What and whither post-prohibition cannabis politics after 2016?

by Dominic Corva, Social Science Research Director

The national landscape for post-prohibition cannabis laws changed substantially in November as eight states delivered change: four out of five legalization and four out of four medical voter initiatives. California, Maine, Nevada, and Massachusetts passed taxe-and-regulate recreational laws; and Arkansas, Florida, North Dakota and Montana passed medical cannabis initiatives. Only Arizona failed at the ballot box this year, and to understand why one would have to dig into my home state’s strange brew of right-libertarian-Mormon politics. Briefly, however, it’s important to remember that Arizona voters passed the most radical drug reform initiative in the US back in 1998, as it included other schedule I substances besides cannabis, but implementation was blocked by various state elements. It also has an extremely liberal authorization policy — I know Humboldt growers that use an online Arizona doctor who apparently has prescription authority in both States.

This analysis, however, is about how to make sense of cannabis politics in a national context after the Big Whale, California, has embarked upon its own tax-and-regulate journey. This comes tightly on the heels of a substantive update to its 1998 medical law, 2015’s Medical Cannabis Regulation and Safety Act (MCRSA). MCRSA actually is a year into developing and implementing regulatory rules that will “absorb” Prop 215’s tax and regulate provisions, so California already has a running start on the materialization of its legal landscape.

There are at least three aspects to cannabis politics I want to address. I want to use this space to open up questions and define terms, each of which can be developed further. I will introduce three here, and elaborate on one. This is because I started this essay intending to address all three, but the first one filled out into a post of its own.

First, now that the simplifying and “black and white” political discourse of election season is behind us, what are post-prohibition cannabis politics, beyond getting either tax-and-regulate or medical initiatives passed? The election season brought into sharp relief major differences amongst proponents of cannabis legalization.

Second, how do the surprising national election results, which bring a different political party with a very, very different administrative cadre to power affect how legalization landscapes play out at the State level? Whither the Cole memo, is the fundamental question.

And third, where do we go from here with respect to “medical” and “legal” discourses for post-prohibition politics? Can they be complementary, or will the polarizing election trend in which proponents of one have to discredit the other continue to divide whatever it is we call cannabis culture?

The first one: What are post-prohibition cannabis politics?

Post-prohibition cannabis politics refer to any approach for replacing the Federal/Global ban on cannabis as a Schedule I controlled substance. These include at least: rescheduling, descheduling, taxing, regulating, prescribing, recommending, authorizing, growing, distributing, banking, profiting from, losing money on, researching, and consuming cannabis sativa (hemp varieties included). This array of formalized stakeholders do not share a common interest, other than operating in a legal and policy environment associated with State-experimental “laboratories of democracy.”

The ecology of prohibition politics is much simpler and cohesive than the array of post-prohibition possibilities, but for the latter the main obstacles remain the Controlled Substances Act of 1971 and the 1961 UN Single Convention on Narcotics and Controlled Substances, which was updated in 1973 to complement the US turn to medical prohibition rather than the 1937 Marijuana Tax Act, struck down in 1969 by the Supreme Court in Leary v. United States.

Post-prohibition stakeholder interests diverge considerably. The benefits of State-legal cannabis experiments are popularly promoted as social, on the one hand; and financial, on the other.

“Grass-tops” funding for State initiatives from organizations like the Drug Policy Alliance, the ACLU, and the Marijuana Policy Project have shared an explicitly social political logic beyond “cannabis shouldn’t be prohibited”: criminal justice reform, usually with primarily racial justice benefits associated with mass incarceration.

Financial benefits to State experiments have two, maybe three, distinct and not always complementary logics. First, direct revenues go to both the public sector, through taxes, and to the private sector, through “profits.” The third is consumers. Indirect revenues accrue primarily to real estate, finance, and ancillary services.

In 2016, across the country, public sector coffers are empty. This is why arguments for “sin tax” rates resonate with policy makers. In Washington State, this discourse has primarily driven legislative changes from targeted social policy budgets (schools, research, and so forth) to the general fund, because Washington has been sued by the Federal government for not fulfilling its basic public education mandate.

In 2016, across the country, private sector profits accrue to “industry” at large but within “industry,” revenues are captured by retailers and distributors rather than producers of commodities. The US farm sector is an anomaly, given its vast subsidies that primarily benefit industrial domestic agriculture, at the expense of small farmers home and abroad. Even then, the basic story of our postwar economy is one in which huge retailers dominate commodity producers, seeking the lowest wholesale cost in order compete by providing the lowest possible prices to consumers. For the rest of the economy, this has happened by outsourcing production to places where labor is cheapest. This is called the “race to the bottom” by critics, and it certainly applies to cannabis as well, given the prohibition risk differential between cost of production and wholesale prices.

