Capitalists Are Bad at Weed Legalization
Capitalist society can only ever legalize cannabis in a way that benefits the already wealthy. Why not put the newly legal weed industry in the hands of the public and away from the profit motive?
The rosy picture of the legal marijuana industry painted by bullish investors and satisfied consumers doesn’t reflect the full reality of the business in a country where the majority of weed consumed is still sold illegally. (My 420 Tours / Wikimedia Commons)
A funny thing happened on my drive through Michigan recently: I couldn’t escape the cannabis dispensaries everywhere — no fewer than five within a ten-minute drive of Paw Paw, a village of fewer than four thousand people. There’s an entire industry dedicated to marketing and advertising weed, which has become a billion-dollar industry in the Wolverine State. Dispensaries are particularly clustered along the western border with Indiana, where cannabis possession is still prohibited even as leaf and edibles flow in over the Michigan and Illinois borders, where it’s legal for recreational use. Everyone who cares to partake is able to do so virtually without restriction, even as a quarter of a million people in the state still bear the burden of drug convictions handed out prior to legalization in 2018.
Similar situations can be found in other states as local economies, reeling from lost industry, lack of investment and infrastructure, and COVID-related job loss, look for some way — any way — to bring in revenue. Today’s cannabis dispensary is 2016’s vape store is 2012’s craft brewery.
Nevada once had one of the strictest anti-drug policies in America; a billboard outside of town, immortalized in Hunter S. Thompson’s notorious Fear and Loathing in Las Vegas, urged motorists not to “gamble” with the drug and warned of prison sentences of twenty years to life. Now, with Nevada home to one of the biggest and most profitable legal cannabis industries in the country, you can buy novelty key rings replicating that billboard in the same places you buy weed. Culture and politics often run counter to economic necessity: in Oklahoma, a generally conservative state that just passed the country’s most restrictive ban on abortion, recreational weed isn’t yet legal, but there are thousands of medical dispensaries — one for every two thousand residents.
For those of us old enough to remember when there was no such thing as legal marijuana, the world of 2022 might seem like paradise for weed users. There is nowhere on Earth, not even Amsterdam’s legendary cafés, where weed is so widely available, easily purchased and used, and of such high quality as in a recreational-use state. But implementation of legalization, both medical and recreational, has been plagued by problems: poorly thought-out regulation, federal laws that cause innumerable headaches, racism keeping owners of color out of the industry, the still-unexpunged criminal records of those who were arrested before legalization, and the clustering of ownership in the industry around the kind of investors who could afford to jump in — many of them already wealthy and with access to venture capital and with the dislike for taxation, regulation, and labor rights so common to that class.
Robin Goldstein and Daniel Sumner, two economists at the University of California, Davis, take on these issues in Can Legal Weed Win?: The Blunt Realities of Cannabis Economics. The book is engagingly written if occasionally corny, and it brings to bear a deeply researched perspective on the practical aspects of the cannabis industry. The authors pull few punches when discussing the state of the trade: the rosy picture painted by bullish investors and satisfied consumers, in their telling, doesn’t reflect the full reality of the business in a country where the majority of weed consumed is still sold illegally.
Among the many problems are the confusing and costly regulations that vary from state to state (even in California, the country’s vanguard of cannabis legalization, there are vast amounts of black-market weed producers, because it’s more expensive to grow legally); the nightmare of financing in a system where federal prohibition makes doing business with interstate banks impossible; the thorny differences between decriminalization, medical legalization, and full recreational use; and inconsistent pricing due to regulation, taxation, and labor costs, leading to situations like those in my home state of Illinois, where cannabis prices are the highest in the country.
“Prices Get High” (get it?), the book’s third chapter, is its most enlightening, discussing not only the various shadings of legality but also how a product with such a relatively low cost of manufacture got so expensive in the first place.
“Legalization changed retail weed in several fundamental ways,” Goldstein and Sumner argue, citing product diversification (the blossoming of simple smokable flower into other delivery vectors, such as edibles, cartridges, vapes, wax, shatter, and so on) and premiumization (the growing of products of different quality to meet different consumer price points) as two of the main factors.
But while it’s true these have had an incredible impact on cannabis pricing, it’s not a function of the product or its legality — it’s a function of the market.
Markets Are Created, Not Discovered
For all the received Econ 101 wisdom about markets being driven by supply and demand, markets are created, not discovered. No one asked for twenty different ways to consume cannabis, or fifty different kinds of edibles, or a graduated scale of quality; these innovations were brought to us by capitalism’s drive to constantly expand its markets in order to maximize profit.
