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From Probation to Regulation: The Economics of Cannabis Legalisation

LOS ANGELES, CA - OCTOBER 19: Dave Warden, a bud tender at Private Organic Therapy (P.O.T.), a non-profit co-operative medical marijuana dispensary, displays various types of marijuana available to patients on October 19, 2009 in Los Angeles, California. Attorney General Eric Holder has announced guidelines for federal prosecutors in states where the use of marijuana for medicinal purposes is allowed under state law. Federal prosecutors will no longer trump the state with raids on the southern California dispensaries as they had been doing but Los Angeles County District Attorney Steve Cooley has begun a crackdown campaign that will include raids against the facilities. Cooley maintains that virtually all marijuana dispensaries are in violation of the law because they profit from their product. The city of LA, which had been tolerant of the dispensaries, has been slow to come to agreement on how to regulate them. Some residents are concerned about the locations and high number of marijuana facilities and prosecutors claim that some of the marijuana was grown by illegal marijuana growers. Californians voted to allow sick people with referrals from doctors to consume cannabis with the passage of state ballot Proposition 215 in 1996. A total of 14 states now allow the medicinal use of marijuana. Los Angeles has 800 to 1,000 marijuana dispensaries, the highest density in the nation. (Photo by David McNew/Getty Images)

Governments are now moving from probation to cannabis legalisation, as a way to tackle the increase in consumption and take away benefits from it.

Cannabis is the most used illegal drug in the world, according to the World Health Organisation (WHO). The body estimates that about 147 million people consume cannabis annually. Governments are now moving from probation to cannabis legalisation, as a way to tackle the increase in consumption and take away benefits from it.

Leading the charge are US states like California and Colorado, and Canada. Now the focus is set on Europe, where the regulation of cannabis for medical use is being discussed in the European Parliament and some Member States have a whole new debate on the economic benefits that legalizing cannabis may bring.

Creating an Economic ‘High’

ETFGI, a leading research and consultancy firm for traded products revealed in 2019 that the Horizons Marijuana Life Sciences Index fund in Canada is on its way to becoming the second most profitable Exchange Trade Fund (ETF) in the nation.

Canada legalised cannabis in October 2018, and within a few months, the ETF grew to $1.3 billion, becoming the 18th largest Canadian ETF, according to ETFGI. Canada is only the second G20 nation after Uruguay to legalise cannabis, and the short-term success has given EU nations a roadmap to follow.

A woman waves a flag with a marijuana leaf on it next to a group gathered to celebrate National Marijuana Day on Parliament Hill in Ottawa in 2016. Photo: AFP

The legalisation of cannabis comes with several benefits, from limiting the black market to accelerating medical applications. The biggest advantage, however, is the economic implications. The Drug Policy Unit of the Faculty of Psychology of the Autonomous University of Barcelona (UAB) calculated that by legalising cannabis, the Spanish Public Treasury would receive €3,3 billion ($3,71 billion) per year in taxes and social security contributions.

If Spain is to meet its current demand for 820,597 kilograms, the study estimated that the government could regularise around 101,569 workplaces. This would mean such establishments would pay taxes, and workers would receive fair pay and compensation, becoming a part of Spain’s formal economy. This merging would also substantially weaken criminal networks, bringing their market share down to around 15%, the study indicates.

Spain Leads the Way

Led by the anti-austerity party Podemos and the liberal right-wing party Ciudadanos, the Spanish government is now considering following Canada’s example. Speaking to the parliament, Pablo Iglesias the leader of Podemos said: “What we are discussing is not whether it [cannabis] should be regulated or not, but who is going to be the next country to do it. I believe that Spain has to be the first [in Europe].”

Research by the Spanish public centre for Sociological Research found that 84% of Spaniards are in favour of legalisation of marijuana for therapeutic purposes and 47% defend complete legalization, including the recreational use of the plant.

As of now, Spain allows at-home cultivation and consumption of cannabis, limited strictly to personal use. Until 2015, the nation had some of the laxest rules in the EU around the drug. This quickly changed after the conservative Popular Party introduced 6 years-prison terms and fines from €601 ($675) to €10,400 ($11,680) for consumption and possession on the public road.

Spanish police seize €3.4m worth of cannabis in 2018. Image: RTE

To further complicate matters, Spain has authorised select companies to grow and profit from cannabis cultivation, but only for medical purposes. In January 2018, the conservative government of Mariano Rajoy authorised the growing of up to 20,000 hectares of cannabis for therapeutic and research purposes.

The EU’s Roadmap

In February 2019, the European Parliament approved a resolution to legalise cannabis for therapeutic uses. The proposal, which was promoted by a Spanish deputy of Podemos, encourage countries to stimulate scientific research on the medicinal use of cannabis and suggests that this type of use should be covered by national health insurance.

The first step, according to the Parliament is to distinguish medical uses from recreational uses. Cannabis has the proven ability to reduce the risk of obesity and diabetes and help combat symptoms of diseases like asthma, Alzheimer’s, arthritis and cancer.

LOS ANGELES, CA – OCTOBER 19: Dave Warden, a bud tender at Private Organic Therapy (P.O.T.), a non-profit co-operative medical marijuana dispensary, displays various types of marijuana available to patients. (Photo by David McNew/Getty Images)

Adopting the resolution at the earliest is critical for the EU, where it is the most prevalent illegal drug. According to the European Monitoring Center for Drugs and Drug Addiction (EMCDD), 14.1% of the region’s young people have used the drug in 2017. Decisive cannabis legalisation policies can help combat illegal networks while helping state finances, and opening up new treatment avenues for those desperately in need of it.

Click here to view original web page at www.forbes.com

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