Sam Riches is a freelance journalist in Toronto.
Last month, when Prime Minister Justin Trudeau visited Toronto City Hall, he was asked about his government's plan to legalize, regulate and restrict marijuana use. He responded with his usual talking points about legalization weakening organized crime and keeping marijuana away from kids. What he left out was what so many have been hypothesizing and salivating over: the profit margins.
Each week, there seems to be a new headline declaring that piles of cash will soon flood into the economy once legalization comes into effect. The latest report, from CIBC World Markets, says Canada's federal and provincial governments could pocket $5-billion a year in tax revenues from the sale of legal marijuana.
A few major players are set to cash in, most notably Tweed Marijuana Inc., which absorbed its closest competitor, Bedrocan Cannabis Corp., in a $61-million deal this past summer. As for the rest of us? We'll hardly notice. The economic impact of legalization will be negligible.
The $5-billion figure, a blip in a near $2-trillion economy, comes with a few caveats. It does not account for the enormous undertaking of building the necessary framework to support legalization. There will be regulations around marketing, sales, production and transportation, and each province and territory will have different systems dependent on their needs, resulting in an expensive patchwork of regulatory parts.
Most glaringly, we still need to implement an effective roadside test for marijuana impairment, and determine at what level a user becomes impaired. Not a simple task, since individual tolerance ranges wildly. We're also not likely to save much in criminal justice expenditures, as the laws around marijuana are applied selectively, in an almost de facto legal state, so legalization will only be making the current situation official.
The CIBC's findings are also dependent on the elimination of the illicit market, which is unlikely to happen. Dispensaries will have limits on their operations, require proof of age, have set price criteria and potency constraints. These are important and necessary restrictions, but they also ensure that others will still turn to the streets. It is, after all, not an open-ended system we are creating, but a restricted one.
The most critical part of all this, though, is that while $5-billion is not an insignificant sum, it is, as the CIBC study notes, just 0.25 per cent of Canada's GDP. Avery Shenfeld, the economist who crunched the numbers, referred to the amount as "no barnburner."
So why are we acting like we smell smoke?
Previously, Mr. Trudeau has stated that he expects only "modest returns" from legalization, and that the money should be earmarked for addiction and support programs.
This has been thoroughly mocked by his political opponents, but Mr. Trudeau has maintained from the earliest days of his campaign that legalization is not about "being a money maker but about public health and safety," and on that front, he has it right.
The Centre for Addiction and Mental Health, Canada's largest mental health and addiction facility, called for legalization two years ago, citing how Canada's marijuana prohibition fails to prevent or reduce harms associated with its use. The hospital encouraged a framework that addresses and prevents cannabis-impaired driving, grants better access to treatment and reinvests profits into education and prevention.
Mental health problems and illnesses cost the Canadian economy, conservatively, $50-billion a year, nearly 3 per cent of our GDP, according to a 2011 report from the Mental Health Commission of Canada. Now that is a figure that matters. The cumulative cost of providing treatment, care and support services over the next 30 years is expected to exceed $2.5-trillion, the study found. If marijuana legalization leads to some extra cash being filtered into public health, in a country where one in five people is affected by mental illness, this can only be construed as positive.
The war on drugs has been a massive ideological failure. The deleterious effects of prohibition are wide-ranging and shameful – wasted resources, ruined lives, overcrowded prisons, laws informed by racism – all the while ignoring that cannabis has legitimate medical benefits. The voice of medical marijuana users has mostly been suppressed in the current national conversation and now, as we linger in this interstitial stage, raids on legal dispensaries are being conducted, and people on both sides of the law are operating in states of confusion.
The day legalization arrives will mark the beginning of a new approach, well past due. There will be benefits to be had, but a substantial economic boon, unfortunately, is not one them.