THE LUCRATIVE BUSINESS OF POT

Ask any of the 17,500 marijuana grow ops in British Columbia about
revenue, and according to the results of a new study, the answer would
be booming. In fact, the study, commissioned by the Fraser Institute,
estimates that the underground B.C. industry is worth $7-billion --
the largest in the country.

The report claims that the sector is doing so well -- almost as strong
as the province's forestry industry, which posted $9-billion in
revenue for 2004 -- that B.C. should legalize the drug and tax it.

The conservative think tank said it doesn't necessarily endorse the
political conclusions in the report.

But are things really so tough in this officially have-not province
that we need to resort to a major social, political and legal
re-engineering of how the system deals with cannabis?

The issue of legalizing marijuana is much more complex than the report
suggests. First, the report's estimates of the size of the underground
industry are inflated because of the way the calculations were
completed and the fact that they are based on data from a sector not
given to filing quarterly reports. Second, marijuana is a controlled
substance, which falls under federal law. That means the Canadian
government would have to change its laws before anything could happen
provincially.

Nevertheless, when added to the state of the provincial economy and
marijuana use in B.C., there is a certain logic to the report's
conclusions. In this respect, by virtue of limited police enforcement,
B.C. has de facto decriminalized marijuana use. For instance,
according to figures from Statistics Canada, only 13 per cent of
offenders arrested in B.C. for marijuana offences are charged compared
with 60 per cent for the rest of Canada. As well, the report claims
that B.C. has low penalties for conviction of cultivation offences,
with 55 per cent of individuals convicted in Vancouver receiving no
jail time.

Here, the province is implicitly following a trend similar to a number
of European nations and some Australian states that have
decriminalized cannabis. However, the drug is still illegal in those
regions and therefore not traded as a taxable commodity. The
Netherlands is the only country where marijuana products can be
legally sold and are subject to indirect taxation.

There are strong arguments to decriminalize the drug, given the fact
that its illegal status is largely a function of poor branding and
accidents of history. Marijuana use became a criminal offence in
Canada in 1923 at the same time that technological improvements
allowed the mass production of another drug, cigarettes, according to
Neil Boyd's well-known book on the history of drug policy in Canada,
titled High Society. At the time, marijuana was largely denigrated
socially and then legally because it was associated with jazz
musicians, madness and promiscuity.

History also offers some lessons about the economic benefit of
allowing the market to regulate morality as opposed to legislation or
the criminal justice system. For instance, by the late 1920s when the
provinces repealed prohibition laws, alcohol became the focal point of
a profitable industry in Canada. This shows that at least from an
economic point of view, moving to deregulate or decriminalize certain
commodities considered immoral or linked to immorality, such as
alcohol and more recently gambling in B.C., can create a powerful
economic sector that provides financial benefits for the larger community.

Social factors and costs make this economic argument more complex. For
instance, critics worry that decriminalizing or legalizing marijuana
will encourage tobacco smoking. And legalization raises issues such as
age, driving and potency restrictions.

So while the report is correct in pointing out that the province is
missing out on a large amount of revenue related to the underground
drug economy, the question becomes whether the public is ready to see
marijuana cigarettes sold at the liquor store.

But from a business perspective, when almost one in four Canadians
(not some criminal underclass) admit to having used marijuana --
whether they 'inhaled' or not -- that's a hefty market for a budding
industry.