Cash Crop or Societal Foe? Marijuana’s Economic Secret

Business.com / Starting a Business / Last Modified: February 22, 2017

Let’s take a look at marijuana as one of the best-kept economic secrets of our time.

When our Congress can’t — or won’t — vote with its conscience, it has a tendency to vote with its pocketbook.

This is part and parcel of why marijuana’s long road to legalization is so perplexing.

Simply put, legal marijuana just makes economic sense, in the same way that taxing alcohol and tobacco makes sense.

But it has the added bonus of being a substance that’s orders of magnitude less harmful than its legal brethren, which have been not just legal, but also intrinsic parts of our country’s economy pretty much since the founding of the United States.

Recently, the push for legalizing marijuana has received a big bump in popularity from the American people and from the more serious presidential candidates. But when political debates are as contentious as this one, we owe it to ourselves to get the facts.

Related Article: Emerging, Thriving or Dying: The Industry Landscape in 2015

With that in mind, let’s take a look at marijuana as one of the best-kept economic secrets of our time.

Marijuana as a Cash Crop

Back in the 1700s, Pennsylvania, along with many other U.S. states, benefited from the sale of hemp — marijuana’s non-psychotropic cousin — as a major cash crop. At one point in time, there were hemp mills scattered across Lancaster and York counties, in the heart of Central PA. But these are long gone.

Last year, in response to a federal farm bill, two Pennsylvania state legislators introduced legislation that would reinstate hemp as a legal crop in PA. It could be a huge economic boon to a state that’s been embroiled in a months-long budget stalemate.

And marijuana as a cash crop? It’s potentially more lucrative still. Jon Gettman estimates that legal pot could become a $35 billion industry if the government plays its cards right, which would go a long way toward shoring up states gripped by financial insolvency.

But let’s return to the question of hemp for a moment, because its fate is so closely entwined with that of marijuana. Back in the days of Washington and Jefferson, hemp was a crop that touched a great many industries. An acre of hemp, for example, can provide as much fiber as two or three acres of cotton, according to some experts. It also has applications in the industries of paper, molded plastics, food, automobile parts and more.

And where you have new products, you have new businesses. And new business lead to new jobs and across-the-board economic prosperity. If America’s community of entrepreneurs and businesspeople feel strongly that they’d like to take advantage of this emerging market, it’s time to let our votes reflect that fact.

Overhauling America’s Prison System

We’re knee-deep in presidential campaign season, and one issue that’s received widespread attention — and unlikely support from both sides of the political aisle — is overhauling America’s prison system, which incarcerates more individuals than any other nation on earth. This represents not just a moral crisis, but an economic one.

In California, the annual price of housing an inmate is more than $47,000 per year. And when you consider that the current American prison population is around 2.4 million, it’s pretty clear that something needs to be done to help offset the costs.

President Obama has done his part, starting with an executive order that commuted the sentences of 46 nonviolent drug offenders. It’s a drop in the bucket, admittedly, but it has helped to elevate this issue into the collective consciousness.

Even if some of us don’t agree on marijuana legalization on personal or spiritual grounds, we should be able to approach some kind of consensus on prison priorities. That we incarcerate young people for non-violent marijuana-related crimes, while a great many other offenses go unpunished, should give us all pause — if only because our nation’s fiscal solvency hangs in the balance.

A Boon to Tax Revenue

Again, if we can’t address the question of legal weed from a moral standpoint, there’s still plenty of financial ground to stand on. Case in point: tax revenue. The United States government, along with every state government, has a great deal to gain from legal pot, particularly when we can’t seem to scrounge up the funding to keep our roads and bridges in good condition or keep our children in school.

Thankfully, we’re not taking shots in the dark here. Now that states like Colorado and Washington have made even recreational marijuana legal, we have a pretty good idea of what to expect when it comes to tax revenue. And the overall picture is really encouraging.

In Colorado alone, legal weed brought in $700 million in sales in 2014. This is expected to surpass the $1 billion mark by the end of 2016. Together, medicinal and recreational marijuana contributed a total of $63 million in tax revenue for the state, along with an additional $13 million in assorted fees and sales licenses.

The result is one of the very best problems a state government can have: figuring out what to do with a significant economic windfall.

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A Time for Legalization?

The role marijuana plays in our country’s identity needn’t be plagued by political unrest and partisan bickering. When we come at this from a purely economic standpoint, the way forward becomes abundantly clear.

Currently, 18.1 million Americans use marijuana on some kind of recurring basis and spend a total of $34 billion annually in the process. Hindsight reminds us of the benefits of dragging alcohol use into the daylight and out of the dark basements of speakeasies and will probably reveal a similar picture down the road when we’ve put this issue to rest for good.

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