Going Dutch
How marijuana can save the economy
By Alaine Lowell 09/09/2010
The case for legalizing marijuana
On Tuesday, Nov. 2, Californians will have the opportunity to boost the state’s devastated economy by voting yes on Proposition 19, the Regulate, Control and Tax Cannabis Act, which would allow individuals 21 and over to grow, possess and transport cannabis (marijuana) for personal use. It would also permit local governments to regulate and tax the proceeds from those sales. Some have called the idea crazy and irresponsible, but I aim to show you why it is actually a brilliant proposal that will bring in hundreds of millions — perhaps billions — of dollars to our cash-strapped economy.
The Dutch Model
In 1976, the Dutch revised their laws separating drugs into two categories, "soft drugs," cannabis (marijuana and hashish), and "hard drugs," such as heroin, amphetamines and cocaine. This change was based on the “social relations theory” of drug use, which showed cannabis users were at risk of becoming hard drug users — not because of anything inherent in the drug, but because the dealer they were buying cannabis from was also probably selling heroin, cocaine and other dangerous drugs, making experimentation with hard drugs likely. It also created a situation in which hard drug and soft drug users made social contact, again increasing the risk of using hard drugs.
The new law upped penalties for hard drugs and reduced those for cannabis, making possession of less than 30 grams a misdemeanor. This opened the door for “coffee shops” where marijuana and hashish could be purchased by adults openly and where no hard drugs would be allowed.
The Dutch Model has been a success. Today there are more than 700 coffee shops throughout the Netherlands that are strictly regulated and taxed by the government. In 2008, the Dutch earned in excess of 400 million Euros (or $530 million) annually in tax revenues from their marijuana coffee shops. By conservative estimates, the coffee shops earn around 2 billion Euros (or $2.52 billion) every year.
The American Model
The idea of relaxing marijuana laws in the United States is not new. In fact, back in 1971, when marijuana was at the height of its popularity, President Richard Nixon convened the National Commission on Marijuana and Drug Abuse — the most comprehensive examination of marijuana ever conducted — with a stated goal “to separate fact from fiction, reality from myth.” The title of their final report, “Marijuana: A Signal of Misunderstanding,” described aptly what was central to their findings; that contrary to popular belief, marijuana is actually “relatively safe” and does not constitute a danger to public safety. They concluded by recommending that marijuana possession and use be immediately decriminalized at both state and federal levels.
So what happened? First of all, the commission's findings were a complete shock to Nixon and his administration. After handpicking a group of mostly conservative commissioners and appointing former Pennsylvania Gov. Raymond Shafer as chairman, Nixon had every reason to expect his commission would produce evidence to bolster his newly created War on Drugs. Today, thanks to release of Nixon’s secret tapes after Watergate, we are privy to the strong-arm tactics Nixon used in an attempt to influence the commission. “Keep your commission in line,” he warned Shafer. “You’re enough of a pro to know that for you to come out with something that would run counter to ... what we’re planning to do, would make your commission just look bad as hell.”
In spite of pressure from the White House, after 50 research projects and hundreds of interviews with doctors, PhDs and marijuana users around the country, Shafer and the rest of the commission had changed their minds about marijuana. Still, the president wouldn’t budge. “I've read the report,” he told the press defiantly, “and reading it did not change my mind.” For Nixon, this was not just an ideological decision, but a political one. He viewed marijuana smokers as his enemies: young people protesting the Vietnam War, blacks, liberals, hippies, even Jews. “Every one of the bastards that are out for legalizing marijuana is Jewish,” he’s caught on tape ranting to his chief of staff, H.R. Haldeman.
Needless to say, Nixon shelved his commission's report — which is why you probably haven’t heard of it — and, like an obstinate child who insists on having his way no matter what, instituted his War on Drugs with renewed vigor, placing marijuana at the top of the Controlled Substances Act list of dangerous substances, along with heroin and angel dust (PCP), where it remains today. The new law allowed sentences of up to five years for possession of small amounts of marijuana and, according to the government’s own figures as of 2008, 20 million Americans have been arrested for marijuana since the Controlled Substance Act was adopted in 1970.
