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Let a thousand pot plants bloom — free of government interference

Ivo Vegter is a columnist and the author of Extreme Environment, a book on environmental exaggeration and how it harms emerging economies. He writes on this and many other matters, from the perspective of individual liberty and free markets.

Finance minister Tito Mboweni has been tweeting up a storm about a large marijuana plant growing on his farm, saying it should be legalised to generate tax revenue. He’s right about legalisation, but wrong about the tax.

There’s a new cannabis hero on the streets of South Africa, rallying the masses around the catchphrase, “Legalise it!”

The decade is barely a month old, but Finance Minister Tito Mboweni has already taken to Twitter no fewer than 10 times to enthuse about a large dagga plant that mysteriously appeared on his farm.

His neighbour has them too, he says.

He worries that the three medical doctors in Cabinet — namely former health minister Aaron “Nanny” Motsoaledi, current health minister Zweli “Jobs for Nieces” Mkhize, and Nkosazana “I stand with Jacob” Dlamini-Zuma — will oppose his suggestion.

Mboweni polled his Twitter followers and a majority agree with him that weed should be fully legalised in South Africa.

At the beginning of February, he let rip with another series of tweets about his beloved pot plant.

Legalise it, he said, quoting Peter Tosh, the late reggae singer who released his debut solo album under that title in 1976.

He challenged the South African Police Service to arrest him over his weed (even though the courts have now declared it legal to grow and possess marijuana in private for personal use, and Mboweni’s micro-plantation is quite legal).

Finally, he gave what he believed to be a good reason why pot should be legalised: the prospect of tax revenue (which, to be fair, he really does need).

There are many good reasons to fully legalise marijuana, but tax revenue isn’t one of them.

South Africa needs more jobs, more industry, and more GDP growth. A cash crop which already exists (albeit in the shadows), and for which there is great demand both domestically and on the global market, would be an excellent way to stimulate the economy.

Ed Stoddard, writing in these pages, has made a good case for the potential benefits of a legal marijuana industry in South Africa, and I entirely support the idea.

By supporting the legalisation of weed I don’t mean to claim either that it is harmless or that it is beneficial.

There are a wealth of claims about the beneficial effects of cannabinoids (CBD), the non-psychoactive ingredients of cannabis. They range from reducing pain and nausea in patients undergoing cancer treatment (which is very plausible), to curing cancer itself (which is not plausible at all). It is supposed to be good for an astonishing array of ailments, a claim that is commonly made about all sorts of herbs in the alternative medicine sector.

There is limited scientific evidence of health benefits of marijuana. There is only one drug derived from cannabis that has been approved for use by the US Food and Drug Administration, and that is indicated for control of seizures in two rare forms of epilepsy.

Some of the research that is ongoing about the potential uses of cannabis for medicinal purposes shows promise, but until that research is completed, published, replicated and subjected to clinical trials, the argument that cannabis is good for all kinds of ailments — as Peter Tosh’s song claims — remains weak.

The associated claim that weed is harmless is also unjustified. Modern strains of marijuana are often bred for high concentrations of tetrahydrocannabinol (THC), the psychoactive ingredient. Like any hallucinogen, regular use can cause psychosis and other mental health problems in users. Increased use of cannabis is also associated with increased cannabis-related hospital visits.

Besides the psychological risks of marijuana, it poses the same physical risks when smoked as any other plant, notably tobacco. Harmless, it isn’t.

The commonly held belief that it is not addictive is also nonsense. It certainly is.

However, the idea that drugs can be controlled by banning them is outmoded. The so-called “war on drugs” has failed. Prohibitions — whether on alcohol, prostitution, gambling or drugs — have never worked, and in many cases have caused more harm than the original problem did.

Prohibition turns profitable businesses over to criminal enterprises. It makes outlaws of ordinary users, many of whom need medical help to cope with addiction, not time in prison learning to become dangerous criminals. There is growing consensus among the world’s medical and regulatory establishments that drug policy should be run by doctors, not police.