In 2016, across the country, consumers have consistently rewarded retailers who master the race to the bottom. However, the conscious consumer movement has gained substantial market share over the last decade or so: this refers to consumers who are willing to pay more for items that can be branded as, for example, “fair trade” or “equal exchange.” This is most obvious for coffee. Consumers have also rewarded “craft” or “boutique” commodities. This is most obvious in the Pacific Northwest with respect to craft beer and microbreweries.

The reason I say “maybe” to consumers as a class that directly benefits financially from legal cannabis lies between the “race to the bottom” and the conscious consumer movement. Anyone with experience in cannabis retail, of any sort, has to recognize that cannabis consumers include low-price seekers, on the one hand; and cannabis culture-oriented consumption.

This may be uncomfortable news to many in the cannabis culture, but the evidence doesn’t lie. Most of the market seems to be totally normal, American-as-apple-pie-at-WalMart, low price seekers. Oaksterdam founder Richard Lee broke the news way back in 2010’s Prop 19 initiative campaign. Lee, the primary funder of that initiative, told me the month before its fate was decided that the market looked a lot like the beer market, in which Coors and Bud take in the vast majority of the revenues. That hypothesis has been confirmed in Washington State, where controversial retailer Uncle Ike’s proudly embraces and extolls the virtues of a race to the bottom, high-volume, low-price approach that helps them lead the market. One could even hypothesize that this is what kept the Mexican exporters dominant until about 10-15 years ago, despite the subpar, mass-produced brickweed it made widely available. Consumers may want high quality cannabis, but they certainly want cheap cannabis.

So a class of cannabis consumers who constitute a majority of the market –let’s call them “commodity consumers” may benefit, but only if legal prices fall below gray- and black-market prices. That’s not a given, certainly not initially. This is for at least two reasons: State taxes, and diverse, non-flower product availability.

State taxes that are set too high create a heavy inertia to legal cannabis prices. It’s not that a 37% tax, a la Washington, can’t be accompanied by a $3 gram. But wholesale prices have to really plummet before that tax is adding only $1.11 to the gram instead of, say, $3.70 to a $10 gram. And the lower the price goes, at some as yet undetermined elasticity factor, the less State revenue becomes. And State legislators want to maximize their revenue.

Second, we use flower and flower prices as a proxy for what is by now a much more diverse cannabis product market, especially on the West Coast. Approximately 40% of medical cannabis revenue derived from concentrates and edibles. And concentrates and edibles have much more complex and expensive basic testing requirements — so much so in Oregon that small processors who can’t do larger lots or win the volume revenue race are in danger of outright extinction. On the plus side, legal cannabis processors in a mature system benefit from MUCH lower raw material costs than informal markets.

Finally, what’s good for low-price industrial consumers is not necessarily what’s good for consumption, in general. Cheap, mass produced food is not actually healthy relative to organic, small-scale production. If, as seems to be the case, legality is consolidating industrial approaches to production and consumption, then consumers are not better off just because they have cheaper weed. As always, though, the access question should be considered. Post-prohibition Cannabis won’t just be cheaper: it will be more accessible (Washington’s unnecessary medium-term retail bottleneck notwithstanding) , and that may be a social benefit.

I’m not sure, or rather, I’m sure it’s a mixed bag. Many, many people will now get the chance to develop a peaceful and healthy relationship with the plant that did not before. However, many, many people will now get the chance to develop a negative relationship with the plant because they pull a Maureen Dowd and freak out on edibles. I’m not one of those people that thinks cannabis works well with or for everyone. I’ve seen many otherwise positively disposed people get very anxious with even the slightest puff.

So, what are the post-prohibition politics of the plant?

They are the competitive and complementary negotiations of all the above reasons for and results of legalizing cannabis. Most concretely, of course, they are the power effects of the different stakeholder groups angling to maximize the financial benefits of a successful criminal justice reform movement. Cannabis culture, for which the exchange value of the plant is just one piece of the value puzzle, seems so far to have minimal input or effect on the formal politics of cannabis legalization. But the cultural politics are there, and they include what remain values heretical to modernity: herbal medicine, syncretic spirituality, whole earth consumption.

This is the depressing dynamic that makes me reluctant to engage in a public conversation that can only be about things that do not matter (much) to me: private sector ideologies of industrial production and consumption. This includes industrial-pharmaceutical approaches to cannabis as medicine. But even if it is ideologically depressing to me, it is of immense social value to understand how formal sector politics and markets encounter and transform a plant that isn’t just banned anymore.

I will turn to assess the other two significant contemporary questions for 2017 before leaving for the Emerald Cup in Santa Rosa next week. By way of transition, let me say that the complex ecology of politics and markets addressed here as “post-prohibition” isn’t terribly complex when it encounters the ongoing continuation of Federal prohibition, so how Federal prohibition changes is pretty important for everyone. And the new administration is likely to be at least a little bit discontinuous with the previous one.

So that’s next, the Federal prohibition landscape. After that, I will address how the relationship between medical and legal cannabis politics is changing, and plead for a “whole plant” politics in which they are not at odds.