Money in the bank
Thinking about marijuana as an economic lifesaver may not be easy for some. After 40 years on the War on Drugs hit list, marijuana has gotten a pretty bad rap with the public. Maligned as the drug of aging hippies and teenage slackers, and further misrepresented as dangerous and addictive, the public’s image of marijuana and its users is in great need of a 21st century update. Let’s start with the fact that 41 percent of Americans — about 140 million people — have tried marijuana, which should put an end to the Cheech and Chong stereotype of marijuana smokers. What this statistic shows is that almost anyone — from Aunt Tillie to the local grocer — might have a stash of the notorious weed buried at the bottom of his or her sock drawer. Even President Barack Obama has admitted to smoking pot in his youth, not to mention our two previous presidents, George W. Bush and Bill Clinton. This is a fact that should lead to the warning: “Smoking pot can lead to becoming president of the United States,” which would make a lot more sense than the claim that “Smoking pot leads to heroin and cocaine use,” a premise called the “stepping stone theory” and a major component of current marijuana prohibition, even though it was disproved by Nixon’s commission 40 years ago.
California’s biggest cash crop
California’s behemoth $1.85 trillion economy is the eighth largest in the world, but the Great Recession has threatened to put an end to it all. Paul Krugman, economist and columnist for The New York Times, points out the problem. “In the most populous state in the nation, the housing bubble was bigger than almost anywhere else, and the bust has been bigger too.” Today a $24 billion budget deficit and an unemployment rate of 12.6 percent (the highest ever recorded) have placed the Golden State on the brink of collapse. If the “too big to fail” epithet can be applied to private banks and insurance companies, California should qualify for the label without dispute. The difference here is that California doesn’t need a government bailout. Marijuana, California’s biggest cash crop, brings in about $14 billion in sales every year, more than the state’s most important legal crops, vegetables and grapes, combined.
Unfortunately, this revenue isn’t going into the state’s bone-dry coffers but to criminal gangs who reap the giant windfall while taxpayers see their dwindling dollars spent on a failed drug war. If voters approve California’s Proposition 19 in November, hundreds of millions of dollars currently in the hands of criminal gangs will be transferred to legitimate taxpaying businesses while at the same time eliminating the high cost of policing, arresting and incarcerating the state’s estimated 1.6 million current marijuana users. A 2009 report by the California State Board of Equalization, using an estimated $50 per-ounce tax rate, suggests that about $990 million could be raised by taxing and regulating the retail sale of cannabis to adults while generating another $392 million in sales tax at state and local levels, bringing the total estimated revenue from taxing marijuana to $1.4 billion.
Supply and Demand
Supply and demand is probably one of the most fundamental concepts of economics and is the underlying concept of President Nixon’s initial War on Drugs. He believed — along with every US president since then — that eliminating supply would curb the demand for drugs. This premise was also the foundation of the Volstead Act, the 18th Amendment to the US Constitution, better known as Prohibition, a debacle that lasted for from 1920 to 1933, during which alcohol consumption increased to record levels. The other side of supply and demand is what is taught in business schools. If you have a limited supply of something of value or if that something is difficult to acquire, then rather than eliminating the demand, the price goes up. When the demand is great, then the price goes up even more. We have already established there is a great demand for marijuana, and because of its illegality it is difficult to get and the supply is limited. The result is that today on the current illegal “retail” market, marijuana costs between $300 and $450 an ounce — a tremendous incentive for the criminal trade.
How much are we talking about?
It is no exaggeration to say that legal marijuana can save the economy, and greater minds than my own make the case. A recent report endorsed by more than 500 economists — including Nobel Laureate Milton Friedman — estimates that legalizing marijuana would save $7.7 billion per year in government expenditures nationwide just by cutting out the enforcement of prohibition. Billions more could be earned by taxing sales of marijuana around the country, as has been proposed by Proposition 19, and even more will be created by the ecologically friendly hemp industries, which will include thousands of products, such as ethanol and biodiesel fuel for automobiles, Dutch-style marijuana cafes and the hundreds of subsidiary businesses created by legalizing marijuana.
Money saved is money earned
Benjamin Franklin knew what he was talking about when he said, “A penny saved is a penny earned.” There will be a two-sided savings by ending the current war against marijuana: The money not spent on fighting the war and the money earned by the hemp and marijuana industries that are created. Harvard Professor Jeffrey Miron released a report in 2010 looking at the costs of drug prohibition. His report estimates that legalizing marijuana would save California roughly $1.8 billion per year in expenditures on enforcement of prohibition.
