Marijuana legalization is one of the most controversial and heavily discussed topics of the last few years. That said, the stigma surrounding the substance has decreased substantially. This is in part due to the recognition of its various health benefits, which have allowed people to see its value beyond recreational use. Marijuana has been proven to help those with cancer, chronic pain, and even children with behavioral disorders. However, for several countries, the case for legalization from a health perspective simply isn’t strong enough. The argument would be that those who need medicinal marijuana should only be allowed to obtain it if they are in possession of a legal medical license, and for everyone else, it should remain a controlled substance.
There is one thing, though, that every single country in the world cares about, and that’s money – more specifically, saving money and making more of it. There is a whole other side to legalizing marijuana: economics. It’s the driving force behind why the legal marijuana market is growing at such a rapid rate. In fact, according to analysts at Technavio, the legal marijuana market will grow at an impressive CAGR of 37% by 2020. In this blog, we break down the reasons why legalization of marijuana is highly beneficial to the global economy, both in the short and long term.
Tax revenues
Tax revenue is perhaps the most obvious benefit that can be derived from legalizing marijuana. According to the Tax Foundation, the marijuana industry could generate up to $28 billion in tax revenues at the federal, state, and local government levels. A surtax of 10% on one pound of product alone could generate up to $5.3 billion a year. And these figures are just in the United States. There are several routes that can be taken to tax marijuana, and each of them would generate substantial revenue, even exceeding the revenue generated by tobacco. Tax revenue also helps offset any costs associated with risks to involvement in the marijuana trade.
Major job creation
When people think about legalizing marijuana, they tend to focus solely on its consumption. They forget that, like any other form of agri-business, producing marijuana requires manual labour and a full production cycle, from growth to sales. An example of how marijuana successfully creates jobs is evident in Colorado’s marijuana industry. According to an article published by Marijuana Business Daily in March of this year, in 2015, Colorado issued nearly 27,000 occupational licenses to those employed at marijuana companies. This figure doesn’t even include those who are not required to obtain licenses but still work in the industry, which is thousands of additional workers. Further, sales for 2016 are estimated to reach between $1.1 and 1.3 billion, which means that the demand continues to rise and the need for workers will only increase. While the unemployment rate in the United States has dropped considerably during Obama’s presidential term, it currently sits at 4.9%, which means 7.8 million people in the country are still jobless. Colorado, on the other hand, has an unemployment rate well below the average, certainly in part a result of job creation through the marijuana industry and decriminalization of the substance.
Lower incarceration rates means more than just money saved
While incarceration costs the most in the United States, it’s certainly not cheap in other countries by any means. In fact, to incarcerate one person can be equivalent to a good year’s salary, or even double that. As reported by the Edmonton Sun, in 2014, each of the incarcerated individuals in Canada’s federal prisons, including those being held on misdemeanor drug charges, were costing tax payers nearly $118,000 per year, an increase of 46% from 1994. Incarceration rates between 2015 and 2016 have increased globally, and the amount of money it is costing governments to keep individuals in prison would be enough to make a major dent in global poverty. Being in possession of marijuana can send someone to jail for several years; growing it could potentially lead to a 25 year sentence. When you look at how many people are in jail for marijuana-related crimes and what it costs to keep them there, the numbers are stunning. Legalization of marijuana would not only reduce the costs associated with incarceration, it would also set a precedent for overall reform of global legal systems. Further, the money saved could be allocated to other areas such education and infrastructure, and in countries like the US, China, and Russia, which have the highest incarceration rates and major socio-economic gaps in their populations, these are critical needs.
Though it may be impossible to completely eliminate the taboo associated with the subject of marijuana, the economic case for legalization is abundantly clear. Further, aside from the issue of black market sales, which is a concern with any product, the benefits come with minimal risks in terms of safety. Currently, the APAC countries are leading the way for legalization, and with a continued understanding of the economic implications of legalizing marijuana, more countries will soon follow suit.
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