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Cannabis legalization is unique co-opportunity

Blog posts reflect the views of their authors.
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Pot leaf
Pot leaf

By Jim Hynes and Tony Patterson
Jim Hynes (jameshynes@rogers.com) is a writer, artist and consultant in Toronto; Tony Patterson (tony@scansite.ca), in Ottawa, is editor and publisher of Co-op Canada Accelerator.

The process of legalizing marijuana in the U.S. has begun, and will likely spread into Canada within this decade, leading federal governments in both countries to revise existing laws. This won’t create a new industry; it will move an existing one out of the shadows, allowing it to take its proper place within our economy and society. It will also put an end to the incarceration of countless people for simply possessing small amounts of a substance that is now widely acknowledged to be medically useful and clearly less harmful than tobacco or alcohol.
Ending the demonization of pot will correct some existing social evils, especially with regard to medicinal uses, but may fail to correct others, if it isn’t handled well. The key question posed by the prospect of legalization is: who should own and run the legal industry? Will we end up with well-managed, socially responsible producers, distributors and retailers, or will the industry remain in the hands of the dubious operators who are in it now?
This isn’t a hypothetical question, it’s a real one; the cannabis industry is already a well-established feature of the economy in both Canada and the U.S., and most of it is made up of scattered, marginal operations, with distribution sometimes controlled by criminal organizations. Legalization will allow a currently haphazard industry to reorganize, and adopt modern agricultural techniques and retail distribution methods. However, this won’t happen automatically. The existing illicit industry will not go away unless it is replaced by a licit one that is better---more efficient, more reliable, more consistent, more responsible, more convenient, more socially acceptable.
Achieving this will take some major agricultural and retail expertise; an industry now run mainly by amateurs will have to be transformed by professionals. In Canada, this is an opportunity that might well be seized by the co-operative movement. Helping to transform a needlessly demonized industry into a socially responsible one is both an attractive business opportunity, and a very appropriate challenge for the co-operative movement to take on. A well-organized initiative by the co-operative movement could lead the way to a cannabis industry in this country comparable in every way to today’s wine industry.

A Government Problem
One possibility is that the federal government will retain control, and regulate the cannabis market after passing enabling legislation. This is the starting position of the Liberal Party of Canada, which is the primary political mover at this time. But it’s more likely that once the federal law has been repealed, cannabis will become entirely a provincial responsibility, as alcoholic beverages are now. Either way, those responsible to take up the challenge will be required to deal with an awkward period of transition, as the existing illicit industry is converted into a new, legally-regulated form. Changes will be inevitable, because legality will make possible major improvements in both production and distribution, with important economic consequences. Scattered, small-scale farms and grow-ops will be consolidated into larger, more efficient ones, and erratic distribution patterns will be rationalized into cost-efficient networks. Marketing methods will also change; an industry that has deliberately kept itself invisible will suddenly become evident in the marketplace.
How the industry’s transformation is managed will determine who will own and operate it in its fully legal form. Just as prohibition drove the beer and liquor industries into the hands of criminals back in the 1920s, the illegal status of the cannabis industry has caused it to be infiltrated by criminal elements. However, low barriers to entry have also allowed many other people into the business who are criminal by circumstance only. Some of these people might convert their existing operations into legal enterprises, but most lack the capital and expertise to make this transition successfully. As matters now stand, the least desirable players in the illegal market are the most likely to survive legalization. Preventing the industry from being dominated in the future by criminal organizations must be a key objective of the legalization process. Governments have a major interest in getting their plans and policies right about this, for both practical and political reasons.

Co-ops As Strategic Partners
Now is the time for the co-operative movement to address this issue by arranging some informal meetings with government officials in Ottawa and provincial capitals. These discussions should examine the challenges raised by legalization, and explore the possibilities of co-op participation in a reorganized cannabis industry. With its long experience and expertise in the agriculture and retail sectors, the co-operative movement is uniquely well-equipped to address the needs and seize the opportunities legalization will create. Co-op participation could offer the surest way for the industry to decisively shed its criminal connections, and quickly emerge in a socially responsible form. For many governments, the assurance of co-op involvement might help to shape the regulatory regimes they will adopt.
Government will have little opportunity to impose regimes that aim to limit availability or raise prices. Unless legal distribution is made convenient and competitive with existing illegal sources, the underground industry will simply continue to operate. Decades of trying have shown that governments and police forces are unable to prevent this, so legal producers and distributors will have to exceed the standards set by illegal alternatives in order to replace them.
This might be done with government-owned production facilities, but that would be the most costly option. Privately owned facilities are much more likely, making co-ops an attractive possibility. Co-ops might even be mandated by governments; new cannabis laws in Uruguay specifically allow co-ops to grow 99 plants each for personal use, effectively removing their participants from the illicit market. Whatever form the legal regime takes, the goal must be to enable efficient legal producers to outperform existing illegal ones, driving them out of the business. This is a key reason to bring co-operative expertise to bear on setting up legal cannabis businesses.
Officials in governments across Canada are watching closely as cannabis laws change elsewhere, and this becomes increasingly likely here. In considering policy alternatives, they should see the co-op movement as a constructive ally in shaping a legal cannabis industry. Governments will certainly prefer to see the industry in the hands of democratic co-op enterprises, rather than under the control of less reputable entrepreneurs.
Governments will also appreciate the positive public image that co-operative involvement will bring to the industry’s transition and transformation. This could be a crucial factor in creating a legal industry that enjoys public acceptance. Decades of propaganda have succeeded in demonizing cannabis in the minds of many people, despite an almost complete absence of supporting evidence. Unfounded fears still cause many to resist legalization, and some controversy is sure to surround the process as it unfolds. The assurance that legal cannabis enterprises will be in the hands of responsible organizations could play an important role in achieving their integration into the legal economy.

The Co-operative Advantage
Government will need help in transforming the cannabis industry effectively, enabling it to discard its criminal connections and assume a fully legal, socially responsible form. No one is better equipped to help achieve this than the co-operative movement. The co-operative business model is particularly well suited to the challenges presented by legalization of cannabis.
From the outset, involvement of co-operatives would improve public perceptions of the existing industry, and expectations about its future behaviour. And once full legalization comes, well-established co-operative expertise in production and distribution would enable the rapid development of efficient, responsible enterprises, pushing dubious operators to the margins. The resulting industry would ultimately be integrated into the legal economy in the most socially acceptable manner possible.
Taking the initiative to transform the cannabis industry in this positive way would enhance the public profile of the co-operative form of enterprise in Canada, boost economic development and stimulate the co-operative movement as a whole. It would be making full use of that foremost among co-operative advantages: trustworthiness.


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