Spending on the War on Drugs has increased with each successive year since its inception. Today’s drug war budget of $15.1 billion is 31 times Nixon’s original budget of $100 million, even when adjusted for inflation. When it’s all added up, the cost from 1970 to today totals $1 trillion and hundreds of thousands of lives. But, unfortunately, all of that money has done little to stop the flow of drugs. While drug war spending includes all prohibited drugs, marijuana — the most popular illegal drug in the nation — represents the greatest portion of that budget and nearly half of all US drug arrests are for marijuana.
Further proof of marijuana’s ranking in our War on Drugs can be witnessed on the balance sheets of the notorious Mexican drug cartels, which currently supply a bulk of all illegal drugs entering the US. These murderous gangs gross nearly three times as much in marijuana profits as they do for cocaine, their next most profitable drug.
A 2010 analysis compiled by Associated Press reporter Martha Mendoza provides a breakdown
of how our War on Drugs tax dollars have been spent over the past 40 years:
- $20 billion fighting drug gangs in countries that supply the US with drugs.
- $33 billion to market Just Say No-style ad campaigns aimed at youth.
- $49 billion to police the borders, in particular the Mexican border, where most drugs cross.
- $121 billion to arrest more than 37 million nonviolent drug offenders, about 10 million of them for possession of marijuana, even though studies show that incarceration will likely increase drug abuse.
- $450 billion to imprison drug offenders in federal prisons. In 2009, half of all federal prisoners were serving time for drug offenses. (This figure does not include the cost of state and county lockups or city jails.)
- The Justice Department estimates an additional $215 billion in costs each year caused by the strain on our overburdened judicial and health care systems, the loss of productivity and environmental destruction.
What about the children?
Back in 1996, as California prepared to become the first state to legalize medical marijuana with passage of Proposition 215, myths and misinformation about marijuana started appearing throughout the media. As the November election nears, these worn-out arguments are being resuscitated. Prohibitionists continue the claim that marijuana is a dangerous drug, even though it has no lethal dose and no recorded death in history. They will talk about “marijuana addiction,” another misnomer, when marijuana’s level of “dependency” is on a par with or below that of caffeine. But once these and other groundless arguments have been debunked, the prohibitionists will pull out their secret weapon, a fallback position that has worked like a charm over the years: “What about the children?” they will ask. “If marijuana is allowed for adults, it will send the wrong message to kids.”
It happened just recently. Earlier this year when current US Drug Czar Gill Kerlikowske spoke to California’s police chiefs, he stated: “We’ve seen the problems of medical marijuana here in this state ... where kids are given the message that since marijuana is a medicine, it must be safe.” This is classic bait and switch. The “problems of medical marijuana” alluded to by Kerlikowske don’t actually exist, which is why he hasn’t named any, so because there aren’t any real problems with medical marijuana, he reverts to the argument that “allowing medical marijuana is sending the wrong message to kids.”
Kerlikowske should take a look at the Netherlands, where marijuana can be purchased by adults in coffee shops and where, according to the World Health Organization, when compared with the US, “there are lower levels of use, particularly among younger adults.” Only 7 percent of Dutch teens have tried marijuana by age 15, while in the US, with strict laws against marijuana, as many as 20.2 percent of teens have tried marijuana by age 15.
Today we know that the warnings about medical marijuana in 1996 didn’t come to pass. In fact, just the opposite occurred. Ten years after Proposition 215 was enacted, a study looking at the effect of medical marijuana laws on young people found that the number of ninth-graders reporting marijuana use in California actually declined by 47 percent between 1996 (when Proposition 215 was enacted) and 2006.
Those who oppose Proposition 19 on the grounds that it sends the wrong message to kids and are truly concerned about the welfare of children should consider the fact that California's proposed budget cuts — which can be alleviated by the tax revenue from Proposition 19 — will cause 1 million children to lose health benefits or coverage while cuts that have already gone into effect have caused schools, parks and libraries to be closed for lack of funds to maintain them.
We have spent a trillion dollars over the past 40 years fighting a drug war that — if the goal is to reduce the sales and use of drugs — has been a complete failure. Doing the same thing over and over again and expecting a different outcome ... isn’t that the definition of insanity? Isn’t that the wrong message to send to kids?
