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Against Legalization: California Politics and the Scourge of Local Control

Marijuana shouldn’t be illegal. Jesus. Of course it shouldn’t. And California voters approved the legal cultivation and sale of recreational marijuana five years ago in Fall 2016. This is, on the whole, obviously good, part of the sudden and increasingly rapid crumbling of failed prohibition policies in multiple states throughout the U.S. I’m glad it happened and as far as it goes, I hope it continues. But making weed a legal business in the state of California means that it is subject to a whole lot of business as usual in the state of California, and has produced results as ludicrous and stupid as they are appalling.

Here is an article on it by Scott Shackford, forthcoming in the April 2022 issue of Reason:

Shared Article from Reason.com

Corruption and Crackdowns in California's Marijuana Market

Black markets thrive under mismanaged legalization.

Scott Shackford @ reason.com

After California voters decided to legalize the cultivation and sale of recreational marijuana in 2016, the vast majority of the state’s cities banned those activities within their borders. But Adelanto’s leaders were eager to embrace the newly legal market. The small desert town of 31,000, best known for its nearby prisons, had a reputation for poverty and emptiness. . . . In May 2017, the Adelanto City Council approved a plan to license recreational growers and retailers, making the town one of the first in the state to do so. . . . In an interview with The New York Times, then-Mayor Richard Kerr predicted that Adelanto could raise $10 million annually by taxing local marijuana businesses.

It didn’t happen. Adelanto’s budget for 2020–21 anticipated just $1.4 million in marijuana revenue, less than a third of the city’s projected $4.5 million budget deficit. While that $1.4 million is money the town would not have seen without legalization, it clearly isn’t enough to save Adelanto.

Kerr is no longer Adelanto’s mayor. The FBI raided his home in 2018 as part of a corruption investigation. Three years later it arrested him on seven counts of wire fraud and two counts of bribery. Kerr is accused of taking at least $57,000 in bribes and kickbacks to approve permits for marijuana businesses. His arrest came four years after then–City Council Member Jermaine Wright was accused of taking a $10,000 bribe from an undercover FBI agent posing as an applicant seeking approval for a local marijuana transportation business.

Other local officials in California have been implicated in similar corruption . . . the Los Angeles Times implied that the problem was California’s “nascent, ill-regulated marijuana industry.”[1] Stories about California’s marijuana market commonly describe it as a Wild West situation.

It is true that California has badly mishandled legalization–so badly that, more than five years after voters approved that change, the black market still accounts for an estimated two-thirds of cannabis sales. But far from the result of weak regulation, the disastrous rollout of legal marijuana stems from giving officials too much power to decide who can produce and sell it….

— Scott Shackford, Corruption and Crackdowns in California’s Marijuana Market.
Reason (April 2022), 27-28. Boldface emphasis added.

California’s licensed legalization scheme has generally made it pretty easy and pretty lucrative for the large, incumbent medical cannabis businesses to expand into the legal recreational market, but it has also instituted an arbitrarily limited ration of permits and a burdensome, restrictive, and almost infinitely-delaying system of licenses, byzantine regulatory requirements and very expensive sin taxes and compliance costs.[2] Weed is legal throughout the state, and that’s great, but if you want to actually get set up to sell weed legally it involves waiting for years in priority queues for permits, raising hundreds of thousands or millions of dollars in capital, jumping through regulatory hopes which grant tremendous discretionary power to city governments and endless opportunities for your incumbent competitors to lock you out of the legal market; and which simply reinstitute blanket prohibition through NIMBY zoning and layer after layer of local control. Recreational weed was legalized five years ago; the City of Fresno, to take one example, set up a system of interviews and scoring which only approved its first legal dispensaries last Fall. Los Angeles has 217 licensed recreational weed shops for a population of 4 million people; they realized that their process was so slow it was effectively locking out the very people who had been disproportionately harmed by the old prohibitionist policies. So they created a social equity program that would help grease the wheels for disadvantaged and marginalized applicants — so far, it has helped to approve a grand total of 20 new storefront shops in three years. Outside of the largest cities and some regulatory oases like Adelanto, the vast majority of municipalities just don’t issue any licenses and prohibit weed shops entirely.)

