Will Legalizing Marijuana Really Help the Canadian Economy?

- February 18th, 2016

The Globe and Mail reported that while legalizing marijuana in Canada will benefit some people and companies in the space, for the majority “[t]he economic impact of legalization will be negligible.” That’s in contrast to the widely held belief that legalizing marijuana will open the floodgates to “piles of cash.”

The Globe and Mail reported that while legalizing marijuana in Canada will benefit some people and companies in the space, for the majority “[t]he economic impact of legalization will be negligible.” That’s in contrast to the widely held belief that legalizing marijuana will open the floodgates to “piles of cash.”
As quoted in the market news:

The latest report, from CIBC World Markets, says Canada’s federal and provincial governments could pocket $5-billion a year in tax revenues from the sale of legal marijuana.

The $5-billion figure, a blip in a near $2-trillion economy, comes with a few caveats. It does not account for the enormous undertaking of building the necessary framework to support legalization. There will be regulations around marketing, sales, production and transportation, and each province and territory will have different systems dependent on their needs, resulting in an expensive patchwork of regulatory parts.

Most glaringly, we still need to implement an effective roadside test for marijuana impairment, and determine at what level a user becomes impaired. Not a simple task, since individual tolerance ranges wildly. We’re also not likely to save much in criminal justice expenditures, as the laws around marijuana are applied selectively, in an almost de facto legal state, so legalization will only be making the current situation official.

The CIBC’s findings are also dependent on the elimination of the illicit market, which is unlikely to happen. Dispensaries will have limits on their operations, require proof of age, have set price criteria and potency constraints. These are important and necessary restrictions, but they also ensure that others will still turn to the streets. It is, after all, not an open-ended system we are creating, but a restricted one.

The most critical part of all this, though, is that while $5-billion is not an insignificant sum, it is, as the CIBC study notes, just 0.25 per cent of Canada’s GDP. Avery Shenfeld, the economist who crunched the numbers, referred to the amount as “no barnburner.”

Click here to read the full article from The Globe and Mail.

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