B.C.'S MARIJUANA INDUSTRY ADDS BILLIONS TO OUR BOTTOM LINE

Its impact is felt everywhere, especially in some small communities that
are becoming dependent on pot

If you're looking for evidence of B.C.'s booming marijuana industry, you
don't have to look far.

Flip to the "hydroponic equipment" section in your Yellow Pages and you'll
find listings that fill 2 1/2 pages. Some companies have even placed
half-page, full-colour ads, advertising multiple outlets and
seven-day-a-week "superstores."

(One, in what appears to be either a typographical error or a Freudian
slip, boasts that it offers "Export advice.")

In Toronto, there are listings for only 13 hydroponic stores.

In Vancouver there are 32.

That's twice as many listings as there were in 1997 (14) and more than a
10-fold increase since 1991, when there were only three.

Indeed, there are now twice as many listings for hydroponic stores as there
are Burger Kings (17).

Store owners contacted by The Vancouver Sun refused to comment on the
reason for their runaway success.

But, as Staff Sergeant Chuck Doucette of the RCMP's drug awareness section
puts it: "There aren't that many people growing tomatoes."

Last week, the Organized Crime Agency released details from a new
intelligence report that pegged the annual wholesale value of B.C.'s
marijuana production at $6 billion.

If true, that means marijuana has become one of the largest commodity
industries in the province, comparable in size to logging.

And given that police estimate as much as 95 per cent of our marijuana is
destined for the U.S. market, it could well be our largest U.S. export --
ahead of our top legal exports of sawmill products ($4.6 billion) and oil
and gas ($2.5 billion.)

The OCA's estimates of the number of people employed by the trade -- an
average of six per grow-op, or up to 150,000 people -- would make marijuana
one of the province's biggest employers, ahead of construction.

The size of B.C.'s marijuana trade puts us in a position likely without
precedent in North American history.

"I'm not aware of anywhere in North America where a single [illegal]
industry would be this important," said Jim Brander, a professor of
business economics at the University of B.C.

For marijuana advocates, such news is cause for celebration.

"Marijuana is the best industry any province can have," said B.C. Marijuana
party president and pot activist Marc Emery. "And people are damn lucky to
have it."

But others say the growing pot trade is cause for concern.

"I don't on the whole think it's healthy," said Mark Wexler, a professor of
business ethics at Simon Fraser University.

Criminal industries can create a whole host of problems, Wexler said,
everything from discouraging young people from pursuing higher education
(because "you don't need an MBA" to work in the lucrative pot trade) to
breeding violence (because growers can't rely on the courts to settle
business disputes.)

And as some B.C. communities, especially smaller ones, become increasingly
dependent on revenue from the marijuana trade, police may face growing
public resistance when they try to enforce the law.

"It's the kind of problems we associate with Colombia," Brander said.

Measuring the size of an illegal industry is difficult.

Detective Anne Drennan, spokeswoman for the OCA, said the agency's
estimates are based on intelligence gathered by police, including
information on the number of complaints received by police about growing
operations in the community.

The agency estimates there are 15,000 to 20,000 growing operations in the
Lower Mainland and a total of 20,000 to 25,000 across B.C.

If the OCA's estimates are correct, that means there is a growing operation
in at least one in every 46 homes -- possibly as many as one in every 35.

Emery, for one, thinks the OCA's numbers are too high. He estimates the
province's pot trade is worth about $4 billion, not $6 billion, and
estimates about 60,000 people are employed full-time in the pot trade.

But that would still make it one of the province's leading industries.

B.C.'s economy as a whole is worth about $120 billion. On the face of it,
then, the marijuana trade could make up as much as five per cent of our
economy. But that only represents the wholesale value of the marijuana
produced in the province.

And just as annual sales of lumber don't give a full picture of the size of
the forestry industry, the OCA's estimates of marijuana production don't
account for the "spin-off" economic benefits from the trade.

The tool usually used by economists to measure an industry's impact on the
economy is the "multiplier effect" -- the idea, for example, that when you
buy a new car, the person who sold you the car will feel richer and buy
some new clothes, and so on.

Measuring the multiplier effect for B.C.'s legal industries like tourism
and logging is difficult enough, said Lindsay Meredith, an economist at SFU.

Measuring it for an industry that, by definition, doesn't want to draw
attention to itself, is downright impossible.

"I have no idea what the multiplier effect for the marijuana industry would
be," Meredith said.

But he added there are a couple of reasons to believe it could be high --
perhaps as high as two or three times marijuana's wholesale value.

The first reason is that, by police estimates, the vast majority of the
marijuana produced in B.C. is for export -- "possibly as high as 95 per
cent," according to Drennan.

Money made from exports tends to go further than domestic dollars, Meredith
said.

"Ideally, what any country wants to do is produce for export to other
countries," Meredith said. "It creates a trade surplus and makes the
currency stronger."

