SINCE late 2012, two states have voted to legalize marijuana for recreational use; licensed shops in Colorado and Washington now sell it to anyone who wants it.
Six states have legalised the drug for medicinal use, bringing the total to 23. Most Americans now say they favour legalisation (see chart 1). The House of Representatives has voted to defund federal raids of medical-marijuana facilities in states that allow them. Serious newspapers (though not, alas, this one) have appointed pot critics. And an Oklahoma state senator has campaigned to legalise the drug because in Genesis 1:29, “God said, ‘Behold, I have given you every herb-bearing seed…upon the face of all the earth’.”
When Colorado became the first state to license pot shops on January 1st, tokers merrily queued in the cold for a puff and a place in history. But the mood in Washington state, which opened its shops on July 8th, is more downbeat. Severe shortages meant that barely half a dozen shops opened on day one; including just one in Seattle, the largest city. Several warned that they probably had only enough weed to last a few days.
Colorado’s recreational pot business was built on the back of a well-regulated medical one. Retail licences were initially restricted to dispensary-owners; on January 1st, many stores merely changed their signs. Washington also has a medical-pot business, but it is an unregulated mess. I-502, the voter initiative that legalized marijuana in 2012, charged the state’s Liquor Control Board (LCB) with building a recreational industry from scratch.
Most people think it has done well, but it has not been easy. “We wanted to bring in as many people from the black market as possible,” says Alison Holcomb, a lawyer who drafted I-502. Application fees were kept low, and a lottery determined who would win the limited number of producer, processor and retail licences, regardless of the quality of the applicant. The LCB was overwhelmed by the number of bids—over 7,500—and says it will not finish processing them until early 2015. It has issued only 90-odd licences to producers.
Officially, the LCB hopes that within a year I-502 shops will capture 25% of the market. Others think that is optimistic. For now, prices are high: around $20 a gram, which is twice the black-market (or medical) cost. That partly reflects eye-watering excise taxes: 25% at each stage of distribution, plus normal sales taxes. But wholesale prices are high too, suggesting supply shortages are the main culprit.
Analysts speak of the “Goldilocks” price for weed: not too low (to avoid spurring consumption), not too high (to undercut the black market). For now Washington is erring on the high side, although prices will surely drop as the market settles. Yet the LCB faces an extra challenge. Like Soviet officials organising the tractor industry, it must, under I-502, determine a maximum quota for production. This was originally set at 2m square feet of marijuana plants, although so far only 687,644 sq ft has been licensed, and officials now decline to offer a precise figure. No more than 334 shops may be licensed (although local bans mean that limit may never be reached).
I-502 will create new consumers, but no one knows how many, or how much they will buy. Nor does anyone know how many people will move from the illicit or medical markets to I-502 shops. Meanwhile, the LCB has deliberately suppressed supply to limit the risk of marijuana being diverted to other states or to children, which would upset Uncle Sam. It is as if those Soviet officials were setting local tractor quotas even as the Kremlin enforced a nationwide tractor ban.
Legalization promises three benefits. First, it will stop governments from wasting lots of cash locking up people who haven’t hurt anyone. Second, it will raise tax revenue. Third, it will put criminals out of business. Washington’s experience suggests that the third promise may be hardest to keep. Even in Colorado, dispensaries rather than shops accounted for two-thirds of sales between January and April.
As support for legalization grows, more states will do it. Oregon and Alaska will vote on legalization in November; Floridians will decide about medical pot. California is likely to vote on legalization in 2016. In other states, particularly in New England, legislators may free the weed.
All states can learn from the trailblazers. This is already happening: after a string of well-publicized incidents in Colorado involving edible products, including two deaths, Washington’s governor tightened the rules. Colorado legislators have copied Washington’s (controversial) provisions for assessing whether drivers are stoned. The market is ill-understood; regulators will need to be flexible.
Research suggests that some of the cannabinoids found in marijuana can help relieve pain and nausea. Others may stimulate appetite (a problem for which America has no shortage of fixes: see article). The drug is also linked to more worrying outcomes, particularly among the young, and may raise the risk of schizophrenia. Alas, federal prohibition has made it difficult to investigate pot’s medical properties.
Campaigners have pursued a state-by-state strategy, but for many medical marijuana is more about paving the way for legalization than about helping the sick. In most states officials and dispensary-owners conspire in the fiction that customers are all “patients” and shops merely non-profit “co-operatives”. The doctor’s “recommendations” needed to procure marijuana are easy to obtain.
The relationship between medical-pot advocates and legalisers can be fraught. In Washington, the main opposition to I-502 came from a medical industry worried, with reason, that it would find itself folded into the same legal regime as recreational pot shops. But more broadly the spread of medical marijuana has softened up voters: fewer now see it as a moral issue (see chart 2). Campaigners in Colorado used the success of their state’s medical system to argue for the creation of a recreational one.
They also hinted at the great bounties that pot taxes could deliver to state coffers. Colorado and Washington have earmarked a lot of marijuana taxes (in Washington, 81%) for worthy causes such as school construction and drug education. But revenue forecasts have proved inaccurate in Colorado, and the licensing chaos in Washington will have a similar effect.
A thornier problem for regulators may be that tastes change fast. Walk into a medical-marijuana outlet in Washington and you will be confronted with a vast array of products, from marijuana-infused ghee to cheese sauce. Vaporisers, which allow smoke-free consumption, are a big hit. Concentrates, which can deliver a quick, intense buzz, account for around one-third of sales at Rain City, a dispensary south of Seattle. As Colorado’s experience with edibles shows, officials struggle to keep up with such a mutable market. But to regulate it properly they must try, for some day the idea of rolling a spliff may seem quaint.
The other great unknown is the role of the federal government. Not only is marijuana illegal under federal law; it is classed as a Schedule I drug—as bad as heroin. So Washington and Colorado are licensing their residents to commit felonies. President Barack Obama and Eric Holder, the attorney general, have given the two legalisation experiments a cautious green light. But if a drug hawk replaces Mr Obama after 2016, he or she will not find it hard to revive the war on weed in states that thought they had ended it.
Thus, the drug still carries a large risk premium. Big banks will not accept deposits from pot shops for fear of violating federal money-laundering laws. Zealous prosecutors have seized assets and threatened landlords. All this puts off investors and makes it harder for above-board operators to acquire the legitimacy they crave. “Either we should wipe out the black market, or we should not,” says a frustrated Brendan Kennedy, the boss of Privateer Holdings, a marijuana-investment outfit.
That will not happen until the federal prohibition is lifted. That may seem remote, but opinion is shifting fast. “I see [legalisation] as a second-term [Hillary] Clinton thing,” says Mark Kleiman of the University of California, Los Angeles. Earl Blumenauer, a pro-legalisation congressman from Oregon, thinks marijuana will be rescheduled within three years. Bipartisan coalitions can be found for reform.
For now Colorado and Washington will push ahead. Cannabis cafés may open in Seattle this year (probably vaporisers only). Campaigners in Washington want to change the law to allow home-grown marijuana; Colorado allows this, but Barbara Brohl, head of the Department of Revenue, says its unregulated nature is one of her biggest worries. Colorado, meanwhile, is opening up its recreational system to non-dispensaries and, for the first time, allowing retailers or producers to specialise. Drug laws are anything but set in stone.
Via: economist
How the Legalization of Marijuana Has Proven Harder than it Looks
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