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Up in Smoke

California was on the verge of legalizing marijuana—until profit-hungry growers just said no. By Kelley Beaucar Vlahos There’s a scene in the Bogart-Bacall noir classic “Key Largo” wherein one of the gangsters at the hotel starts rolling at the mouth to distract skittish guests from the hurricane outside. “I bet you two or three years […]

California was on the verge of legalizing marijuana—until profit-hungry growers just said no.

By Kelley Beaucar Vlahos

There’s a scene in the Bogart-Bacall noir classic “Key Largo” wherein one of the gangsters at the hotel starts rolling at the mouth to distract skittish guests from the hurricane outside. “I bet you two or three years we get Prohibition back,” he says almost wistfully. “This time we make it stick … absolutely, yeah.” Prohibition had been great for business. It made kings of men.

While it would be unfair to compare California marijuana growers and distributors—legal or otherwise—to Prohibition-era gangsters, the failure of Golden State voters on Nov. 2 to legalize the possession and sale of marijuana was partly due to cultivators’ opposition. Self-interest trumped what could have been the most significant step toward decriminalizing marijuana since the herb was outlawed by the federal government in 1937. Growers saw their piece of a lucrative market threatened, say critics, so they cast their ballots accordingly.

“They were willing to vote against this because they enjoy the succor from the market price caused by prohibition,” said Allen St. Pierre, director of NORML (the National Organization for the Reform of Marijuana Laws), after Proposition 19 went down to a 46-54 percent defeat. The initiative would have allowed individual Californians to maintain tiny plots for marijuana plants and possess small amounts of the drug, while local governments would be permitted to regulate and tax pot like any other commodity.

St. Pierre says “new wave” growers—particularly those in the “Emerald Triangle” (Northern California’s Humboldt, Mendocino, and Trinity Counties) who made big money from pot after medical marijuana was legalized by California voters in 1996—hired PR firms, led protests, and poured their profits into stopping Prop 19. More established growers, the off-the-grid hippies who had been illegally raising the crop for decades, joined in for fear of a new tax regime and the prospect of being squeezed out the market entirely. Overall, the Emerald Triangle voted down Prop 19 by an even greater margin than the rest of the state, 55 to 45 percent.

“This is how divided it is when you get down to brass tacks, when it comes down to the almighty dollar,” St. Pierre tells The American Conservative. “The amazing division of what can be called the ‘I gots mine’ crowd, and people like me”—that is, activists who have been promoting legalization and fighting the Drug War as a moral and constitutional issue for decades.

What St. Pierre calls the “succor” of the “almighty dollar” is far from one activist’s postmortem hyperbole. Some state estimates declare the annual crop of marijuana in California to be worth $14 billion. In 2009, the New York Times reported that medical marijuana sales totaled $2 billion the year before. Proponents of Prop 19 claimed taxes on legalized cannabis could bring upwards of $1.4 billion into beleaguered state coffers, though that would depend on how many local governments bought into the program.

Nationwide, marijuana is a vast black market economy, which is now being funneled into profitable legal channels in 14 states through their burgeoning medical-marijuana programs. According to SmartMoney, there are already a handful of tiny medical-marijuana-related companies trading on the open market, “the most promising” being Converted Organics, a $2.6 million organic-fertilizer firm.

A cottage industry is sprouting up to accommodate the proliferation of state laws sanctioning private “grows” and individual access to medical marijuana, a cause which today is supported by no less than 70 percent of the public. (An all-time high of 46 percent of Americans now support full legalization.) Aside from suppliers dealing in farming technology and materials, there are the accountants, lawyers, insurance brokers, real estate agents, bookkeepers,  and even franchise dealers and “colleges” that teach aspiring cannabis entrepreneurs how to cultivate and market marijuana.

“This is going to be the fifth largest business in America, and the leading positions are being staked out now,” Steve DeAngelo told SmartMoney in November. DeAngelo is executive director of Harborside Health Center, a licensed dispensary in Oakland that made $21 million in sales last year and purchased marijuana from 500 area farms. He was also an opponent of Prop 19. He says he was worried about government overreach. Others say he was just protecting Harborside’s market share.

