The Economist - USA (2022-05-14)

The Economist May 14th 2022 United States 27

Californiacannabis

High maintenance

K

arenandtom hesslermovedtotheir

remote corner ofHumboldt County,

California,in1971.Distrustofthegovern­

mentduringtheVietnamwaranda desire

toliveoffthelanddrovethemtosettlein

Ettersburg,some 225 miles(360km)north

ofSanFrancisco.“Wethoughtwe’dcome

outintothewilderness,andwecouldjust

doourthing,”MrsHesslersays.Theonly

waytogettotheHesslers’farmistonavi­

gatemilesofserpentinedirtroadsthrough

northernCalifornia’stoweringredwoods.

Theisolationthatsointrigued“backtothe

land”hippiesliketheHesslersalsoturned

HumboldtCountyintothecannabiscapi­

talofCalifornia—and,therefore,America.

Humboldt, Mendocino and Trinity

countiesmakeupthe“EmeraldTriangle”,

anarearoughlythesizeofMassachusetts

famousforgrowingweed.Localssaythe

denseforestsactasa“redwoodcurtain”,

affordingfarmersseclusionwhencanna­

biswasstillillegal.Fordecadescannabis

farmerswereseeinggreen.JohnnyCasali,

a smallfarmerinHumboldtCounty,says

herememberssellingsomeofhiscropfor

$5,800a pound($2,600a kg)in1990.

Californialegalisedmedicalmarijuana

in 1996 andrecreationalcannabisin2016.

Thestateisnowthelargestlegalweedmar­

ketintheworld,rakingin$5.2bninsales

in2021.Proposition64,theballotmeasure

thatallowedrecreationalweed,washer­

aldedasa waytoshrinktheillicitmarket,

andgivethoseharmedbythewarondrugs

a chancetojointhelegal economy. Some of

thathashappened.Mr Casali was released

in 2004 afterservingeight years in prison.

Henowrunsa legalcannabis farm.

However,manycannabis businesses in

Californiaarefloundering.  Supply  surged

asmoregrowersentered the legal market.

In 2017 eraEconomics, a consultancy, esti­

mated that California  consumes  2.5m

poundsofthe13.5m­15.6m pounds of weed

produced there each  year.  Farmers  and

shopownerscomplain that onerous taxes

andrulesmakerunning  a  profitable  legal

weedbusinessnearly impossible. Last au­

tumnwas“aperfect  storm  of  everything

thatcouldhavegone  wrong”,  says  Nicole

Elliott,California’stop pot regulator. Pric­

esfellto$400a pound; the cultivation tax,

of$161apoundforbuds,  was  raised  be­

causeofinflation;and labour was scarce. 

Thepricehasrecovered  somewhat;  in

Aprilit wasabout$800 a pound. But the le­

gal frameworksetup  by  Proposition  64

spellslong­termtrouble. It gave local mu­

nicipalitiesthepower  to  decide  whether

theywouldallowcannabis to be grown and

sold.Intheirforthcoming book “Can Legal

WeedWin?”twoeconomists,  Robin  Gold­

steinandDanielSumner,  argue  that  local

control ensured that  the  illegal  market

wouldcontinuetoflourish in places where

legalweedwasbanned. Local control also

helpsexplainwhyCalifornia  lags  behind

ninestatesinweedshops  per  person.  By

comparingsalesfigures with drug­use sur­

veys,  Messrs  Goldstein  and  Sumner  esti­

mate that only about 25% of the weed sold

and  consumed  within  California  is  legal.

Many  pot  farmers  in  Humboldt  say  that

some  of  their  fellow  growers  have  gone

back underground to make a profit. 

One  way  to  try  to  stamp  out  the  illegal

market,  including  the  organised­crime

groups which have set up shop in the Em­

erald Triangle, is to ramp up enforcement.

But that is not popular among officials who

want  to  make  up  for  the  trauma  inflicted

during  the  war  on  drugs.  In  the  1980s,  “it

was like the military coming in,” says Wil­

liam  Honsal,  Humboldt  County’s  sheriff.

“A  lot  of  the  old  farmers  still  have  ptsd

based upon the helicopters flying low.” He

says  his  department  doesn’t  have  the  re­

sources anymore to go after illegal farmers

even if it wanted to. Of the 120 deputies that

roam  Humboldt,  only  four  are  devoted  to

smoking out illegal cannabis. 

Programmes  to  help  former  offenders

have  fallen  short.  An  investigation  by  the

Los Angeles Times,  published  in  January,

found that at least 34,000 old drug charges

for marijuana had yet to be cleared. 

Wake up and smell the weed

Chipping away at local control by incenti­

vising—or  compelling—cities  to  join  the

legal  market  might  help  the  industry.  But

the  change  farmers  want  most  is  tax  re­

form.  Some  cities  and  counties  have  sus­

pended  local  taxes  on  cannabis.  Gavin

Newsom,  California’s  Democratic  gover­

nor, has promised to “look at tax policy to

stabilise  the  market”.  Meanwhile,  Hum­

boldt  farmers  are  getting  crafty  to  keep

their  businesses  afloat.  Some  take  part  in

cannabis  tours,  where  Bay  Area  potheads

are whisked to different farms to see what

happens behind the redwood curtain. 

Humboldt  farmers  hope  federal  legali­

sation will save them by creating a national

market.  “When  California  cannabis  be­

comes legal”, says Mr Casali, “the Emerald

Triangle  will  be  the  Napa  Valley  of  weed.”

They  might  be  disappointed.  Because  in­

terstate  commerce  is  banned,  states  that

might have bought California pot have in­

stead  built  their  own  industries.  If  and

when  weed  is  legalised,  these  states  may

strive to prop up their local businesses. 

California  may  also  have  trouble  com­

peting  with  lower­cost  states.  Industrial,

indoor farms have proliferated as the can­

nabis  industry  has  begun  to  resemble  Big

Ag. But the state’s high energy costs make

growing  pot  indoors  expensive.  In  future

farmers may choose to grow in somewhere

like  Oklahoma—a  medical­only  state  that

licenses  new  businesses  quickly—rather

than California, where they must also con­

tend with high taxes and burdensome reg­

ulations. “Peoplegotta wake up in Califor­

nia,  man,”warnsMr  Hessler,  “before  it’s

way too late.”n

E UREKA, CALIFORNIA

The world’s largest legal weed market is going up in smoke

Don’t take a leaf out of California’s book