All this legal control has produced some really spectacular gross corruption — which the conventionally-minded press then, wildly, blames on the insufficiency of industry regulation. (Of course it is exactly the opposite; the corruption cases were all about illicitly purchasing permits, privileges and anticompetitive exclusions that exist only because of the regulatory framework in the legalization law.) It also means that in the country’s biggest legal-weed state, two-thirds of the weed is still sold on the black market:

Most California cannabis consumers do not buy pot from state-licensed shops. Market observers such as Global Go Analytics estimate that illegal cannabis sales in California total $8 billion a year, double the amount of legal sales.

One reason for the black market’s persistence is that many Californians do not have easy access to legal retailers. California has only two licensed dispensaries for every 100,000 residents, compared to about 18 in Oregon and 14 in Colorado.

Proposition 64, the ballot initiative that legalized recreational marijuana, authorized municipalities to cap the number of local retailers or prohibit them entirely. For every California city that allows dispensaries, two have banned them.

While Prop. 64 allows people to grow their own marijuana, that alternative has little appeal for consumers who lack the requisite space, equipment, and know-how. In the parts of the state where retailers are banned, this policy is akin to letting people brew their own beer while denying them the ability to buy the finished product from a local store.

— Scott Shackford, Corruption and Crackdowns in California’s Marijuana Market.
Reason (April 2022), 28. Boldface emphasis added.

The State of California’s answer to this utterly inane and completely evitable situation has been to send in the cops again, increase enforcement, seize marijuana plants and arrest unlicensed operators. Incumbent operators in the United Cannabis Business Association loves this because the force of the state shuts down their competitors and protects the lifestyle to which they have become accustomed:

So far the government’s response to this marijuana mayhem has focused on tougher enforcement and penalties rather than lighter taxes and regulations. Prop. 64 authorized civil penalties against unlicensed marijuana growers and sellers, who also are guilty of misdemeanors punishable by a $500 fine and up to six months in jail. A law that took effect at the beginning of 2022 doubles down on that approach, allowing civil fines of up to $30,000 per violation against anyone guilty of aiding or abetting unlicensed cannabis commercial activity. Each day of assisting illegal sales or cultivation is a separate violation.

The Drug Policy Alliance and the American Civil Liberties Union opposed that law, warning that the wording is vague (it doesn’t define aiding and abetting) and will let local law enforcement target low-level employees, who could have their wages garnished and driver’s licenses suspended. But the United Cannabis Business Association welcomed the new penalties, saying the illicit cannabis market must be shut down to ensure that legal operators can see an increase of patients and consumers, which creates union jobs.

— Scott Shackford, Corruption and Crackdowns in California’s Marijuana Market.
Reason (April 2022), 31. Boldface emphasis added.

Gentlemen, that is all; you may now close up the State of California. It has finally reached its logical conclusion.

But yet, notwithstanding:

. . . In October, California Attorney General Rob Bonta bragged about a 13-week operation by state and local law enforcement officials that rounded up and eradicated more than 1 million illegally grown marijuana plants. The cops targeted growers who tried to escape oppressive fees, taxes, and licensing demands by operating in rural areas.

Raids like these were a familiar feature of life in California for decades before voters approved legalization. The difference now is that the government is promoting a black market not by banning marijuana but making its production and sale absurdly difficult to accomplish legally.

— Scott Shackford, Corruption and Crackdowns in California’s Marijuana Market.
Reason (April 2022), 31. Boldface emphasis added.

This is a horrible situation and a truly stupendously asinine problem. The blindingly obvious policy solution here is liberty — liberal and forgiving, totally unlicensed, unregulated, and unfettered economic freedom. The most likely practical strategy here is still countereconomic direct action.

If you’re a reformist, then go ahead and push whatever you push to try and vote in simpler, more just and more inclusive measures that will strip out that goddamned mess of a legalization law. But really, I think, after decades of voting and legislating and legalizing and licensing, it’s still the case that electoral politics is at the very best a lagging indicator for radical changes that happened long ago in culture and in society; in the numerical supermajority of cases California’s nonviolent drug users and dealers continue to find that the best way to make a change is not to jump into the politico-legalized system, but just to walk away from the political forum, to a different corner of the agora.