On the other hand, Richard Lee, the wildly successful medical-marijuana distributor and founder of Oaksterdam University—a premier institution for “higher” learning, boasting three campuses in California and $2 million annual revenue—saw only upsides to pursuing Prop. 19. He wrote and promoted the initiative, ignoring resistance from growers and the pro-legalization community and poured in $1 million of his own money to collect the 434,000 petition signatures necessary to get it on November’s ballot.

Lee told CNN just before the election that marijuana is already a “legitimate business, legitimate industry like other ones. Just like the alcohol industry is a real business.” His aim was to legalize this commerce and end the new prohibition, which he said does nothing but promote Al Capone-style crime on the one hand and a prison system clogged with non-violent offenders on the other.

But critics like NORML say Lee’s campaign did not reach out to the Emerald Triangle, and while its denizens’ concerns were partly selfish, they were serious and not altogether unrealistic. Their fears should have been addressed, and could have been if there had been a more concerted effort to build consensus from the beginning.

“The fact is that many small time growers are paying their mortgage and feeding their families from profits on illegal marijuana.  Nobody is going to vote to reduce the price of weed from $300/oz to $60/oz when that takes food out of their kids’ mouths. The next initiative needs to create a level playing field for small businesses to compete in marijuana cultivation,” wrote NORML’s outreach director, Russ Belville, in his own postmortem, “10 Lessons Learned from Marijuana Election Defeats,” for Men’s News Daily.

“By emphasizing small, local grows, we can increase the grower vote while also soothing pot smokers worried about ‘Walmartization’ and non-tokers worried about pot becoming as ubiquitous as [the] alcohol they see advertised daily nearly everywhere.”

Certainly, “Walmartization” is a real concern: city-sanctioned “mega grow” farms for medical marijuana are already being planned in Oakland and Berkeley. Not only would such plantations drive all existing “mom and pop” operations to the margins, critics fear pot would go the way of shoes and children’s clothing, markets rendered thin and tasteless by the dominance of cheap Chinese imports over the last 20 years.

But St. Pierre says there is nothing one can do about the prices, which would plunge back to earth—estimates say by 80 percent—if legalization were passed and government had the opportunity to tax and regulate it. “Cannabis when it is grown in the ground is pennies on the pound,” says St. Pierre.

The government will likely slap marijuana with a 5 to 12 percent “vice tax,” but high-profit growers “with their SUVs” and their “aggressive” defense of the status quo could kiss their high-times goodbye, he adds. “The bottom line is you simply can’t continue growing vegetable matter and get $300 to $400 an ounce for it.”

As for the mom-and-pops and the illegal growers in the Emerald Triangle, he said there’s a case to be made that under legalization, organic farms that have been cultivating “the finest cannabis” for the last 40 years will have the opportunity to be the Whole Foods to Southern California’s Sam’s Club market—or better yet, the new Sonoma wine country. Instead of traveling hundreds of miles for the finest grape, yuppies will build entire vacations around the lush California countryside and award-winning strains of sensimilla.

This future sounds worlds more attractive then the carny-like atmosphere that took hold in places like Venice Beach after medical marijuana was legalized 14 years ago, giving local jurisdictions discretion over cultivation and distribution. Some did this better than others, and the results have tainted feelings about the government’s ability to handle legalization. That raises another reason critics say Prop 19 failed: it was too ambitious, creating too many details where the devil can hide. It turned out to be self-defeating.

“It was a very complicated initiative,” says Eric Garris, who has actively supported marijuana reform efforts in California for the last 40 years, beginning with the first ballot initiative, another Prop 19, in 1972. That one would have made simple possession a misdemeanor carrying a $100 fine. It lost, garnering only 34 percent of the vote.