The other reason to believe marijuana money may go far is that, because the
trade is illegal, those involved in the industry may be more likely to
spend their money than to hold on to it.

"The multiplier effect is probably augmented because it doesn't go into a
savings account," Meredith said.

However, the experience in other criminal economies -- like that of Bolivia
- -- suggests the opposite can also occur.

One of the biggest problems with criminal profits is that those who make
them are less interested in investing in productive parts of the economy
than they are in hiding their ill-gotten gains.

That can result in large pools of money being essentially "parked" in
real-estate or offshore accounts.

Indeed, police say one of the things that distinguishes those in the
marijuana trade from hard drug dealers is that they tend not to spend their
money in ways that will draw attention to themselves. It is only after they
are arrested that police usually discover large quantities of money stashed
away.

"I think they've gotten smarter," said Constable Tom Clark, an RCMP drug
awareness officer in the Kootenays. "They realize if they drive around in
new cars and go on lots of trips, police are going to look at them more."

It happens every year in Nelson.

Around September or October, people come into town from the rural Slocan
Valley and lay down a lot of money for fancy dinners and drinks at the bar.
It's as if everyone got their paycheque at once. And, in a sense, they have.

"The outdoor [marijuana] crop has come in and they've gotten paid,"
explains Drew Edwards, managing editor of the Nelson Daily News.

The vast majority of B.C.'s marijuana industry is based in the Lower
Mainland (the OCA estimates anywhere from 75 to 80 per cent of the
province's growing operations are here.)

But it may be in places like Nelson, with little other industry, where the
impact of the marijuana trade is most keenly felt. And where one can most
plainly see the beginnings of an economy based on crime.

"I can't imagine another community that would be affected as dramatically
as Nelson were marijuana to disappear tomorrow," said Edwards, who wrote a
book, WEST COAST SMOKE, about the pot trade in the Slocan Valley. "This is
a very important part of the economy of Nelson, and the Kootenay region as
well."

Edwards is convinced Nelson's economic success - a bustling downtown with
many bars and restaurants - is due in large part to profits made in the
drug trade.

"I just don't see where that economic stimulus is coming from strictly
based on legal economic factors," he said.

Even the RCMP's Clark conceded Nelson's economic success is hard to explain.

"The town of Nelson really doesn't have a large industry," Clark said.
"There's a lot of tourism and-some people are saying - a lot of dope."

But Clark is reluctant to give the pot trade too much credit.

"If tomorrow all the marijuana were gone, Nelson wouldn't shut down and
die," he said. "I just can't believe that."

Edwards doesn't think Nelson would die either. But it would definitely be
injured, he said.

"We'd definitely be hurt," he said.

"You'd see a reduction in disposabe income and a drop in the number of bars
and restaurants."

What makes Nelson's marijuana trade different from Vancouver's, Edwards
said, is the large number of people involved in the trade.

Instead of a few massive growing operations run in abandoned houses by
criminal syndicates, in Nelson there are large numbers of smaller
operations run out of people's own homes to supplement their income.

"In Nelson, the people growing marijuana are your neighbours and your
friends," he said. And that means people are more reluctant to call the
police when they learn of a grow-op in their neighbourhood.

Clark agrees that what sets Nelson's marijuana trade apart from Vancouver's
is "smaller grows and maybe more ofthem."

And he concedes that, given the likely size of the pot industry in the
region, there doesn't seem to be nearly as many busts as in the Lower
Mainland.

"Are people less likely to inform on someone else?" Clark said. "In certain
areas, in the outskirts of Nelson, there may be a higher tolerance level."

Several polls have suggested a majority of British Columbians think
marijuana should be legalized (the latest pegging support at 52.4 pr cent.)

So far, however, that tolerance hasn't extended to marijuana production. A
poll last year found 81 per cent of those in the Lower Mainland support
existing laws against marijuana growing.

But, if the pot trade grows - and more and more people begin to profit from
it - some predict such views might soften.

Police might have problems enforcing the law, Wexler suggests, if marijuana
"becomes a predominant part of the economy."

Once an illegal industry reaches a certain size, as some suggest marijuana
has in B.C., it begins to distort the way the legitimate economy operates,
experts say.

Unlike peoople who work in legal industries, where success is due in large
part to sound business practices and hard work, those in the marijuana
trade can make money simply because they are willing to engage in an
illegal business that others are not.

Young people who see this may be discouraged from pursuing their education,
Wexler said, content instead to make easy money from the pot trade.

"If you're going to work outside the law, you don't need an MBA or a
nursing degree," Wexler said.

And once someone joins the illegal economy, he said, it can become a trap.

"If a large component of your workforce is outside the mainstream, that's
bad. Especially when they get older and want to get back in," Wexler said.
"If you're in the marijuana industry for 11 years, it's hard to then go
work for General Motors...it's not a career that leads to other industries
very easily."

