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Thinking Beyond Big Marijuana

(Photo: Eric Parker / Flickr)

The precipitous rise in public approval for legalized marijuana has accelerated over the last year. A spate of victories for cannabis proponents in early November was a fitting corollary to the Gallup poll a month earlier, revealing that 58 percent of Americans approve of marijuana legalization, and also seemed to confirm that the United States is on an inexorable march toward a mostly (if not entirely) regulated market for the plant: currently, 20 states plus DC permit either recreational or medical marijuana use, and cannabis industry experts predict that 14 more states will be added to that roster in the next five years.

Marijuana prohibition has roots in neither health-care consensus nor scientific consideration; rather, it was sparked by white Americans’ xenophobic resentment of Mexicans living in the Southwest, who had grown the plant in the region since before the United States forcibly seized it from Mexico. Locking up these “ginger-colored niggers” (so called by America’s first drug czar, Harry Anslinger) was a convenient way to bar them from taking white jobs in Depression-era America, and the US government made marijuana’s possession and sale illegal in 1937. Over time, the brazen racist justification for pot prohibition morphed into a moral argument tied up in the cultural wars of the 1960s. Successive Republican presidents sold the public on the idea that marijuana was anathema to the industrious American way, and by the end of the 1980s, 80 percent of Americans opposed its legalization.

There has never been a legitimate reason for outlawing cannabis, and the shift in favor of legalization owes some of its momentum to generational change and expanded access to information. But if the sudden support for legalization still confuses our understanding of America as a nation steeped in Puritanical conservatism – a tradition that, at one point, helped elevate the criminality of marijuana possession higher than child sex abuse – then we can reconcile the apparent contradiction by identifying another tradition that even more profoundly captures the essence of America’s ethos: big business capitalism. The United States has incubated more multinational corporations and enriched more moguls than any country in the history of the world, and a burgeoning class of weed elite is hoping to turn marijuana into the next great American industry.

The ArcView Group, an elite network of cannabis businesses and investors, estimates the current national legal marijuana market (including medicinal and recreational) at $1.44 billion, a figure that is projected to rise to $2.14 billion next year and soar to $10.2 billion over the next five years. Separate attempts at estimating the total market value of the combined lawful and underground business have clocked numbers as high as $100 billion (by comparison, Facebook’s market capitalization reached the same value in August 2013). Entrepreneurs have rushed into the increasingly legitimate business of cannabis – some with steeled lucidity wrought from years spent working with medicinal marijuana, others more bumbling and fresh faced. All of them are united not only by stratospheric expectations of success, but also by an idea of what it will take to get there.

The Corporate Vehicle

Troy Dayton, CEO of the ArcView Group, believes that large-scale corporate ventures will be “absolutely” necessary to legitimize cannabis in the eyes of the law and sophisticate the consumer economics of pot. “The market represents people’s desire; the market is what leads to products,” he explained to Truthout over the phone, and in the market for marijuana, “bigger companies with more mass appealed products will certainly get a big piece.” In a May 2013 feature from VICE, Dayton was quoted as saying, it is “so much better to have large investors and corporations involved in this industry, because when you have big business behind something that creates jobs and tax dollars, it becomes completely untenable to keep putting people in prison for it.”

Dayton is an overseer of a huge hyper-capitalist experiment in which investors and entrepreneurs are aggressively courting (and sometimes hustling) each other to claim their piece. As a recent article in the New Yorker pointed out, Colorado and Washington are the only places in the world to create legal cannabis markets overseen by the state. Uruguay passed a law in August that would legalize the purchase of marijuana at government-run dispensaries, but the American experiment will institute much less public regulation, and the entrepreneurs leading the charge are near delirious with opportunism.