Garris, a libertarian based in San Francisco and the founder and managing editor of Antiwar.com, insists the latest Prop 19 was upended not by hostile growers upstate but by provisions in the bill that would have made it difficult for employers to discriminate against pot smokers in the workplace. He said this killed a golden opportunity to get libertarians and conservatives on board, scared big business, and gave opponents more ammunition than Richard Lee and his group could handle.

“I think that if they left that out, it might have passed,” says Garris. “Regardless of all the other problems, that was the most significant one. People don’t want to think they will be forced to hire potheads.” Indeed, Congressman Dana Rohrabacher (R-Calif.), a stalwart conservative who has represented Huntington Beach for 22 years, told TAC in July that the Drug War has been a “tremendous cost” to America, morally and fiscally, and he would have gladly supported Prop 19 but for this one red flag.

It’s not as though all conservatives see marijuana as the “evil weed.” Sarah Palin has suggested police have better things to do than bust smokers in their own homes, and outgoing California Governor Arnold Schwarzenegger signed a law in July that reduces the penalty for adults carrying small amounts of marijuana to the equivalent of a speeding ticket. But like Rohrabacher, he didn’t like Prop 19. Appearing on “The Tonight Show” on Nov. 8, he said it was “badly written” and “went a little bit too far.”

The California Chamber of Commerce, smelling blood, seemed to hit its mark with a $250,000 radio campaign in October stressing the issue. “[Prop 19] creates a whole new protected class of employees and ties employers’ hands in maintaining a drug and alcohol-free workplace,” said Erika Frank, general counsel for the California Chamber of Commerce in Sacramento, in an interview with the Wall Street Journal’s MarketWatch. “The concern is being able to manage marijuana use and employees showing up to work high on marijuana.”

Garris says the initiative left too many unanswered questions and gave people on both sides plenty to worry about. How would competing jurisdictional laws across the state affect growers and smokers? What about current medical-marijuana card holders? How would police test for DWS—driving while stoned? Could the new law actually be more punitive? And, of course, what about the children?

“Because it was so complicated they needed time to sell it and they didn’t have the time to sell it. As a result of not selling it, every single major newspaper came out against it, even the two San Francisco dailies,” Garris tells TAC.

He says longtime activists had tried to dissuade Lee from pursuing legalization in 2010 because it “was premature,” thinking they’d have a better chance to pass it in the 2012 presidential election cycle. Thus much of the organized grassroots didn’t give 100 percent of their effort—or worse, they actively campaigned against the initiative. Without them driving younger Californians to the polls, voters over 50 dominated the election. And they certainly weren’t heading to the voting booth to legalize pot, particularly in Los Angeles County, which represents a quarter of the state’s population and voted against legalization 53 to 47 percent.

Former New Mexico Governor Gary Johnson, a pro-legalization activist and libertarian Republican whom many expect to launch a presidential bid in 2012, tells TAC there was no excuse for not supporting the measure, actively or otherwise. “I’m in the camp that there should have been a yes vote. I’m absolutely aware of all of the flaws. But it slays me to think that the pro-marijuana community stuck their knife in it because it wasn’t perfect.”

“But I do think this advanced the issue nationwide,” he adds, looking to the future. Conservatives, he says—including the Tea Partiers he addresses regularly—are starting to open up to legalization as a question of limited government and individual liberty. What’s more, 46 percent of the California electorate is nothing to balk it. “I’m viewing the whole thing as positive.”

Those missed votes in Los Angeles and the three counties that make up the Emerald Triangle made the difference, as did opposition from a pro-pot community wary of the initiative’s darker implications. The key next time—whenever there is a next time—will be framing a cleaner, “up or down” proposal, building the necessary coalitions, and convincing the new-wave entrepreneurs and old hippies furrowed in the underground that the current laws are more destructive and morally reprehensible than any hit they would take to their own livelihoods from the end of prohibition.

Kelley Beaucar Vlahos is a Washington, D.C.-based freelance reporter and a columnist for Antiwar.com.

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