In this way, the marijuana trade can create an illicit labour force,
because those who enter the pot trade and fail may have little choice but
to find other work in crime.

"The more peoople who make their living outside the law, the more likely -
if it doesn't work out - they may have to make their living outside the law
somehere else," Wexler said.

The second problem is that history shows economies that rely on illegal
industries, like Colombia or Bolivia, are usually very violent.

"The more an economy is illegal, the more that economy has the potential
for violence," Wexler said.

The reason is simple.

While legitimate businesses can seek recourse in the courts when they have
a dispute, illegal ones cannot - making it more likely that brute force and
fear will be used to enforece contracts.

"Legitimate businesses generally don't take the law into their own hands,"
Wexler said. "But illegal businesses do not have third parties to act as
intermediaries."

Indeed, police have reported a growing problem with home invasions
orchestrated by criminals to steal money and marijuana from rival growing
operations.

And those involved in the trade aren't the only ones at risk. Innocent
people are often caught in the crossfire - sometimes literally - of
criminal disputes.

But Wexler stresses the problem is not marijuana per se, but the nature of
any industry that is forced underground.

"Can marijuana be made legal and most of [those problems] go away?" asked
Wexler. "Yes."

But police aren't so sure.

Since most of the pot produced in B.C. is for export, even if it were
legalized in Canada there would still need to be an illegal element in the
trade to smuggle marijuana into the United States, Doucette said.

But John Conroy, an Abbotsford lawyer who defends marijuana growers, said
while there would likely still be some illegal smuggling, legalization
would legitimize the bulk of the industry - creating a situation similar to
when Canadian distillers fed the U.S. market during Prohibitioin.

"It would be much like the old rum-running days," he said.

Another problem with the illegality of B.C.'s marijuana trade, economists
say, is that it contributes to bad business practices.

"Any time an industry goes underground, it is carried out less efficiently
than it would be if it were a legal industry," Brander said.

Emery agrees, saying the most obvious example is the way marijuana is grown.

If the pot trade were legal, he said, marijuana growers wouild likely get
out of their basements and use greenhouses to take advantage of the sun's
natural - and free- light.

Emery said a legal industry would also have less turnover of equipment.

"The only reason you need those [hydroponics] stores is to replace
equipment destroyed by police," he said.

The lawless nature of illegal industries also increases the chances that
the profits made from the trade will be concentrated among those most able
to function profitably without laws.

"[Marijuana] does generate net income for the province," Brander said. "But
it may not be to the people we want."

The OCA has estimated that 85 per cent of the province's marijuana trade is
controlled by organized crime - primarily outlaw motorcycle clubs or
Vietnamese gangs.

That gives criminals access to "large pools of capital" that can be used
for other purposes, Wexler said.

Doucette said police believe organized crime uses the money made off the
marijuana trade to bankroll other criminal businesses - including bringing
large quantities of cocaine and heroin into the Downtown Eastside, feeding
a drug problem with real costs for the B.C. economy in overdose deaths and
property crime.

Doucette said police have uncovered several cases in which B.C. marijuana
has been traded directly for cocaine to avoid a money trail. (Though the
idea that pot is traded "pound for pound" with cocaine has largely been
discounted as a myth.)

"If it's bankrolling more mayhem, clearly that's very destructive,"
Meredith said.

The fact that the marijuana trade is illegal also makes it vulnerable - in
a way legal industries like logging are not - to sudden changes in police
tactics.

"If there were an international or domestic police crackdown, it could have
a significant effect on the industry," Brander said.

And, by extension, the economy as a whole.

"It would be a pretty big hit in overall economic activity. People would
buy smaller houses, fewer cars," Brander said. "Do we really want to be in
a position where so much of our provincial income comes from an illegal
crop?"

There is, of course, another concern with having such a large underground
industry in the province: lost taxes.

Clearly, the government already collects taxes from marijuana's spin-off
industries like hydroponic equipment suppliers.

Emery, for one said he pays about $60,000 a year in income tax from the
profits he makes on his various marijuana-support businesses, like seed
selling.

But the vast majority of the money in the trade - from the profits made by
smugglers to the wages paid to plant trimmers - is escaping the tax system.

"It would probably be worth a billion or two in revenues. That's the kind
of magnitude we're talking about," Brander said.

"The impact on the provincial budget if it were legal would be significant."

B.C's finance ministry refused to comment on whether legalizing marijuana
would be good for the provincial bottom line.

But Wexler said that governments at all levels may be forced to address the
marijuana issue head-on, whether they want to or not.

"If we were in a jurisdiction where marijuana was a much smaller
contributor [to the economy], we wouldn't be asking these questions," he
said. "But now we're at the point where this is big business."

An illegal industry that employs tens of thousands of people and may be
propping up the economies of small towns across the province cannot be
safely ignored, he said.

"The public [needs] to decide the degree to which the commercialization of
marijuana should be brought into the economy," Wexler said. "We need to
figure out what our approach to this is."