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U.S. pot decriminalization: Will B.C.'s economy go up in smoke?

If we Albertans want a hint of what it may be like when the oil runs out -- or is replaced by cold fusion or something -- all we may have to do is watch what happens next door in British Columbia in the months ahead.

Back in October 2010 I twisted up the lyrics of Leonard Cohen and opined, "Decriminalization is coming … to the U.S.A." That is, outright legalization of marijuana use for recreational purposes, not just a half-cured law allowing pot to be smoked for medical reasons.

Now, thanks to two propositions in separate U.S. states in the Nov. 6 election, that day with all its consequences good and bad is a step closer. Possibly a big step.

On Nov. 6, electors in both Colorado and Washington State, the latter of which neighbours British Columbia and has experienced crime and other impacts associated with the British Columbia marijuana industry shipping its product across the relatively porous B.C.-Washington border, voted to allow adults to possess and use small amounts of the drug for recreational purposes.

These votes do not mean non-medical marijuana decriminalization is a fait accompli south of the Medicine Line. Everyone is waiting now to see what the U.S. federal government's Department of Justice will try to assert federal supremacy over drug laws (a problem, since the U.S. Constitution gives responsibility for criminal law to the states) and keep the ban against the weed in place.

But voter attitudes speak loudly. So, whatever the U.S. government does, and however long the process takes, decriminalization of marijuana really is coming to the U.S.A. -- probably more quickly than Canadians imagine.

After all, when the people move far enough on this issue to make recreational use of pot socially acceptable, the wishes of the strange coalition of illegal drug producers and the military-enforcement complex will be quickly brushed aside by politicians with the idea of a completely new and extremely bounteous source of tax revenue in their sights. Anyway, the enforcers can soon be turned from enforcing prohibition to enforcing tax violations, and who listens to criminals anyway?

But when legalization arrives Stateside, it really will be an economic disaster for British Columbia, which seems to depend almost as heavily on the covert marijuana trade as a Middle Eastern or Latin American narco state. And the success of the trade, in turn, depends on the prohibition of the drug in its principal market.

Really, B.C. grows far more marijuana than its own citizens could smoke if every one of them took up the habit. And why would Americans take the risks of smuggling a substance across an international frontier that will quickly be available right at home in the Good Ole U.S.A.?

So if the decisions by Colorado and Washington voters somehow stand and are quickly implemented, it will soon be apparent that civilization did not end in a pot-induced frenzy, or grind to a halt in a bud-based stupor for that matter. At that point, bet on it that other states will start to follow suit and the huge U.S. market will quickly go up in smoke.

If decriminalization comes, some experts have estimated the decline in the price that can be fetched for export marijuana from Canada will be about 80 per cent. And while it may come as a surprise to the vast majority of Canadians who don't buy or use illegal drugs of any kind, that will cause economic hardship for B.C. because the province has become hooked on pot production as an economic driver.

Estimates of what this completely illegal industry built up in increments over the past 40 years is actually worth to the B.C. economy continue to be all over the map because there are precious few records and it generates no tax revenue on which estimates can be based. But even the low-end numbers are big, with current estimates starting at around $6 billion a year and rising as high as $24 billion, almost double the $13-billion legal revenue generated by B.C.'s forest industry.

Some regions of British Columbia, particularly the Kootenays, depend particularly heavily on the trade. But as has been said here before, if you live anywhere in B.C., you benefit from it whether or not you have any involvement in the illegal industry behind it. If you are a retailer, a real estate salesperson of just a homeowner, or merely a participant in the economy, you depend in part on pot profits -- and pot stays profitable because of prohibition in the United States.

Why do you think house prices have remained high and stable throughout Western Canada, especially B.C., even during the time they were collapsing in the United States? Untaxed profits from the drug trade certainly helped.

If you are a government that collects sales taxes or a municipality, especially in communities that would otherwise be recession-bound, you also benefit.

So what comes next may provide a useful example to Albertans who may have wondered what might happen if the international price of oil suddenly fell to, say, $25 a barrel.

The end of the B.C. pot economy would also, ironically, deprive the Conservative federal government of Prime Minister Stephen Harper of a wedge issue it has used effectively against politicians with more generous spirits and more sensible economic philosophies than the harsh dogma of neoliberalism.

After all, faced with American pot legalization, Canadians will have little choice but to follow suit and legalize the substance to capture the huge potential tax revenues, as we do with tobacco and alcohol.

For the time being, though, the many beneficiaries of B.C.'s marijuana industry and the province's homeowners may wish to join theo-conservative supporters of the Harper regime on their knees praying to the Almighty for the U.S. government to somehow block the U.S. legalization of pot!

This post also appears on David Climenhaga's blog, Alberta Diary.

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