Ganj-Econ in Washington
This is my take on the new Washington State legal changes concerning cannabis and business as it stands now.
So a certain type of cannabis business is sorta legal in Washington State now. People are kinda not getting busted anymore (that I’ve heard of) for smoking pot in their homes. Historically, whenever people get busted less, prices go down, supply goes up with demand, driving the most dangerous criminals out of the market. It’s very basic macro-economics. The new economy is still in birthpains though. Shit’s gonna get weird. It will be tightly regulated and heavily taxed. The new business will have to spawn new ways of producing, transporting, marketing, and selling things that don’t currently exist in the blackmarket or in legal business methods.
There’s still a looming conflict between federal and state laws that stoners seem to miss. Federal law still says that marijuana is one of the worst things anyone could do to themselves; It is forbidden because it is bad; It is bad because it is forbidden; and it could never be of any benefit to anyone. This weird, archaic sounding law is probably why most financial institutions won’t let i-502 businesses open accounts. A lot of business people, finance people, building owners, and insurance people who are necessary to normal businesses are opting to stand back and see if the fed takes everyone’s stuff before committing any capital to cannabis industrialists. The DOJ has released a few statements (in lawyerese) like the ogden memo and the cole memo. Both say things like : we may or may not enforce this federal law that says cannabis is forbidden, and take our choice to do so or not to do so at our discretion seriously. The writers of these memos are firm and direct in their resolve to sound firm and direct without giving up anything useful. The cole memo does suggest (not legally binding in any way) a priority list of things they will look at before deciding to go after a state-legal cannabis biz. Read a certain way, it looks like state-legal cannabis businesses will only be prosecuted by the feds if they cause harm or undue risk to other people, sell to kids, evade taxes, that kinda thing. YET, federal authorities still reserve the right to take any property, liberty, and money from someone engaging in a pot-biz… weird thing, that.
I’m kinda surprised the issue of state’s vs. federal jurisdictions doesn’t come up more often. As a non-lawyer who likes history, it seems to me that the only times federal law has gone in and forced changes in state laws was when people’s civil rights were taken away by state laws. Would the whole thing really reverse? Is it really likely that the federal gov. would make a state change their laws because they had given their people too many self-determination rights? For pot smokers, who are socially conditioned to the reality that their daily lives are illegal, it’s not that big of a deal to hear that they could be committing a federal crime that seems legal in their state. For the bourgeois however, who are used to the law always being on their side, it is terrifying to know that their capital could all be seized at any moment.
The Likker Control Board (we used to have socialist likker dispensaries in WA, and now we don’t, so we have this big regulating body without much to do and a lot of weed regulation that needs doin. I think putting the WSLCB in charge of our precious Bud Law will prove to have been the right choice.) appears to have thought things out pretty thoroughly. They did so in a way that potfarmers may find confusing but the new legal structure isn’t really about farming, it’s about laws. Now I keep seeing something about the licensing that no one in the control board is talking about publicly: Economics. Inorite!? Doesn’t it seem weird that the only mention of the economics of the new economy comes from early Rand reports that call everyone else’s predictions wild speculation (they are, actually), and then make equally wild speculations? See, I think that since the I-502 law writers opted not to fix prices artificially, and everyone knows that legalization causes huge price decline, the Likker Control Board is going to drastically limit the output of legal bud in an attempt to keep prices high (sic). If a hundred good growers apply, the WSLCB may only license 3, if it means keeping legal bud above 100$ an ounce. The blackmarket is already in trouble. Trade value of the kind of “commersh” that is likely to be produced in the new legal market has recently gone down around 50% in the blackmarket. A lot of the best growers now work for sorta-legalish medical dispensaries, and their laws are basically all being re-written under I-502.
I predict that pot in the new legal economy will eventually be weaker and cheap, with a great diversity of products. The big biz types that WA is counting on to create the new economy will shy away because of the low profit margins and tight regulations. The lower profits will scare off the dangerous gun-toting types from the legal and illegal markets.
I think the black-market will bounce back from the recent setbacks too, because the legal market will never come close to meeting the increased demand that is caused by the decreased enforcement and plummeting prices. The stoners may all be smoking 1970’s-ish outdoor in 5 years, and it may cost them around 5$ an ounce. Those are my economic predictions, and I think they are less wildly speculative than the popular model, where the states and the rich all make a bazzillion semolians as the blackmarket mysteriously vanishes.