See also.

  • GT 2020-01-16: Listening To Weed the People, Latino USA:

    Obviously, no matter what ends up happening here, it’s hard to deny that the situation now — whatever its flaws — is not as bad as the situation that proceeded liberalization; obviously, nobody should want a halt to the process or a return to Drug War policing. But there’s also a sort of Against Legalization point that needs to be made here — about the effects that unsurprisingly, naturally occur when liberalization is only allowed to happen when and where it can be refracted through an elaborate, expensive, in some ways highly conservative regulatory regime for permitting and controlling the sale of weed to willing customers — something which, need we recall, is really just fine, and does not actually need to be controlled by the state, and should never have been treated as a crime in the first place.

    The city government in Oakland has approached the issue by trying to manipulate the issuing of permits — by implementing a priority queue that’s explicitly intended to benefit racial minorities, and operationally designed in favor granting licenses more quickly to people who had been arrested for drug crimes and people from neighborhoods where a lot of other people were arrested for drug crimes. But what if the permits themselves — and the drive to maintain social and economic control behind those permits — are part of the problem? . . .

    . . . [A] whole lot of black and Latino people have been victimized by the racial politics and the police violence of the drug war. The state owes them reparations for the years of damage that it has done. And the way they’ve tried to go about legalization risks excluding many of them from a market where — despite the risks and the costs and the violence unjustly inflicted on them under Prohibition — they had at least made something of a living up to now. But the best thing to do is not to try to tweak the licensing scheme to favor a different class of legal weed dealer; it’s to get rid of the restrictions and licensing entirely — to let as many people as possible enter the legal weed market, with a minimum of interference or monitoring by police, city governments and state regulators.

    — Rad Geek, GT 2020-01-16: Listening To Weed the People, Latino USA

  • GT 2010-01-27: The State of the Debate # 2: Against Legalization

    … And that’s why I’m against legalization schemes. For decriminalization, yes, of course; but against this kind of cockamamie tax-and-regulate license-monopoly scheme, carried out in the name of exposing yet another good to government control.

    It’s also why I’m against relying on electoral politics as a means of social change. When the political debate is constrained to the one side, who argue for arresting harmless potheads and locking them in cages, even though they think it is a bad idea, simply because their conscience demands absolute submission to the will of the United States federal government; and the other side, who think that marijuana ought to be legalized *so that the government can use a tax-stamp scheme to more fully control people’s access to it — when, that is, the debate consists of two sides, each jockeying for position against the other to see which of them can package its policy proposals in the *most authoritarian** terms — when, I say, the political debate is constrained to those kind of options, it’s time to start looking for a new forum.

    —Rad Geek, GT 2010-01-27: The State of the Debate # 2: Against Legalization

  • GT 2010-02-04: Against legalization (cont’d):

    There ain’t nothing wrong with illegality that can’t be fixed with more extralegal grassroots social organization.

    Don’t legalize; organize.

    —Rad Geek, GT 2010-02-04: Against legalization (cont’d)

  1. [1][In One giant French kiss wrapped in money: Cannabis magnate admits bribing San Luis Obispo County supervisor, Matthew Ormseth, July 29, 2021. –R.G.]
  2. [2]Including chickenshit requirements on everything from your business plan to the storefront you occupy to the kinds of vans that you use to deliver your totally legal weed. Here’s Shackford, on pp. 30ff: Cannabis entrepreneurs who survive t licensing gauntlet still have to deal with complicated, burdensome, and expensive regulations imposed by two levels of government. Fresno, for example, requires more than $8,000 in application fees from those vying for the small number of licenses being distributed, and the eligibility process requires applicants to include six separate plans describing different components of their proposed business’s operational models. Each of those plans have a dozen or more city-mandated information requirements. Meanwhile in Los Angeles’s social equity program, Applicants needed to secure a property to qualify, Jain [Hirsh Jain, chair of the Los Angeles Marijuana Chamber of Commerce] notes. Some had to take loans and were paying rent for storefronts. It bankrupted some applicants and made sure only the most well-capitalized could participate. Not exactly a winning model for lifting up the poor.

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