While it’s great to have choice, the mistake is assuming this can only happen with a push from marketers; the people can innovate any industry without sacrificing all their efforts to the bosses. If the authors are right in predicting a major correction to the cannabis industry as investors, frustrated with slow return on investment, fall away, it will result in many of these products disappearing — not because demand has disappeared, but because consumers will never have enough money or enough desire to buy everything the manufacturers foist on them.
Can Legal Weed Win? also posits regulation and taxation more as problems to be overcome rather than necessities to be accepted — an acceptance of capitalist greed as a good. The book also dwells heavily on the black-market weed that can undercut legal cannabis and be sold more cheaply. But again, this is a problem of a profit-driven market economy: in a system that removed the profit motive, neither legal nor illegal producers would gain from skirting the rules, reducing the possibility of both legitimate manufacturers cutting corners and the criminal element filling the void.
Later in the book, the authors prognosticate the world of legal weed in 2050, estimating downturns of up to half of currently predicted revenue (though they sensibly admit their predictions are no more ironclad than the market optimists’). The reasons for this, already widespread in the young legal cannabis industry, are nearly universal: overoptimistic revenue predictions by companies eager to attract investors; lower-than-expected returns on investment; the aforementioned oversaturation of a limited market; and a largely incoherent patchwork of laws and regulations that makes life difficult for capitalists interested only in the bottom line. As is often the case with investment bubbles, an industry with plenty of money for everyone quickly became an industry with not enough money for the lucky few.
They cite four major possibilities that will impact the industry: federal legalization of weed, the related ability to conduct cannabis trade across state and even international borders, more efficient production, and scaling up through high finance, specialization, production efficiencies, and rational management. While they’re likely right that this will result in consumer-friendly market adjustments, they do not advocate dealing with the problems created by just such changes in every other industry through nonmarket means.
Control the Means of Weed Production
Can Legal Weed Win? is an excellent primer on the state of the cannabis industry in America today. Some of Goldstein and Sumner’s policy prescriptions are perfectly sensible and would not be out of place for any socialist to endorse as needed reforms. But the book’s stated purpose is to create “a smarter and fairer market” where weed is “cheaper, better, and more available” legally than its black-market equivalent. To them, it’s all part of a largely value-neutral economic exchange system, and cannabis is just another commodity. (The book’s conclusion, which predicts that financiers and Big Tech will eventually depart the weed market in favor of agribusiness, is not comforting.)
It is true that legalization has had unforeseen consequences, and that “laws dreamt up by activists and tech elites” sometimes end up “illegalizing more weed businesses than they legalize.” The cost of entry to the legal cannabis trade is so high, from licensing and growing costs to regulation and taxation, that many choose the illegal business, finding plenty of customers who are happy to pay less for lower quality. But this is a function of accepting current conditions, with the government acting as a facilitator for private profit rather than the people performing a limited watchdog role.
For socialists, the question must go deeper. What would the world of weed look like if it was divorced from the profit motive altogether?
We can envision a future where serious drug addiction is treated as a medical problem and treated as such under a universal health care system, and we can finally have hard, evidence-based research that proves the medical value not only of cannabis but of psychedelics and other substances, free from the stranglehold of for-profit pharmaceutical companies.
We can also admit that despite over a century of reactionary propaganda to the contrary, cannabis is a nonaddictive, harmless indulgence that can promote good mental health, stress relief, and comradely conviviality. There is no reason that we cannot settle the question of cannabis in a socialist context as definitively as Karl Kautsky settled the question of teetotaling among the German working classes, in opposition to prohibitionists like Victor Adler: it’s fine for comrades to get high.
Goldstein and Sumner do a worthy job of envisioning a future where the legal cannabis industry operates more efficiently, affordably, and equitably. But socialists can go further. We can see a world where growers are regulated for safety and quality, while still supported and protected by law; where every link in the chain of cannabis production, from growth and processing to distribution and sale, is represented by union labor controlling a democratic workplace; where marginalized communities of black and brown people are not subject to imprisonment, police brutality, and exclusion from legal production; and where medical and recreational users are in harmony, not in competition.
Cannabis grows naturally and is easy to grow, cultivate, process, and package. It can be done pretty much anywhere by anyone. It would be simple and easy for workers to control the means of weed production. And cannabis ties into all sorts of issues near and dear to the hearts of socialists, from land reform and racial justice to creating a less repressive society and eliminating private control of resources that rightly belong to the people.
A capitalist society can only ever legalize cannabis in a way that benefits those who are already well placed in its hierarchy of power. A socialist society has the power not only to abandon the harmful prejudices of the past but to create a future where good jobs, good health, and good use of resources are available to all who want them by treating nature’s gifts as a communal resource, not a crime or a joke.