The Socio-Economic mechanisms of cannabis legalization

The last decade brought a lot to liberalization of the view on marijuana around the world. The product gained popularity for its medical properties which with time became more appreciated by the public and advertised by countless celebrities. Social and academic institutions also began expressing their views about the logic behind cannabis legalization which were the driving force behind governments’ actions. In 2013, Uruguay was the first country to legalize recreational use of marijuana, followed by countries like Canada, Georgia, and certain U.S. states. Numerous other countries allowed the medical use or decriminalized possession up to a certain threshold. Even if possession of small amounts of marijuana is still completely illegal in some countries, it began being often unenforced by police. All in all, multiple steps have been taken in the direction of softening the views on cannabis use around the world. This process seems to continue as more local and state governments keep joining the green team or express willingness to do so. New York (in 2021) and Thailand (in 2022) are just examples which can be followed soon by a serious European representative like Germany. Whether we can expect a domino effect within the EU afterwards remains a secondary question. The main point is how countries should go about this topic, given the many opposing views on the issue and keeping in mind that the rosy expectations of the current pioneers do not seem to have been fully met yet.

In order to specify the way in which marijuana could be legalized, we must firstly focus on the socio-economic motivations governments have behind cannabis legalization. The basic rule of marketing is that you need to find an existing demand and create a value for it. Where there is value there is money. This element is often mentioned by marijuana supporters who try to attract authorities using the possibility of increasing tax gains. And not without reason, as the data seem to confirm their view. Cannabis related tax revenues in the U.S. range between states and the highest earning ones are: California ($770 mln), Washington ($520 mln), Illinois ($470 mln). On the other hand, when we take a look at the European market, ganja experts in the Netherlands also cannot complain with tax revenues from sales (€400 mln) which they spend on fighting  addictions. Nevertheless, taxes are purely economic focus and are not the only reason why countries consider legalization. Another issue which is of crucial socio-economic importance is the whole law enforcement system. Police with their equipment, judges and their time, thousands of people engaged in court cases consume time and money, not to mention the people’s damaged wellbeing. Well, you do not need to be biased to say that in the case of marijuana it does not really work, and its use and spread are not really limited. It is estimated that the war on cannabis costs the U.S. about $3.6 billion a year, yet it had hardly any effect. Data also confirm that whether with or without restrictions the users’ statistics did not change recently in the U.S. or back in the 70’s in the Netherlands. That’s why legalizing the system may bring enormous relief for the judiciary and law enforcement systems and governments are starting to realize that.

The most human-oriented element of recreational cannabis legalization is distinguishing soft drugs from hard drugs by highlighting the health and safety implications. It may sound shallow, but it is in fact the ultimate reason why the first coffee shops were opened in the Netherlands. Then, it all became clear, easy, and trusted. No hiding in a dark street, no talking to guys in hoodies having lots of other stuff in their pockets. Dealers were left naked without their main product as consumers turned to legal and licensed stores to buy ganja. Well, the Dutch is a successful example of this plan. Statistics show much lower use of other drugs like cocaine or heroin compared to other European countries, and other governments which decriminalized the use of drugs such as Portugal also observe similar patterns.

The afore-mentioned motivations seem to be the main point of consideration for the governments, and as long as the law-related issues can be resolved with simple legislation the remaining motivations are just idealistic goals with multiple factors influencing them and require in-depth research not to omit any variable in the equation. In fact, we are reaching the key point as the existing statistics are not as rosy as they seem and produce multiple confusing and occasionally contradictory phenomena. Moreover, they don’t come without a cost. Cannabis business in the U.S. is not going as well as it possibly could. Agriculture, supply chain and sales are thoroughly controlled and regulated. Entrepreneurs must get through tons of red tape which can take years, since getting the necessary permissions takes time due to understaffed government agencies. Therefore, investors wait and lose money as businesses hire consultants to help them in this process. There are very strict rules regarding labour or production which are common for other branches of agriculture just like the use of pesticides. Is that all bad? Not really. But as the U.S. wants to control every step of the production and establish certain quality, it has to acknowledge a significant fact. Cannabis in dispensaries is twice as expensive as the one on the street. That drives the demand as well as taxes down as customers have old and verified contacts with dealers who they know and who can offer much lower prices. For example, in California the vast majority of weed is still bought underground. Hence, people are still in touch with unlicensed products and have also easier access to other drugs. Occasionally, local governments seem to ask for it themselves. For instance, by disallowing weed purchase after 10 p.m. Nevertheless, over 400,000 jobs were created in the broad marijuana-related industry in the U.S. Could that be treated as a socio-economic remuneration? The American system seems to function just ok, maybe even moderately well, but that would probably be an exaggeration as both businesses and consumers are not clearly satisfied.

The Dutch system has been consistently rated as satisfactory among society and loved by tourists visiting the capital city of Amsterdam, in which a stop at a coffee shop is a must. It is worth writing a couple of words on how cannabis tourism is a huge scale phenomenon which throughout the years has raised concerns of local authorities. Crowds of stoned tourists in the famous red-light district are a common sight and it is estimated that 100 of Amsterdam’s 166 coffee shops serve just tourists. Whether locals consider that as a visual pollution or it is associated with any kind of danger is a more detailed question not changing the crucial conclusion that policymakers introducing weed should keep cannabis tourism in mind. The main point behind the Dutch system which also differentiates it from the one of the U.S. is that the sale of weed is indeed allowed in prescribed places but the whole supply chain behind it is not. To make it fully clear, when customers buy marijuana in a coffee shop they don’t know where it comes from, how it was produced and by whom. Nothing. The coffee shop can firstly buy them from criminal organizations and then legally sell it to customers. Surprised? Nonetheless, if you think it makes any difference to consumers then you are wrong. Coffee shops have a long tradition and are often local, are trusted by their customers and possess the reputation they strive to maintain. The system operates as a back door policy. Hence, the issues of quality checks and jobs in the whole value chain are vague but prices stay low, and the theoretical objectives are met. Is that all that can be done?

All in all, the green business is differently perceived by governments and is being carefully observed by authorities. The conclusion is that the nature of the problem does not allow for a perfect solution. At least the probability of finding one seems negligible. As there are no remedies for societies, governments should try to optimize the system in given circumstances. The next step, and probably the hardest, is to define optimization.