Cannabis Cash

The U.S. and Italian legalization of marijuana in the last decade marked a paradigm shift. These two cases, in particular, can show us how its legalization can create less pressure on prisons, how it can weaken the power of criminal organizations, and finally, how it can create an economic revenue for the State.

Alexander Wang AW16 /Photography Evan Schreiber

Marijuana, a psychoactive drug derived from the cannabis plant, has a long history of human use dating back to 500 BC in Asia. Early cultures used the plant for medicinal purposes, with some cultivating higher levels for religious ceremonies. In 1830, Irish doctor Sir William Brooke O'Shaughnessy discovered that cannabis extracts could heal stomach pain and vomiting in cholera patients. THC, the psychoactive component, interacts with brain areas to reduce nausea and promote hunger. However, the U.S. and Italian legalization of marijuana specifically marked a paradigm shift. These two cases, in particular, can show us how its legalization can create less pressure on prisons, how it can weaken the power of criminal organizations, and finally, how it can create an economic revenue for the State. During the Great Depression in the US, Henry Anslinger, the Commissioner of the Federal Bureau of Narcotics, used racism against Mexicans and marijuana to fuel a propaganda campaign against the drug. He testified that marijuana caused death and was an addictive substance. Congress officially banned marijuana in 1971, and with Anslinger's help, mandatory minimum sentencing laws were passed. However, scientists later proved that marijuana was not connected to violence or insanity, as previously stated by the government. In 1973, a bipartisan commission recommended decriminalizing marijuana, but Nixon started the war on drugs. Anslinger's aide, John Ehrlichman, admitted that they had a different scope, as they criminalized both hippies and blacks to disrupt communities and vilify them.

Italy's marijuana industry, on the other hand, was once the second-largest in the world, with around 100,000 hectares of farmland involved. However, the drug's decline in the 1950s and 1960s was accelerated by the economic boom, the introduction of synthetic fibers, and increased international campaigns against narcotics. Italy endorsed the Single Convention on Narcotic Drugs and the Cossiga Law 685/75 of 1975, and later came the Jervolino-Vassalli law, which was basically an Italian war on drugs. This led to the disappearance of the marijuana market and agriculture.

Less Pressure on Prisons

The U.S. prison system has a high recidivism rate, with a 38.6% reoffending rate for individuals incarcerated once, 54.9% for those incarcerated twice, and 63.9% for those incarcerated three or more times. However, incarceration rates do not necessarily correlate with reduced crime rates. State spending on corrections has grown faster than higher education spending between 1987 and 2007, with higher education at a 21% rate and corrections at a 127% rate. Drug rehabilitation programs can decrease recidivism rates by up to 69%, reducing costs by $5,144 per offender. In 2015, the cost of prisoners in the U.S. was around 87 billion dollars, a 1,000% increase from 1975. The average time a police officer makes a marijuana-related arrest is 58 seconds, and the cost of arresting recreational marijuana users ranges from $30,000 to $35,000 per year. Additionally, a criminal record can negatively impact individuals' relationships, mental health, and the judicial system, reducing faith and trust in the system. Italy, on the other hand, ranks first in Europe for drug inmates, accounting for 31.1% of total European inmates in 2015. This category is the highest in Europe, with a weight increase in the last decade. Antidrug policies in Italy have a significant impact on the justice system, with police operations involving narcotics exceeding 19,000 in 2015. Marijuana and its derivatives are the most frequently investigated substance, with 56.31% of police operations focusing on marijuana and 48.2% of reports for the judiciary authority. The "7th White Book on Drugs" highlights the link between anti-drug policies and mass incarceration in Italy. In 2015, nearly 80% of reports to prefects were due to marijuana consumption.

The journalist, politician, and activist Marco Pannella in the 1980s, in a pro-legalization of marijuana rally, one of the most well-known figures for the legalization of marijuana in Italy. Via La Voce di New York, 2016.

Weaken Power of Criminal Organizations

A report by the Global Commission on Drugs suggests that decriminalizing marijuana could help governments combat organized crime. The report argues that criminal organizations profit from drug prohibition by controlling and making money from every aspect of the production and distribution chain. Cannabis, the most consumed drug globally, accounts for the largest share in Europe's illicit drug market. To combat this issue, some countries have liberalized marijuana use and commercialization, such as the U.S., which has liberalized marijuana for recreational use. Mexican drug trafficking organizations (DTOs) smuggle around 6 billion dollars of illegal drugs into the U.S. each year, often backed by local gangs. However, Medical Marijuana Laws (MML) introduced in over 20 states have effectively decreased the role of Mexican DTOs in the U.S., decriminalizing small-scale marijuana consumption and production. The 2011 National Drug Threat Assessment Report shows U.S. production increased by over twofold between 2005-2009, and the quality-adjusted price of marijuana decreased by 6% between 2009-2012. MML significantly reduces violent crime rates in U.S. counties bordering Mexico, with drug-law rates decreasing by 46%, juvenile-gang rates by 34%, and robbery-related homicides by 30%. This is particularly evident in Mexican-border states, where MML may reduce drug-trade and gang-related crimes. The effect of MML on crime is not significant in one-year differences but becomes significant in two-year differences. Legalization of marijuana production could further reduce violent crime in regions with strong links to organized crime.