Alaine Lowell, producer and director of "Grow Dutch" (growdutch.net), a documentary about marijuana in the Netherlands, is the author, along with Dutch marijuana expert Wernard Bruining, of the soon to be published "Going Dutch: How Marijuana Can Save the Economy." Excerpts of “Going Dutch” will be appearing at pasadenaweekly.com until the week before the election. Contact Alaine at alainel@sbcglobal.net.
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Comments
Passage of the CA Proposition 19 will deal a serious blow to the Mexican drug cartels and to the "drug war" in general. It will also restore sanity to the California State budget by collecting sizable Cannabis revenues and eliminating the wasteful spending on the so-called anti-Cannabis "enforcement". It is established by the science of addiction medicine that the so-called "gateway drug" theory, advanced by the opponents of the measure is a complete fantasy, as is the assertion that Cannabis is "physically addictive". Cannabis is NOT physically addictive, as there is no clearly definable and reproducible PHYSICAL withdrawal syndrome, associated with its use, as opposed to truly physically addictive substances such as opiates or alcohol. In fact, the latest addiction medicine research reveals that Cannabis may serve as an "exit" substance with the potential of helping former alcoholics or hard drug users to abstain from alcohol, hard drugs, or even dangerous and physically addictive prescription drugs! It is also being established that Cannabis use may help prevent such serious illnesses as cancer and Alzheimer's disease! Cannabis use also suppresses violent urges and behaviors. Let's not be intimidated by the scare-tactics of the "opponents", but be motivated instead by science, reason and understanding of these issues, and this means voting YES on California Proposition 19 on November 2!
posted by doctork on 9/09/10 @ 01:47 p.m.
The fact remains, no matter how high everybody may get from any freshly-legalized bud, THE BEST that will ever happen to the economy from legalizing marijuana is just a quick-fix.
The primary problem is, America's economy is no longer focused as a grand producer of manufactured goods (except for maybe, military hardware). And while converting some (or even much) of our nation's agricultural capacity as a hemp products provider, that alone simply does not have the encompassing capacity to "turn" our severely assaulted economy around.
First and foremost, corporations must be denied "personhood." Next? NAFTA needs to be rescinded. And finally, America's modern robber-barons of the Federal Reserve need to be functionally annihilated as a monetary force.
America needs to get Constitutional again and stop outsourcing its banking needs. Until that happens, all other fractured "fix-it" tactics and strategies will just be nostrum.
DanD
posted by DanD on 9/10/10 @ 10:38 p.m.
Cannabis prohibition has never been, and is not based on science. Passage of the CA Proposition 19 will deal a serious blow to the Mexican drug cartels and to the "drug war" in general. It will also restore sanity to the California State budget by collecting sizable Cannabis revenues and eliminating the wasteful spending on the so-called anti-Cannabis "enforcement". It is established by the science of addiction medicine that the so-called "gateway drug" theory, advanced by the opponents of the measure is a complete fantasy, as is the assertion that Cannabis is "physically addictive". Cannabis is NOT physically addictive, as there is no clearly definable and reproducible PHYSICAL withdrawal syndrome, associated with its use, as opposed to truly physically addictive substances such as opiates or alcohol. In fact, the latest addiction medicine research reveals that Cannabis may serve as an "exit" substance with the potential of helping former alcoholics or hard drug users to abstain from alcohol, hard drugs, or even dangerous and physically addictive prescription drugs! It is also being established that Cannabis use may help prevent such serious illnesses as cancer and Alzheimer's disease! Cannabis use also suppresses violent urges and behaviors. Let's not be intimidated by the scare-tactics of the "opponents", but be motivated instead by science, reason and understanding of these issues, and this means voting YES on California Proposition 19 on November 2!
posted by doctork on 9/15/10 @ 06:44 a.m.
Top notch article! I would expect no less from Pasadena Weekly.
posted by Zardoz on 9/29/10 @ 08:40 a.m.
"Those who oppose Proposition 19 on the grounds that it sends the wrong message to kids and are truly concerned about the welfare of children should consider the fact that California's proposed budget cuts — which can be alleviated by the tax revenue from Proposition 19 — will cause 1 million children to lose health benefits or coverage while cuts that have already gone into effect have caused schools, parks and libraries to be closed for lack of funds to maintain them. "
I think that pretty much sums it up. Thanks for an enlightening article :) Looking forward to future installments.