“We are in the process of building the number one global brand of cannabis,” proclaimed Jamen Shively, spokesperson for the recreational marijuana retailer Diego Pellicer, in an interview with Truthout. The company, whose founders have dually labeled it “Big Marijuana” and “the Starbucks of pot,” was launched in the hopes of becoming an enterprise worth tens of billions of dollars, and its founders held a hyped-up media conference this past summer, with special guest Vincente Fox Quesada, 55th President of Mexico, to drive home the point. If any company captures the sky-high hopes of those at the helm of the recreational revolution, it is Diego Pellicer. Although the business stumbled considerably after its boisterous debut in Washington State, it has nevertheless become a point of revulsion for marijuana enthusiasts who believe companies like Diego want to tie up their precious plant with some of the worst features of capitalism.

“I understand why people are afraid of quote, unquote, corporatization, but really, it’s the thing that’s finally going to bring down the wall,” John Davis, CEO of Northwest Patient Resource Center, a business partner of Diego, assured Truthout in a recent conversation. He spoke positively of “business” as the only force that has been able to successfully challenge draconian pot laws: “If [positive] things happen through the corporate vehicle, that’s not a bad thing at all.”

The short history of Diego raises the question of how much public good can be rendered through the corporate vehicle. From its initiation until very recently, the company was led by two senior traders named Doug Anderson and Alan Valdes of the investment firm Wall Street Capital Partners. An October article in the Seattle Weekly exposed how Anderson, Diego cofounder, was once accused by an Illinois judge of defrauding investors through a Ponzi scheme; Valdes, the former board chairman of Diego, openly suggested selling the firm to undisclosed tobacco companies in 3 to 5 years. Both men are now nominally uninvolved with the company.

“Most people in the pot movement want a progressive pot industry that supports people in communities and that creates a lot of good-paying jobs,” longtime marijuana journalist David Bienenstock told Truthout, “but there’s the concern that’s not how corporate America tends to view free enterprise.” While he believes that the proliferation of corporate cannabis would be a “massive improvement” over current oppressive prohibition laws, he believes it is fallacious to say that corporate America is the solution for which pot activists have been waiting: “The most dangerous thing is accepting this framing that big business will make marijuana legitimate and to rewrite history in a way that it was big business and capitalism that came in and created this wonderful industry.”

Existing experiments with highly capitalized, publicly traded medical marijuana corporations have proven to be such fraudulent ventures that they’ve done anything but legitimize the industry. The first publicly traded marijuana company, Medical Marijuana Inc., is a “penny stock company run by criminals and alleged fraudsters,” rails a report on Seeking Alpha, a stock market analysis web site. Among many damning allegations against the company, the report accuses MMJ of cooking its books by inflating its market value (peaking at $355.6 mm) and somehow ducking out of filing quarterly reports to the Securities and Exchanges Commission that would reveal the scam. Furthermore, as the report highlights, MMJ’s now-former president and CEO Michael Llamas had a long history of blatant financial mischief that resulted in an indictment by the federal government for participating in a “multistate Ponzi scheme and related mortgage fraud scams.”

The corporation has also been outed by whistleblowers for enabling its subsidiary companies to lie about the content of their products. A recent analysis published by Martin Lee of Project CBD found that the company Dixie X Elixirs & Edibles, MMJ’s first foray into the $5 billion “cannabinoid and wellness industry,” has routinely mislabeled its products as containing more medicinal value than they actually have. As Lee put it to Truthout, “Medical marijuana is proof that corporate capitalism is not necessary [for legitimacy].”

A Progressive Pot Industry

Among the high hills and snaking creeks of northwest California, illicit marijuana growing has been a way of life for decades now, and locals have had a head start over the rest of the country in considering what a legal system of regulation should look like.

Scott Greacen is an environmentalist whose intimacy with the area’s river channels has forced him to bolster his own understanding of marijuana cultivation. The excesses of unregulated marijuana plantations have poisoned and leveled creeks, and his vision of the industry is one he calls “highly regulated,” with low barriers to entry so that small-time farmers and others interested in the production process can be registered by the state. Not only would a more level playing field undermine the black market, he told Truthout, but it would produce other benefits as well: “You’re going to get a higher quality product and better environmental performance from more small production. It’s when you go to high-volume production, you lose quality and you have to use chemical crutches.”