Medical Marijuana stands with doctor’s offices for prescriptions in California. Via Buzzfeed, 2016.

In Italy, marijuana is popular among the younger population, with 19% of young adults using it in 2016. However, due to its illegal nature, users face no alternatives but to buy it on the streets, creating revenues for those active in the black market. In December 2016, a legislative gap created an opportunity for legally selling cannabis with a low level of THC, leading to start-ups selling light cannabis, also known as C-light. This marijuana liberalization provided an opportunity to test the changes in the equilibrium supply of street marijuana in a market where illegal and legal retailers co-exist. The market of cannabis-derived drugs represents around 91.4% of the entire market of illegal drugs in Italy and represents a significant source of revenues for these organizations. A report from Vincenzo Carrieri, Leonardo Madio, and Francesco Principe from the “Health, Econometrics and Data Group” from the University of York analyzed the link between light cannabis and organized crime. They found that the legalization of light marijuana led to a contraction of up to 12% of the monthly confiscation of street marijuana, resulting in 6.5 kilograms per existing grow-shop at the province level. The forgone revenues for criminal organizations ranged from 159 to 273 million euros per year, excluding other cannabis-related drugs. The study suggests that even a mild form of liberalization can reduce the quantity of marijuana sold in the illegal market and related revenues of criminal organizations, potentially encompassing various cannabis-related drugs.

Miley Cyrus lights up at the MTV Europe Music Awards.Photo: Kevin Mazur / Getty Images

Economic Revenue for the State

Marijuana legalization is gaining momentum in the United States, with 16 states and Washington DC legalizing marijuana for adults over 21 and 37 states legalizing medical marijuana. The Controlled Substances Act of 1970 prohibits the use and possession of cannabis, but state policies vary significantly. This has led to a burgeoning industry of legal cannabis companies, including those researching and developing medical products, distributing and growing marijuana, and more. The economic benefits of legal marijuana include increased tax revenue, income and job creation, investment opportunities, and saved money. Sales in Colorado and Washington have resulted in higher taxes and fees, while federally legal marijuana could generate $105.6 billion in aggregate federal tax revenue by 2025. Establishing marijuana nurseries and dispensaries would create jobs and support economic activity in the marijuana industry. National legalization could generate up to 1 million jobs by 2025, likely coming from the rapidly growing industry. Workers would be needed to farm, process, distribute, and sell marijuana-based products, and secondary industries related to legal cannabis, such as software developers, financing services, and construction companies, could also benefit. Investors may express interest in the cannabis industry as more states legalize cannabis, reducing enforcement costs. As marijuana becomes legal in more parts of the U.S., prices for marijuana-based products may drop, potentially benefiting individuals using them for medical treatment. In Italy, cannabis consumption is estimated to have cost 14.1 billion euros in 2014, with cannabis alone spending 4 billion euros, accounting for 0.25% of the country's GDP. The University of Messina has estimated the economic benefits of legalizing marijuana, based on a 75% tax rate. The economic benefit for the state would be around 6 billion euros, calculated from the estimated consumption of cannabis multiplied by the market price. However, legalization could also save up to 541.67 million euros in prison judiciary costs and 228.37 million euros in public order and security operations. The indirect and direct costs of legalization, including regulation and increased consumption, must also be considered. The University of Messina's study shows that the effective costs are not impactful on the national GDP. Legalization could also create new job opportunities, though projections suggest higher numbers.

Dazed and Confused (Film Still)

Harvesting Hope

Legalizing marijuana can have significant positive impacts on society and the economy, as demonstrated by Italy and the U.S. Prisons are increasing worldwide, leading to negative consequences such as increased crime and financial burdens. Decriminalizing marijuana could decrease arrests and reduce the monopolistic power of criminal organizations. Legalizing or decriminalizing marijuana could also create millions of jobs and new sectors, similar to tobacco and alcohol. However, the pros and cons of legalizing or decriminalizing marijuana can be controlled and regulated. With the right measures, the legalization of marijuana could benefit a wide range of people and address societal problems, especially in countries like the U.S. and Italy.