Friday, June 25, 2010

Why Bother with a Ban?

The economic arguments for licensing, regulating and taxing medical marijuana -- see related news stories here and here -- won't make a dent with prohibitionists. They are on a moral crusade to prevent the corruption of Colorado Springs youth, by pushing medical marijuana back into the shadows. That this will deny medical marijuana patients their constitutional rights, and get the city sued, while doing nothing to curb teen drug use, is of little consequence to them. Crusaders can see no shades of gray.

But those fretting over the prevalence of medical marijuana dispensaries in Colorado Springs need only be patient. Many of these businesses won't be around a year from now. They'll have been killed-off by regulation or competition.

One cause of death comes naturally in a capitalist system, with competition separating the good operators from the bad. Boom almost always leads to bust; that will happen here, too. Too many suppliers chasing a limited number of patients (and it is limited, despite the recent surge in red card applications) will sooner or later thin the herd. I trust in the market to solve many MMJ-related "problems," if given time to operate and evolve. But that requires a degree of patience, and an understanding of markets, that prohibitionists lack.

The second cause of death -- death by regulation -- is more objectionable, in my opinion, because it is government-induced and largely unnecessary. Some reasonable local controls make sense, given the newness and sensitive nature of this industry. But most regulation is excessive and blindly destructive; it's imposed for the ego-gratification of politicians and the job security of regulators. It pretends to "fix" what isn't broken, to protect the public from a phantom menace.

An example of this dynamic at work can be found in this article from the Boulder Camera, which details the struggles that city's dispensaries are having trying to comply with a spate of new regulations imposed by the state.

"Boulder-area providers of medical marijuana are scrambling to comply with new state regulations that require them to grow most of their own pot, keep detailed records of all transactions and apply for state licenses through a process that includes criminal background checks.

The new rules, signed into law by Gov. Bill Ritter earlier this month, are predicted to put at least half of the state's 1,100 medical marijuana dispensaries out of business.

Local dispensary owners agree their numbers soon will be fewer, but each business owner is doing everything possible to be one of the survivors.

"When I look six months down the road, we're either going to be very successful because we made it through this, or we're going to be out of business," said Ryan Hartman, owner of Boulder Wellness Center on Arapahoe Avenue.

The biggest hurdle for Hartman is the requirement that dispensaries grow 70 percent of their own marijuana by Sept. 1. Hartman doesn't have the resources to hire employees right now, and he and his partners -- his wife and another couple -- are working "triple-time" to ramp up what had been a very small growing operation.
The new rules also require that dispensaries -- called "medical marijuana centers" -- have a local license by July 1 and apply for a state license through an as-yet-undetermined process by Aug.

1. The state license requires criminal background checks for all owners, officers and employees and calls for detailed security and record-keeping measures to account for all the marijuana that moves through a center.

"I think ultimately the goal of the legislation is to centralize the industry so it's easier to keep track of and control and tax," said Eric Moutz, a Boulder attorney who specializes in advising clients who work with medical marijuana.

While some of the law's requirements are clear, many of the details still need to be worked out through a state rule-making process that could take most of the year.

"Everything is in a holding pattern until the rules get set," Moutz said. "And those could be crippling or they could be very reasonable."

Colorado Springs dispensaries are in the same boat. Some will sink, others will stay afloat, as they struggle with the dual threat of competition and regulation. The architects of H.B. 1284 said they were out to kill many of these businesses, and they'll undoubtedly succeed. A year from now, the landscape will look much different, whether or not a dispensary ban makes the ballot.

Storefronts now filled will be empty again; landlords will be without tenants; jobs will disappear; city tax revenues will fall. Instead of visible dispensaries, operating openly in designated areas, some providers may go underground. The action will move back into neighborhoods, back behind closed doors. With less competition, and fewer places to purchase their medicine, the costs and inconveniences for patients will soar.

All the dreams of MMJ prohibitionists will be realized, in short, without the need for a divisive ballot battle, or the legal battle that will follow. And all they have to do is be patient, trust in the free market and let business-killing regulations take their toll. Banning businesses outright isn't really necessary in the United States. We have plenty of other ways to drive them under -- to strangle opportunity and entrepreneurship and cripple our local and national economy -- without the need for such extreme measures. All we need to do is the usual thing and these businesses will also disappear.

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