ON THE SUPPLY SIDE OF THE EMERGING MARIJUANA INDUSTRY

THE SUPPLY SIDE OF THE EMERGING MARIJUANA INDUSTRY: WHO WILL BE THE NEW ECONOMIC KINGPINS?

WILL THE PIONEERS OF THE MARIJUANA INDUSTRY, THE STREET HUSTLERS, BE MUSCLED-OUT OF THE MARKET NOW THAT POT IS BEING LEGALIZED? WHAT INTERESTS STAND TO MAKE BILLIONS ON LEGALIZED MARIJUANA ON THE SUPPLY-SIDE OF THE EQUATION?

Will the legalization of marijuana empower those whom are today illegal street hustlers making them the rightful beneficiaries of a potentially billion dollar industry once it becomes fully street-legal?  If so, for these undocumented entrepreneurs it may be a simple matter of applying for a business license with their local jurisdiction for them to turn a life-long hustle into a legitimate enterprise?  But if the laws legalizing the sale, manufacture and distribution of this commodity attempt to impose restrictions against persons with criminal records it could lock them out of one of the most lucrative enterprises to open up in this nation’s economy since the legalization of alcohol.  This begs the question, “Will decriminalization of marijuana precipitate total amnesty for those who were previously prosecuted under marijuana laws or will it continue to haunt them, even perhaps preventing them from establishing themselves in a business for which they wrote the book”?  

For a moment I want to step aside from any ethical and moral argument about the cultural dynamics of this plant and explore cannabis as simply an organic substance, one that does not possess any inherent qualities of good or evil, just an ancient organism which has been growing on the earth for millions of years before man and which has been cultivated for medicinal purposes by him for over 3,000 years documented.  Like many good things at some point in time men began to abuse and misunderstand this substance but that is a consequence not of the plant but of our failure to comprehend how to effectively integrate its use into our culture.  The greater reality is that in this capitalistic society, there is both a demand and supply for cannabis that represents a billion dollar industry heretofore conducted off the books that will presently inundate our failing economy with a financially vivacious commodity.  We should we asking how we can catch the wave of economic prosperity that certainly will ensue as marijuana products are gradually introduced into our marketplace. 

Every American knows that the legalization of pot is inevitable but the federal government continues to delay this process bringing into question its underlying motives.  Anyone who is even vaguely aware of the shady history of drug enforcement in this country knows the reason why the Federal government is loath to decriminalize marijuana is in part because of the questionably aggressive way they have prosecuted dealers and users in the past for crimes that will no longer exist in the future of drug enforcement!  Because of the unsettling issues of its past there is really no way that the DEA and the federal government can save face.  One must admit that it takes considerable gall to confront Americans admitting what was classified as criminal behavior so terrible it was punishable by years of harsh imprisonment including seizure of personal property and defamation of individual character is perfectly acceptable behavior today? Surely they cannot even imagine legalizing marijuana without completely expunging the records of those who were prosecuted under laws treating it as an illegal substance in the past?  Since Reagan’s ineffective drug wars in the 1980’s it has been a long expensive and destructive road to the legalization of pot, now we are all genuinely relieved that the government is finally doing the right thing by absolving pot of its criminality but we have to ask ourselves how did such a magnificent mistake ever happen in the first place and what retroactive measures need to be set in place to rectify the considerable damage moving forward.  It would be arrogant for the government to simply change its evil laws to good being allowed to get off with a guilty conscience knowing that its mistakes will continue to ruin the lives of millions of men and women for decades to come.  If our government is to be forgiven it would only be fair for it to expunge the records of every man and woman touched by its indiscretion; this would be a humane application of the law. 

There is however a much darker side to the story of legalization that will metaphorically put the new legal drug hustlers into the black economically.  

The new purveyors of cannabis will not operate on the corner in an open-air marketplace or huddle in an urban alley, they will not pass off a hastily packed nickel or dime bag in a cheap plastic zip-loc micro-baggie through the window of a passing sedan.  Like tobacco and alcohol marijuana will be robustly marketed as a premium commodity with all the sexiness of a full blown ad campaign by Ciroc, Cohiba, Absolut or Camel; it will open up an entirely new category in the stock market!  

So the billion dollar question is who will be the lucky dogs to get in big on a market that will certainly capture the attention of every financial magazine and publication in the country? One thing is certain; it will not be the lowly street hustler.  I spent some time thinking about what the brand names of these new marijuana products might be based on who might be manufacturing them, it was an interesting exercise the prospect of which caused me to realize that legalization of marijuana could encourage tobacco sales with everyone lighting up again.  Once legalized the cannabis plant can be cultivated in the U.S. the same as any vegetable, grain or fruit is grown on a farm subject to FDA and other standards.  What is not yet clear is how closely regulated this substance will be once legalized and that will make all the difference regarding how it comes to us in the marketplace.  Companies who have access to large tracts of land for cultivation and manufacturing, packaging, etc. will immediately be able to flood the marketplace with their product.  People frequenting farmers markets might find the stuff heaped high beside fennel, rosemary, sage and other herbs.  In urban settings cannabis lovers might frequent upscale cafes selling marijuana in different forms, offering hand rolled cigarettes and exotic chocolates, pastry and other delicacies.  It is logical that companies will manufacture marijuana cigars and cigarettes perhaps reviving the coin operated cigarette machine dispensing packs or even single cannabis cigars.  If pot is completely legalized then street vendors would have to compete with more sophisticated and far better capitalized merchants but one can assume that when the stuff can be grown in a flower box outside of grandma’s window the demand on the street will ultimately die. 

When Ronald Reagan presaged the economic shift from a manufacturing to a service economy in his 1980 inaugural speech digressing to romanticize a 21^st century cottage industry I am certain he had no inkling that a brand new industry would open up in this country to suit and contradict his prediction and that that industry would be the sale of marijuana products.  O how times do change… Now it is quite likely that the international market will seek to capture over the counter sale of cannabis products offering pre-packaged commodities produced cheaply overseas and sold cheaply in the U.S. to an eager and captive market of cannabis connoisseurs. 

So it all hearkens back to the old supply and demand models we studied in macro and microeconomics our freshman year in college.  Although it sounds boring excitingly enough it will ultimately play out something like this; the legalization of marijuana creates a demand and suppliers respond by offering a broad range of products and services from a broad range of prices to satisfy the demand across the entire scope of consumers.  Depending on how the substance is legalized it could render it as commonplace as catnip.  The key factor in pricing will be determined by the means of production, for instance, although many people smoke cigarettes very few of them bother to grow their own tobacco so while a few cottage industries will undoubtedly thrive most of the product will have to be manufactured by a very large corporation in order to meet the entire national demand.  Eventually quality control and simple economic issues related to financing and marketing will cause smaller home-grown varieties to be overrun by corporate grown product.  Smart companies will immediately develop branding to make their products distinctive and they will use advertisement to quickly make their product name a household name.  The more refined products will quickly rise into favor in a market of convenience and so like its brothers,( tobacco and alcohol), marijuana will finally enter the world market as a legal product robustly traded on the stock market.  We already know there is a demand for pot in these United States which is why pot is finally being legalized and because legalization represents the opening of an entirely new market potentially earning billions of dollars a year I want to see who is lined up for the windfall, I am keeping my eye on the supply side of the equation.

FIN

WRITTEN BY BIGDADDY BLUES