He’s heard from a lot of people in his area who dread the day when “corporations come and take over [cannabis],” but remains optimistic that a regulated industry can develop into something that doesn’t contort to the big business archetype. “Change is coming and overwhelming us, and the challenge is, can we create a system that doesn’t just give it away to the corporations? I see a lot of hope for that.”

One group in northern California is matching Greacen’s hopes with action. The Emerald Grower’s Association is a collective of people in northern California who advance policies for a sustainable cannabis industry. Its chairperson, Kristin Nevedal, explained to Truthout over the phone that her organization stands opposed to the kind of “industrial agricultural” model of marijuana production, and hopes California will eventually implement a regulatory model that allows for an abundance of small-time producers, distributors and retailers who keep the wealth generated from the crop mostly local. It’s a vision inspired by the demonstrated material windfall that befell northwest California between the late 1970s and the mid-2000s, when the regional economy thrived on soaring marijuana prices under national prohibition. The Sacramento Bee reports that in Humboldt County, one of three northern California counties that comprise the “Emerald Triangle” fabled in marijuana culture, the pot industry accounts for over a quarter of the county’s $1.6 billion economy.

“We want cannabis cultivation to return to the agricultural model,” Nevedal told Truthout. “Marijuana is the number one cash crop in California, primarily produced by small [and] medium farmers . . . [and most of them] are responsible for supporting their home region’s economy. They put money in fire departments, schools and the economic system by keeping their work and money local.”

In addition to advancing communitarian pot laws, the EGA also lobbies for environmentally conscious growing; namely, by advocating sun-grown weed. “Diesel dope,” the kind cultivated inside factory-sized warehouses swimming in horticultural lamp light, is unbelievably carbon-intensive, and the current annual CO2 emissions volume of all such facilities nationwide is “equal [to] that of 3 million cars,” according to a study done by Evan Mills of Lawrence Berkley National Laboratory. The analysis also highlights that “a single [lamp grown] cannabis cigarette . . . is equal to running a 100-watt light bulb for 25 hours of average US electricity.” The EGA instead supports sustainable outdoor growing methods, and in places like Sacramento, where outdoor growing has mainly been banned, advocates for the use of greenhouses that rely on sunlight to flower the crops.

In order to prioritize more ecologically sound growing, states would need to implement strict systems of regulation that mandate these methods, because there is more financial incentive to not use them. “In a [lamp-lit] indoor environment, [you] have six to seven turnovers over the course of a year,” Steve DeAngelo, executive director of Oakland’s Harborside Health Center, said in a discussion with Truthout. “In an outdoor canopy, it’s at best two a year.” The new regulatory systems in Washington and Colorado fail to give favor to sustainable growing methods, and have actually advantaged large-scale production – the former by offering a licensing category for gargantuan 30,000-square-feet facilities and the latter by mandating marijuana retailers also grow the majority of their weed. DeAngelo believes the developing landscape for the industry’s future currently favors heavily capitalized lamp growers over the less capitalized sun growers. “That’s a real mistake. If anything, the incentive should be in the direction of supporting family farms and supporting more environmentally sound production methods.” It does not take much to intuit which growing method the profit-possessed pioneers of the “Starbucks of pot” would prefer.

Yet for any support already amassed by Big Marijuana, there remains one critical check that still hinders the growth of monopolies: federal prohibition. “You can’t have a national producer right now, because each state has its own market, and those markets don’t interact,” said Troy Dayton. This means that for all the money changing hands and eyes twinkling with little trichomes of hope, nothing is yet certain; and for all the talk of the business going legitimate, the terrain for the wider national industry still more closely resembles the open possibility of the Wild West than the narrowed corridors of older, more predictable enterprise.

The fact that some see corporate capitalism as necessary for legal marijuana indicates “a lack of imagination,” in the words of Project CBD’s Martin Lee. There are many who do possess such an imagination, and states can act on their ideas for a regulatory framework by instituting a combination of environmental standards, support for small-time farmers and alternative business models (such as cooperatives), and regulation against monopolies. First, however, voters and lawmakers must finally get around to ending the violent travesty that is marijuana prohibition.

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