People often talk about cannabis prohibition as if it was just a law and that was that. The reality is that enforcing cannabis prohibition not only costs a large amount of money, but it also prevents a large amount of money from being made. As this article will argue, cannabis prohibition is a colossal waste of money, so much so that it’s worth repealing it on that basis alone.
The cost of cannabis prohibition is close to half a billion dollars a year. This is comprised of two groups of costs: the direct cost of enforcing prohibition, and the opportunity cost of prohibition.
The direct cost of enforcing prohibition chiefly includes prison costs, court costs and Police costs.
According to an estimate made by the New Zealand Treasury, New Zealand spends about $400,000,000 dollars every year on enforcing cannabis prohibition, and is missing out on $150,000,000 of GST on cannabis sales. This means that, according to the New Zealand Government itself, the opportunity cost of enforcing cannabis prohibition is over half a billion dollars a year.
A study by Harvard economist Jeffrey Miron estimated that the American federal government spends USD8,700,000,000 annually on enforcing cannabis prohibition. Adjusted for population size and currency, this suggests that something in the range of $200,000,000 is spent annually in New Zealand to enforce cannabis prohibition (this includes court and prison costs as well as Police costs).
Potentially much greater than this is the opportunity cost of prohibition.
The Miron report linked above suggested that America loses a similar amount from taxation opportunities to what it loses from having to pay to enforce prohibition. Converted to the scale of New Zealand, that suggests that around $200,000,000 in potential tax revenue from legal cannabis sales are instead funnelled into the pockets of criminal gangs.
Other studies suggest similar figures. According to Shamubeel Equab, who wrote a report commissioned by the New Zealand Drug Foundation, up to $240,000,000 could be claimed in tax annually from a regulated drug market.
This is supported by other calculations. The state of Colorado, with a similar population to New Zealand, sells $2,000,000,000 worth of cannabis a year. If a similar amount was sold in New Zealand, that would mean that $300,000,000 of GST would be collected on it.
So, as mentioned earlier, the combined cost of all of the aspects of cannabis prohibition is about half a billion dollars per year.
This is a lot of money for something that arguably has no benefit at all. Even if one charitably conceded that a majority of people wanted cannabis prohibition (they don’t), or that cannabis prohibition prevented a significant amount of cannabis getting into the hands of young people (it doesn’t), $400,000,000 is a great deal of money, especially when considered on an annual basis. It’s about $150 a year for every taxpayer.
Had the Fifth National Government legalised cannabis at the start of their term in 2008, New Zealand would have already saved at least $4,000,000,000. The asset sales campaign run by the National Party raised barely more than this, and that was at the draconian cost of losing ownership of these assets forever.
It sounds incredible, but it’s hard to deny the maths. If the Fifth National Government had legalised cannabis instead of selling state assets, they would have raised almost the same amount of money – without losing ownership of the assets. They sold the country out from under us for effectively nothing.
Worst of all is that New Zealand is borrowing money from overseas sources to pay for the deficits that we’re running in order to finance this prohibition. So not only did we not save $4,000,000,000, but we’re paying interest on those billions – just to imprison our own young people for growing medicinal plants.
Cannabis prohibition should be repealed because it simply isn’t worth the money. The total losses to the New Zealand economy from cannabis prohibition cannot be justified – even if it was charitably conceded that there was some benefit to prohibition. It would be much better to make cannabis legal, which would save hundreds of millions currently wasted on enforcement, as well as gathering hundreds of millions in tax revenue.
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This article is an excerpt from The Case For Cannabis Law Reform, compiled by Vince McLeod and due for release by VJM Publishing in the summer of 2018/19.