The biggest risk associated with legalising marijuana, however, is not the relatively manageable health risk or the social implications of smoking pot. After all, those risks already exist. The biggest risk is expressed by Mboweni when he salivates over the tax revenue he could raise.

Instead of letting a thousand flowers bloom (to misquote Chairman Mao quite out of context), the government is likely to issue a restricted number of licences to grow marijuana, manufacture related products, and sell cannabis. They’ll go to a select few commercial enterprises which are in a position to bribe the government with guarantees about job creation and other political goals. Then, the government will subject them to a substantial “sin tax”.

This is exactly what it did with the casino industry. Before the 1996 National Gambling Act was promulgated, thousands of small-scale casinos existed, vigorously competing for customers by offering favourable odds. They were a thriving business, and as a one-time customer of theirs, I can attest that they offered a thoroughly enjoyable way to spend an evening.

After the Gambling Act regulated the industry, however, they were all banned, and only a few large operators were granted licences to operate casinos. Instead of small, cosy casinos with great odds, now we have a few dozen giant, glitzy, noisy, expensive and frankly horrible casinos offering terrible odds to the gullible and the desperate. There is no real competition to speak of, because the government decides whether there is “room in the market” for new licensees.

The same is likely to happen with marijuana. The government will decide how many licences the market can bear and issue them to the highest bidders so only large commercial farms, well-funded factory operations and large-scale retailers will be permitted.

It is unlikely that large numbers of small-scale farmers will find profitable work in a legalised marijuana industry, though they should. It is unlikely that lots of interesting “head shops” will open to retail cannabis products, though they should.

There won’t be much competition in the highly restricted, tightly controlled industry, so prices will remain high. Moreover, Mboweni will tax the hell out of them, raising prices even further. The outcome will be that ordinary users will continue to buy their product from the black market where they get it now, and will be able to do so much cheaper.

After all, the same has happened with cigarettes and alcohol. The problem of illicit tobacco products or homebrew booze is entirely caused by excessive taxation. It’s not as if sin taxes even bring in that much revenue or are ringfenced to pay for the particular social and public health impacts of the products on which they’re levied.

That also means that cannabis users will remain uncertain of the quality or strength of the product they buy, which is typical of black markets, and is a major reason why drug prohibition has been so dangerous for consumers.

The public scare about lung diseases associated with vaping was not caused by legal vaping products, but by illicit black-market cannabis cartridges which contained harmful substances that users didn’t know about. With illicit hard drugs, many of the deaths attributed to overdoses are caused by unexpectedly strong product or dangerous additives, not by the drugs themselves.

A legal market is always much safer for consumers, and a government that claims to govern in the public interest should legislate accordingly.

It is probably too much to hope that the government will not require any licences at all for growing, manufacturing or selling cannabis products. If marijuana is fully legalised, as it should be, licences should be widely available to anyone who meets a limited set of basic public safety criteria. Those criteria should not include promises of future employment or revenue targets. Government has no business policing business plans.

Government should not interfere with competition by determining whether there is “space in the market” for additional licensees. It should always assume that someone who applies for a licence is in a better position to know the answer, and to take the risk, than a government bureaucrat. And if they’re wrong, so what? They go out of business. That’s how an efficient market works.

Cannabis businesses should be taxed like any other business. Ordinary VAT, company tax and payroll taxes should be all the windfall Mboweni can look forward to. Even those taxes risk keeping the black market alive. Any licence fees or taxes above and beyond that guarantees a thriving black market, endangering producers, sellers and consumers alike.

This principle, that minimal regulation and taxation will enable legal businesses to thrive and create jobs, income and tax revenue, applies not only to the marijuana industry, of course.

It applies throughout the economy, as Jordan Griffiths recently wrote:

The ANC government’s obsession with regulation, taxation and control of the economy is anti-growth. Less regulation and interference is what is actually needed.”

I couldn’t agree more. Legalise it, and then leave it alone. DM

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