Brave New Marketplace

By James Collins

The global economy is stalled. There is little argument to be made on that subject. While slow recovery is beginning to peak its head out of the detritus of the banking crisis, there is still endemic unemployment and a marked decline in prosperity across the western world. It is true that capital markets look strong on the surface, but the story on the streets is a far different one. Sales are down across the board, things are just not picking up the way people hoped they would.

On January 1st of this year a pilot project began in the United States, specifically in the state of Colorado. The first day of sales saw estimated figures of 1 million USD. That’s over six hundred thousand GBP in sales, in one single day. The rest of the week saw similar sales figures, and they don’t really show signs of slowing down. The total figures for that week are over 3 million GBP when converted from American dollars.

Sales like this shouldn’t be a surprise. Those sales figures have maintained for years, except that it used to be off the books. We’re talking about the legitimization of an entire black market economy through regulation. We’re talking about legal cannabis. Cannabis is already on the streets. It is in every city and town across the known world, even in the places where you can be executed for possession. Cannabis is here to stay; historical evidence of its use predates literacy and metalwork, so perhaps it is time to consider how we learn to live with it.

Total sales of medicinal and recreational marijuana in Colorado in USD Jan - July 2013

Fast food giants and other retailers are struggling to meet growth projections. It is increasingly difficult to squeeze the dollars out of the consumer market with so many out of work, and so many more afraid that their future is insecure. It’s a desperate state of affairs when even the giants of industry are having trouble peddling their wares to the consumer public. Legal cannabis offers a boost to an economic engine with decidedly reduced output.

There is an argument to be made about public safety. The trouble is that public safety has not been addressed by the current state of the prohibition regime. Criminals are still selling cannabis, and the money is flowing out of the regular economy into the black market to the tune of billions a year globally. Children and teenagers have wider access to illicit substances than regulated products like alcohol and tobacco. Even with prohibition the social damage cannabis might do is done, and then compounded further by empowering a criminal element instead of legitimate markets. We’re just not safer with prohibition than we would be with regulation.

The state of Colorado has a population of roughly 5.3 million people. That estimate is current as of January 1st 2013, meaning that it’s probably a few thousand more people by now. With legalized cannabis some predict we’ll see that population number jump somewhat in the next couple of years. That might be true, although I’m not sure the state government there would be thrilled to find out every cannabis user on Earth is now thinking of migrating to their jurisdiction.

The population of Colorado spent in the range of one dollar per person per week with the advent of legal recreational cannabis sales. It’s hard to imagine a product which is not a basic necessity of life which people consume on quite that level. Alcohol and tobacco are in that range, in fact you’ll find that other than food, clothing and shelter, people spend more of their income on vices of various kinds than just about anything. Vice is a very profitable line of products.

The current population of the United Kingdom is about 63 million people. That is roughly 11.9 times the population of Colorado. This estimate leaves a fair margin of error; population figures for Britain are two years older than those for the United States by virtue of when census dates happen to fall, so our back of the envelope estimate will be on the low side even on that basis alone. If we assume that cannabis consumers in the United Kingdom are probably about as enthusiastic as those in America, we can just simply multiply the sales figure in Colorado by the population difference to the United Kingdom and we come up with a projected first-week figure of 39.7 million GBP in gross sales. The figure is pretty astonishing in a marketplace which is generally considered to be stalled, and some argue still in a state of decline.

If you expand those figures, averaging the same sales per week over fifty two weeks, you come to a figure of about 2 billion GBP. One can guess that sales will peak during major holidays, and decline during other periods, so we’ll just average it out for the sake of ballpark estimates. It’s 4.7 million GBP per week in London alone, for a total of 244.3 million GBP per annum. You can’t off the top of your head imagine a product line that could possibly threaten a quarter of a billion in sales in the city of London alone in the first year. These figures aren’t even pie-in-the-sky; they’re the low waterline of expectations, the performance of a fledgling marketplace.

Right now the program in Colorado is restricted to a handful of stores, 14 of them sold that five million dollars’ worth of cannabis in a single week. They continue to sell like this; the proprietors of these first few legal retailers are bathing in profits. Only a few more outlets have since been licensed across the entire state with a population of just over five million. A license to sell cannabis products is a license to print money, even when faced with a program of regulation and taxation more restrictive than that applied to firearms in the same jurisdiction.

My projection of figures into the United Kingdom is based on the limited pilot project that restricts purchase size to one ounce, roughly twenty eight grams, and only allows a handful of outlets. This is still an experiment we’re talking about; those sales figures don’t begin to approach the levels of the black market for the same product. They’ve taken a small chunk out of that underground economy and brought it into the light, to be taxed and regulated and employ people in an above board fashion. There is much ground to be gained yet.

