When Economics Beats Politics: The Rise of the Marijuana Industry

Photo by: Frederic J. Brown/Getty Images

Photo by: Frederic J. Brown/Getty Images

The marijuana industry is the new Wild West in the United States. At best, the legal and regulatory framework surrounding the budding industry is ambiguous; often, laws are contradictory; and at worst, some of the drug-related policies on the books are so archaic and broken that they are discriminatory, and sometimes even predatory. So if you are a producer, a seller, or consumer of cannabis, you face uncertainty at every bend. Even in states where medical or recreational use of cannabis has been legalized (or decriminalized), you risk antagonism or outright prosecution by federal authorities.

The complicated and sometimes-backward legal environment for marijuana is a product of its equally complicated and sometimes-backward history. Pew Research conducted its first survey on the views that Americans held on the legalization of marijuana in 1969 and found that 84 percent of Americans thought marijuana should be illegal, while just 12 percent supported legality.

At the time, marijuana laws were strict and carried severe punishment. Although the counter-culture revolution was in full swing and recreational use of cannabis was on the rise, the Main Street political environment remained doggedly conservative on drug issues. The 1937 Marijuana Tax Act, a piece of legislation born out of the “Reefer Madness” propaganda campaign that effectively criminalized most marijuana cultivation, possession, and use, was the law of the law of the land. Moreover, provisions in the 1952 Boggs Act and the 1956 Narcotics Control Act had established draconian mandatory sentences of between two and ten years, as well as a $20,000 fine, for a first-time possession offense.

That same year, however, the Supreme Court found the Marijuana Tax Act to be unconstitutional, and the following year Congress passed the Controlled Substances Act, which repealed the Marijuana Tax Act as well as most drug-related mandatory minimum sentences.

The Controlled Substances Act was passed as Title II of the Comprehensive Drug Abuse Prevention and Control Act, which established the five-tier scheduling system the federal government still uses today. Cannabis rolled out at Schedule I, drugs that, according to the legislation, “have no currently accepted medical use in the United States, a lack of accepted safety for use under medical supervision, and a high potential for abuse.” Other Schedule I drugs include LSD, peyote, meth, heroin, PCP, and ecstasy.

Pew conducted its next survey on American attitudes toward marijuana legalization in 1972, and found that even though President Nixon had declared drug abuse to be public enemy number one in 1971, public opinion had moderated slightly. The survey found that 81 percent of people thought the drug should be illegal, down from 84 percent three years previously, and 15 percent thought it should be legal, up from 12 percent.

The trend continued to moderate until the end of the 1970s as American counterculture matured and various states decriminalized cannabis, but polls conducted through the 1980s showed renewed and steady conservatism similar to the public attitude in 1969 and 1972. The Anti-Drug Abuse Act re-established mandatory sentences in 1986, and in 1989 President George H.W. Bush declared a new war on drugs.

But beginning in the early 1990s, Pew’s surveys show a fairly steady moderation in American attitudes toward marijuana legalization. In 1990, 81 percent thought the use of marijuana should be illegal and 16 percent thought it should be legal — by 2000, just 63 percent thought it should be illegal and 31 percent thought it should be legal. California had passed Proposition 215, which recognized and legalized medical use of marijuana, in 1996, but the federal government sued in 1998 and in 2001, the Supreme Court ruled against the state.

(Photo by David McNew/Getty Images)

Photo by David McNew/Getty Images

The decision wasn’t enough to stop the tide, and public opinion has continued to shift in favor of marijuana legalization. State-level governments continued to pass legislation recognizing legitimate medical use for marijuana and decriminalizing recreational use. In 2013, 53 percent of Americans supported legalization while just 45 percent opposed it. Currently, in 2014, twenty-three states and the District of Columbia have legalized medical marijuana and two have legalized recreational use of the drug, and 54 percent of people support legalization.

Based on the results of the 2012 National Survey of Drug Use and Health, the good folks at the Department of Health and Human Services estimate that 18.9 million Americans over the age of 12, or 7.3 percent of the population, “used marijuana” in the month before the survey was conducted. This is up 30 percent from 2007. Further, 7.6 million, or 40 percent of those who said they smoked the previous month, said that they used marijuana on 20 or more days that month, and 5.4 million said they used marijuana daily or almost daily over the preceding 12-month period.

Estimates compiled by CNBC put the total size of the national marijuana market at between $10 and $120 billion. In 2006, John Gettman, a marijuana policy activist, used DEA seizure data to estimate that the domestic marijuana crop alone consisted of 68.2 million plants worth $35.8 billion. That’s a yield of 10,000 metric tons, a ten-fold increase from 1,000 metric tons in 1981. At the time, according to Gettman, this made marijuana “the largest cash crop in the United States, more valuable than corn and wheat combined.” However, in 2012 the National Corn Growers Association valued the corn crop at nearly $80 billion and the wheat crop at nearly $18 billion.

More from Business Cheat Sheet: