voted to support medical marijuana, so there were a couple of more “baby steps” toward legalization in the mid terms. So, it may be that legalization of marijuana is more about when, rather than if.
Addicted to the benefits of the pot economy
A question I was asked in a recent interview about Proposition 19 was, “How can we prepare for the possibility of legalization and the impact on our economy?” My response: "Create more resiliency in the legal economy." But the more I think about it, the hard truth is – we can’t. Why? Because, we can’t seem to find a way to talk about this as a serious issue. Ask anyone about pot growing in BC, and I’ll guarantee you that the first response will be a joke or laughter.
In many ways, marijuana is socially more legal than cigarettes or alcohol. It’s common to see pot smoking and even trading in public places. If you tried to do the same with beer or liquor you’d be asked to leave, or the police would be called. So we focus on gangs as the issue rather than our neighbours, or even our own or our kid’s behaviour or involvement in the industry either directly, or indirectly as consumers. We rarely talk about our dependence on the marijuana trade as a support for the health of our retail and services sectors. It’s only recently, for example, that I’ve seen commentary that part of the reason for high real estate values in BC might be marijuana industry incomes.
Our best hope?
We are all in a very real way addicted to the benefits of pot economy and are complicit in its continuing existence. But because it’s illegal, we can’t engage with producers and distributors, and can’t have an informed discussion about the possible decline of the industry. We can’t discuss the need for “Pot Renewal BC” or “The Pot Action Coalition,” as we have done in forestry. We don't sit down with growers, pruners, or gang members and talk about “job transition training.”
Getting off our dependence on the illegal marijuana industry “cold turkey,” as would have happened had Proposition 19 passed, would be a major shock to our economy. Our best hope is that legalization continues to move forward in small steps so we can adjust as those small steps occur, and slowly reduce our dependency on and addiction to the benefits it provides.
about the author
GEORGE PENFOLD is the Regional Innovation Chair (RIC) in Rural Economic Development at Selkirk College in Castlegar, BC and Adjunct Professor at the School of Business and Economics at Thompson Rivers University in Kamloops, BC.
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