People are already spending this money on cannabis. The fact is that the underground economy is thriving, and despite poor quality, high prices and the pervasive threat of legal prosecution for possession and distribution thereof cannabis use continues to flourish and grow across the United Kingdom and the entire globe. Some very shady people and organizations become involved in the trafficking of illicit substances because it is a source of easy and seemingly limitless income. Drug money goes into all the wrong hands. In some cases human smugglers use slave labor to grow cannabis in factory farms under heinous and unhygienic conditions. The intervention of regulations and oversight could only improve the state of the drug trade, one which predates modern economics and will never likely be eradicated.

To make such an industry legitimate, as has been done with alcohol, changes the demographic of the profiteers. People make billions in legitimate income, employ tens of thousands of people, and pay millions in taxes selling ethanol-based beverages. There are five thousand deaths attributed to alcohol overconsumptions in England and Wales alone every year, but it is a risk that society assumes on the basis that the responsibility to control consumption belongs to the individual. Even with dangerous products on the streets the number of deaths associated with cannabis is insignificant by comparison. The risk verses reward test seems to fall on the side of Tax and Regulate over Prohibit and Enforce.

There is another fact that alcohol sellers are well aware of: The vice trade is not only recession-proof; it is one of the only industries which grows during an economic downturn. Sales of alcohol are more robust than ever, with economic decline increasing the daily stress of the average person. People will spend money they should have spent on more important things in times of hardship simply to relieve the daily grind of being broke and poor. As an element of a larger investment portfolio trading in cannabis could act as a hedge against decline in mainstream consumer markets by being part of a long-term diversification scheme.

Cannabis dispensary in Coloarado

A selection of legal cannabis in Colorado.

Cannabis grown and sold by publicly traded companies could become a new investment market all their own. Aside from that, they hope to stimulate other industries as well, like transport and retail sectors. Cannabis as an investment, even from the perspective of commodities speculation, could become a new blue chip investment in times of wild uncertainty in marketplaces. When you remove the caricature of propaganda that has been associated with it and just look at it the way you do beer, the face of cannabis becomes one not of mischief and social decay but of profit and growth.

Like any other product it promises an entire spectrum of peripheral industry and employment. It has to be grown and then dried and packaged. From there it must be shipped, and unpacked, and then sold to people who take it home and use it. That means farmers and labourers, forklift drivers, long haul truckers, shippers and receivers, salespeople and delivery persons will all get jobs. Those jobs will pay wages that get taxed and help keep a floundering public sector afloat, aside from stimulating private industry.

Those people will buy things with their wages, like food and homes and cars. They have to wear clothes; they want electronics and other expensive toys. All that money made from cannabis will flow into other markets as well. It is a quarter of a billion pounds taken away from gangs of criminals and put in the hands of decent tax-paying citizens in London alone, many of whom don’t even use cannabis, couldn’t hurt a struggling economy.

Another step removed from the actual sale and distribution of cannabis is the already bourgeoning paraphernalia market. Water pipes and vaporizers are increasingly popular, as are edible products and other medically focused cannabis derivative products. Cannabis is demonstrating a magnificent capacity as a raw material for a whole new scope of consumer goods, most of which aren’t even intended to get people high. Increasingly complex products like vaporizers mean factories and skilled workers. More corporate profits and salaries to tax, more VAT from the end buyer in the shop. We’re not just talking about little bags off weed; we’re talking about a major commercial industry waiting to happen.

After eight months of legal cannabis sales in the state of Colorado people are still going to work. The roads are not clogged with traffic accidents, violent maniacs are not running through the streets. The people that were using too many drugs the day before legalization are still using too many after legalization, and everybody else is behaving the same way they were last year about this time. The only difference is that a few shrewd business people are making millions of dollars a week supplying a demand that has always existed.

We keep hearing about how we live in a new normal. We live in a new world with new market realities to address and new challenges to overcome. In a global economy with few good luck stories to share a new perspective on cannabis use in modern society is yielding vast returns in America. The war on drugs has been a costly failure, and a best practices approach seems to at the very least reduce the social harms of an unavoidable phenomenon while providing greater economic stability when that is a scarce commodity. Everybody wins, public opinion polls support it; it makes you wonder when Westminster will wake up and smell the smoke in the breeze.


James Collins is a Canadian blogger, author and activist. This article originally appeared in Weed World earlier in the year.

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