A News Consumer Politics — 25 May 2016

While there is a constant debate among policy and lawmakers about the possible impacts of cannabis in society and the health effects on its users, things seem to be different in Economics. As far as the financial growth concerns, there is far less skepticism about the effect cannabis might have on economic growth.

Economists are obviously more optimistic as sales of legal cannabis products increased by 17% in 2015, rehearing $5.4 billion, and sales are expected to increase by 25% in 2016, reaching a total value of $6.7 billion. In its annual report on the U.S. cannabis industry, Marijuana Business Daily predicts up to $44 billion in economic impact by 2020

Recent polls show that the majority of the population in the United States approves the end of federal marijuana prohibition nationwide. Of course there are differences in the policies that every state applies to cannabis sales in their district.

FIGHT THE PAIN Visa Prepaid Card Ad 3 V1In Colorado, adult use sales surpassed $100 million last year for the first time. Colorado collected $13.2 million in taxes and fees in August. Colorado cannabis sales were more than $996 million in 2015.

Washington state also saw strong monthly sales gains in 2015. Sales of edibles and extracts in Washington already number in the hundreds of thousands of units in a single month. Moreover as medical research proves the healing properties of cbd products, more and more patients become customers of this new range of medication.

The cannabis industry is fragmented into many sectors. The growing cannabis market features a variety of innovative consumer-facing products such as vaporizers, edibles and capsules. Beyond actual marijuana production and sales, more businesses are emerging, including security, insurance and e-commerce companies that support the entire supply chain.

A simple example of tremendous growth due to cannabis liberation is tourism. Marijuana is significantly boosting tourism in the states that made their laws more flexible. Tourists spend more and more. People want to go there to see what cannabis all about. A new range of products has appeared. For example in Colorado tourists go to visit the dispensaries that opened and combine hiking or skiing and other outdoor activities with some “high experience”.  In Washington, since cannabis is free for recreational use a whole bunch of new touristic products, like cannabis friendly hotels and guided tours in dispensaries, and several workshops and spa are offered. The market seems to adapt really fast to the new laws.

The main drivers of the growth in recreational sales are Oregon, Washington and of course Colorado. Since 2012 that Colorado legalized and taxed heavily the weed sales– many millions of dollars from these taxes are flowing every month towards school construction across the state.

But markets that get their profit from the recreational use of marijuana are not the only ones growing fast. Also the (older) medical marijuana markets are growing much faster than before, in states like Arizona and New Mexico where medical use is already permitted. The market is expanding in more states (Nevada, Massachusetts, and Illinois) as they start their own medical cannabis plans.

But, it’s not only the amounts that the states that liberated cannabis win. Additionally is the vast amounts of money that the federal government and the all the states were spending in order to keep up fighting for the War on Drugs, it is obvious that the new regulation has prevented these expenses and the money can be invested in a more productive way.

Although Tax revenue isn’t usually among the arguments of those supporting legalization of cannabis, states are collecting millions in tax revenue, so it’s an important part of the equation.  Usually the cannabis activists talk about the medical benefits of the plant.

There is also another dimension that we should think: It seems that all these years the cost of prohibition was very big, and somebody was getting rich from the prohibition. Now that the laws are more flexible, somebody is losing money.  It is proven that the legalization of cannabis took away the profits from the drug cartels in Mexico. It seems that all those who were profiting from the War on Drugs were mostly drug dealers after all.

When we take a closer look at last year numbers of marijuana seizures along the southwest border from the U.S. Border Patrol , we can clearly see that they reached the lowest level in at least a decade. Agents snagged roughly 1.5 million pounds of marijuana a relatively very small quantity compared to what we were used to for many years now.

Not only is cannabis the fastest growing industry in the US, but the smell of money makes more and Wall Street investors to decide that even if they are dressed in business suits and ties it’s time to think of cannabis investments opportunities with a quick turnover and exceptional growth rates.

When some time ago, a well-known market research firm (IBISWorld), had projected the sales of marijuana for medical use to increase to $13.4 billion in 2020 from $3.6 billion in 2015 the news has caught Wall Street’s interest. Since then hundreds of investors, keep an eye on the booming cannabis industry and the potential investment possibilities.

These numbers of growth and the successful experiment of Colorado is one of the main reasons that other countries also reconsider their prohibition policies and start making second thoughts. For example in England according to the Institute for Economic and Research, up to £900m could be raised annually through taxation of regulated cannabis market.

Economist say that marijuana economy has an economic multiplier of 4. That means that for every dollar spent on marijuana, another $3 is generated by the real economy. Even if, the cannabis economic growth could be easily affected by political developments, the wave of growth has a very big dynamic that it won’t be easy to turn back to a previous stage. When half the states of the country have passed laws legalizing medical Cannabis and an increasing number of states are thinking to legalize the use of the plant for recreational purposes, it seems that sooner or later the federal laws that still prohibits marijuana businesses for getting bank accounts, will have to reconsider their policies.

H. Hackman has studied Sociology and Law and has written about legal developments on psychedelics and cannabis for the last 10 years. He lives in Brussels.

 

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