In the previous issues of Canterbury Today and Auckland Today we began our review of the legal status of Class C drug marijuana.
In this issue we look at the economic impact of legalisation worldwide and the predicted impact – good or bad if any – that marijuana would have on our economy were it decriminalised or legalised.
The economic impact of legalisation in other countries
The medical value of marijuana is being recognised by an increasing number of medical professionals and policy makers worldwide and the medicinal use of cannabis is now legal, to some degree, in at least 20 countries.
“Many international markets – Colorado, Washington and Holland, to name but three – have shown that legalisation can result in huge tax boons,” writes NZIER principal economist, Peter Wilson.
Figures from state agencies show that in 2014 and 2015 Colorado collected nearly $6 million in revenue. In 2016 the state surpassed $1 billion in legal cannabis sales after 10 months.
Washington collected a reported $67.5 million revenue in the first year following legalisation and expects this figure to surpass $1 billion by 2019.
In other states, Oregon reported almost $3.5 million in the first month of state revenues. California is believed to bring in between $59 million and $109 million in tax revenue each year, while Arizona sees about $2 million and New Mexico collects around $650,000.
In Holland cannabis is one of the country’s biggest industries. Dutch ‘coffee shops’ in 2008 generated $2 billion in gross sales, resulting in $4 million in tax revenue.
Rates of sales tax differ between these markets but not one has reported a fiscal loss since legalising cannabis to whatever degree.
The icing on the cake, perhaps, is the amount of jobs ‘cannabis economies’ can create to combat the rate of unemployment, not to mention using tax revenue for research, drug prevention, education and treatment, or wherever else in the economy it may be needed.
The likely economic impact of legalisation in New Zealand
There is no guarantee that a marijuana economy in New Zealand would enjoy the same success as the international markets above.
Currently marijuana usage in New Zealand sits at around 11 percent of adults aged 15 years and over – approximately 388,666 people (Cannabis Use 2012/13: New Zealand Health Survey) – which gives some indication towards predicted legalised sales and tax revenue.
New Zealand Institute of Economic Research (NZIER) principal economist, Peter Wilson, concluded in his 61-2016 NZIER Insight report that “prohibition of marijuana, just like prohibition of alcohol before it, has been a costly failure”.
“A better way of lowering harmful marijuana use would be legalisation, combined with heavy taxation, regulation and education. The result should be less use, considerable fiscal savings to the Government and the removal of a valuable source of revenue for criminals.
“The New Zealand Treasury has calculated that a change in the legal status of marijuana could reap an additional $150 million in revenue and reduce spending on drug enforcement by around 40 percent ($180 million). From this, we can conclude that the cost of the current enforcement policy is over $300 million per year.”
A marijuana-based economy in New Zealand could certainly be a pecuniary incubator. It would bridge our two most illustrious industries: tourism and agriculture.
Dutch police estimate that 80 percent of production goes to foreign buyers (tourists), of which there are an estimated four million every year.
Some even argue that a marijuana economy in New Zealand would better support our au-natural ‘clean, green’ image than dairying, whose run-off is perpetuating alarming levels of pollution in our waterways.
What are the experts saying?
While in New Zealand to speak at a charity fundraiser, entrepreneur-extraordinaire Sir Richard Branson told Newshub journalist Samantha Hayes that New Zealand should swap cows for cannabis.
During the interview Sir Richard noted that we have the prime climatic conditions for growing and argued that a shift of focus in our agricultural sector would bring an abundance of benefits.
“We’ve done a lot of studies on the war on drugs and it’s been an abject failure, and what is absolutely clear to us, is that drugs should be decriminalised and people who have drug problems should be helped,” he told Newshub.
“You should legalise it, grow it, tax it, regulate it… I think that would be wonderful because obviously the amount of dairy cows that New Zealand has is damaging the rivers. If you could put some of that land over into growing cannabis it would be just as profitable for them, if not more profitable.”
One Kiwi capitalising on the marijuana movement is John Lord. He moved to Colorado and in 2009 established LivWell – now one of the largest legal marijuana dealers in the state that sells in excess of $80 million regulated product annually, employs approximately 500 staff and counts businessmen and retirees among its customers.
LivWell is believed to have driven the price of marijuana in Colorado down by 25 percent and driven street dealers out of the state.
Drug Foundation executive director, Ross Bell, believes our current drug law is obsolete and he supports the 2011 Law Commission recommendation that the Misuse of Drugs Act 1975 be repealed and replaced by a mandatory cautioning and health referral scheme.
“About 80 percent of the Government’s spending on tackling drugs goes to Police, courts and prisons. We have the balance wrong. It’s now time to re-focus Government’s efforts on drug prevention, education, treatment and rehabilitation,” Bell said in an April press release.
Poll after poll continues to show the majority of New Zealanders are now – historically they weren’t – in support of a cannabis law reform.
For the first time there are multiple parties contesting the election who advocate for cannabis law reform (the Greens, Labour, the Maori Party, ACT, TOP, United Future and the Cannabis Party). So who are the naysayers and why?
The Right Honourable Bill English told The AM Show in April that there’s already a “compassionate and legal” route for patients to get cannabis products if they need them.
“The minister’s just changed the rules so that’s a little bit easier, with the Ministry of Health now approving it instead of each one going to the minister. As far as we can see, that’s going to work pretty well and we don’t want to take it any further,” the PM said at the time.
Internationally, former commissioner of US Customs and Border Protection (2014-2017) and director of the Office of National Drug Control Policy (2009-2014), Richard Gil Kerlikowske is perhaps the most outspoken marijuana prohibitioner.
“Young people are getting the wrong message from the medical marijuana and legalisation campaigns,” he told USA Today.
“If it’s continued to be talked about as a benign substance that has no ill effects, we’re doing a great disservice to young people by giving them that message.”
Whether you’re in support of a law reform or not; in the spirit of societal, economic, cultural and human development, it’s hard to deny that marijuana makes a meritorious case for legal review.
By Natalia Rietveld