With all the debate regarding the legalization of marijuana for recreational use in Colorado and Washington, one unintended consequence gets lost in the shuffle. As supporters and cheerleaders of small-business innovation, do we celebrate the advent of a new, in-demand, startup industry? Or, as supposedly morally-minded, professional business people, do we lament entrepreneurship's noble reputation being dragged into something as ignoble as pot-growing? Some points to consider:
Legal Really Does Mean Lawful
Tobacco, alcohol, and gambling are similarly considered "vices" by most societal standards and have proven to be potentially addictive, yet general society not only accepts, but celebrates entrepreneurship in these areas, such as craft beer-brewing, ESPN poker tournaments, and Bud Light Super Bowl commercials. Also, like cigarettes and alcohol, marijuana is a perfectly legal, commercial product (in specific states, so far) albeit with restrictions on its growth and distribution, so why shouldn't entrepreneurs benefit from a legal activity?
Like any legal commercial product, marijuana's sale to the general public will generate taxes, increasing a state's revenues that can be applied to community projects, infrastructure, education, and other positive benefits. And from a policing perspective, bringing a previously illegal business into the light of day has the potential of limiting black market operations and the violence and abuse that always accompanies hidden, criminal activity. So what's good for the state must be good for entrepreneurship.
This Is Your Brain on Drugs
But who are we kidding? The DEA classifies marijuana as a Schedule 1 substance -- the same category as heroin, LSD and Ecstasy. And the science is pretty clear about both the short and long-term effects of pot-use: it's a gateway to harder and more lethal drugs, and its effect on developing brains among teenagers and young adults may be irreversible.
The "high" that pot produces impairs judgment to the point where even minor use will impact the effectiveness of our labor pool. While alcohol is eliminated from the body at a rate of about one unit/hour (approximately one glass of wine), the chemicals in one joint still remain after 24 hours. Do you really want to support an industry that lets your accountant grab a few tokes right before your meeting with the IRS? Do you want the guy on the Honda assembly line, who's supposed to ensure your brake pads work, to take a few hits during his lunch break?
Also, one joint deposits four times as much tar into your lungs as one cigarette. Do we just toss out all the knowledge we've gained about the cancerous effects of cigarettes? Do we just ignore the gut-wrenching, heartbreaking lessons we've learned from lung cancer and emphysema deaths, only to have this conversation all over again in 20 years?
Retail Can't Compete With Black Market
Contrary to the point above regarding the benefit of legalizing a previously criminal activity, the onerous taxes and prohibitive regulations of legal pot will just increase black market operations, and the violence and criminality that inevitably accompany the sale of vice-related products. Heavy regulation and the need for increased security lead to high operator expenses that get passed to the consumer as higher prices. And then there are the taxes.
Consider the numbers: Legal marijuana in Denver carries a regular city 8 percent sales tax, a 15 percent Colorado excise tax, a 10 percent Colorado special sales tax, plus Denver's own special sales tax of 3.5 percent. Then there are also cultivation limits, which hinder the actual production of a viable quantity of the product, further driving up demand, and hence, the price.
If the consumer knows he now can't be arrested for holding 1 oz. of pot, why should he buy it legally for about $400 plus taxes, when he can get it on the black market for $225? Or, he can grow up to six plants at home for free, and share it with whomever he wants.
Time will tell whether the marijuana business will be a viable, revenue-producing commercial activity, no different than a liquor store or a casino, or whether it will be another example of social engineering gone awry. Either way, the word "entrepreneur" is certainly going to take on a whole new meaning. What say you?