(This post is not related to investing)
In 1933, the government of Franklin Delano Roosevelt did something remarkable that changed American history. FDR's government was famous for a lot of 'firsts' but this was unimaginable to conservatives. The government did the unthinkable and legalized alcohol. Thus ended The Noble Experiment. The "experiment" was a total failure from almost day one, with alcohol being widely available in most cities but, nevertheless, the conservatives held sway until the day Roosevelt, and subsequently, Congress, legalized alcohol.
Similar to The Noble Experiment, America has been pursuing the War On Drugs for several decades now. It is debatable when the policy was started but, apparently, the concept was first unleashed by Richard Nixon. Nixon was also responsible for establishing the largely incompetent, and somewhat corrupt, Drug Enforcement Agency (DEA). My opinion is that the War On Drugs really got going under the Ronald Reagan government with the militarization of the drug war.
It looks like USA has also lost control over the drug war in Mexico, particularly along the US-Mexico border. I have no proof but it is possible that US government agencies have been infiltrated by drug traffickers. In particular, the three Department of Homeland Security agencies that were created out of the former agency responsible for immigration and border control, Immigration and Naturalization Service (INS), may be unreliable.
Like all terrible policies, we may be close to the abolishment of the War On Drugs. Similar to 1933, economics may be driving policy more so than moral battles.
Writing for The Globe & Mail, Barrie McKenna reports that the State of California is contemplating legalizing marijuana. It is still in the very early stages but I have a feeling it may happen. Other media sources, as well as opinion sites, have suggested the possibility earlier but my impression is that we may be witnessing a pivotal change:
Governor Arnold Schwarzenegger says he welcomes the debate about legalizing marijuana as the state struggles to avoid insolvency. A recent poll shows 56 per cent of Californians want pot legalized. A major push is on to put the issue to statewide referendum next year. And yesterday, state lawmakers held an initial hearing into a proposed law to end California's 96-year-old pot ban.
“I think it's time for a debate,” acknowledged Mr. Schwarzenegger, who as an actor portrayed a drug fighting undercover police officer in Kindergarten Cop.
A spokesman for the governor insists Mr. Schwarzenegger is opposed to legalization.
The move could generate as much as $1.4-billion (U.S.) in new tax revenue and save the state “tens of millions of dollars” in prison and police costs, state officials told the California Assembly's Public Safety Committee. They based their estimates on a $50-per-ounce levy.
“It is time to take our heads out of the sand and start to regulate this $14-billion industry,” said committee chairman Tom Ammiano, who is sponsoring the legalization bill. “By doing so, we can enact smart public policy that will bring much-needed revenue into the state and improve public safety by utilizing our limited law enforcement resources more wisely. The move toward regulation is simply common sense.”
California could use the cash by taxing pot, just as it does cigarettes and alcohol. But legal experts, economists and law enforcement officials who testified Wednesday before a state committee warned that the proposal is fraught with unknowns.
And chief among them is how the U.S. government would react.
Possession, distribution and sale of marijuana remains a federal crime. And while California can eliminate state penalties and charges, it can't fully legalize.
In terms of finances, the biggest benefit is not necessarily the additional tax revenue. Rather, the biggest financial impact is likely to be a reduction in prison and law enforcement costs. America spends a fortune on its jails with seemingly little benefit.
Given how California is dominated by liberals, I think legalizing it within the state isn't as difficult as it seems. However, as the article suggests, the US government still views it as illegal so it requires federal government policy change as well. We may be seeing the initial stages of a battle between the State of California and the Government of the United States of America. I'm not sure how the courts will rule. I am hopeful that US courts, which tend to be very libertarian, will rule against the federal government but I'm not knowledgeable about legal matters and am not sure if it will be tested by the Supreme Court; it's possible that the federal government has absolute say over state policies in this case.
Some other countries, such as The Netherlands, has experimented with legalization of marijuana in limited regions but they have minor impact. If California does it, it's huge! And if America does it, it's monumental!
Speaking as a Canadian, I think it's about time Canada followed a similar path and legalized marijuana. There will be some initial side-effects but it will be benefitial in the long run. The conservatives will fight tooth and nail but they are very close to completely losing the war. If California legalizes marijuana, I say the Liberal Party should make it a party platform (a minor one) and try to influence the public.
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- Sivaram Velauthapillai
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