High Finance
Canadians spend almost as much on cannabis as we do on tobacco. With $1.8 billion in domestic sales alone, where does the money go? This Magazine takes a hit off Bud Inc., a work that has the whole country buzzing
BY Brian Joseph Davis
Once, years ago, before I quit pot just to annoy my roommates, I was lying on the floor of a Brixton, UK, council flat, completely wrecked. I, the world’s most sentient chunk of lead, managed to ask my host, “What did I just smoke?” and, “where, by the way, could I puke?” The answer to the former was “BC bud” and I remember being filled with a vague patriotic pride, like coming across the faucets my hometown makes in a distant, fancy hotel. The answer to the latter question was that I had already thrown up. So much for pride, but it was the first time I had heard the phrase “BC bud.” The pot industry is now as inextricably associated with British Columbia as corn is with Oklahoma. The story of how the West Coast got as high as an elephant’s eye and created Canada’s only recent, real economic miracle is told with verve and detail in Ian Mulgrew’s new book, Bud Inc. Inside Canada’s Marijuana Industry (Random House).
At $5.7 billion a year in combined domestic and export sales (an estimation put forth by Stephen Easton, senior scholar at the Fraser Institute), Canada’s most profitable agricultural crop was nurtured by a ready supply of hippies and draft dodgers and, more important, lax penalties for not only users but for growers. A trafficking charge in Canada could land you as little as a fine. Compare with United States’ penalties (i.e. years of prison time)—where would you set up shop? Canada is in a state of unenforceable law that Mulgrew compares to Prohibition and, he warns, will engender the same problems as the era of bootleggers and gangsters.
Mulgrew is upfront about his position. He has smoked on and off since he was a teen and when his mother was suffering through cancer, he secured pot for her. But he’s no Phish fan rhapsodizing about hemp butter. His X-ray of this shadow economy is precise and unsparing when it comes to cataloguing the murderous thugs and organizations that are a hidden part of an industry mostly known for its hash-addled zealots. Mulgrew has talked to weed barons who are as comfortable doing business with members of hate groups as they are with giving away medicinal marijuana for free. Their philosophies may be an ideological mess but their business acumen is not. It’s all at a fragile point though. As pot consumption has gone middle-class with its endless varieties and SUV-sized prices, organized crime is poised to move into the racket with chemically enhanced, cheaper product. The owner of this problem, Mulgrew argues, is the Canadian government.
By “slouching towards decriminalization,” legislators have created strange weather that allows for huge market growth but, by upholding trafficking as illegal, keeps profits in black market hands only too eager to use it as capital in other criminal pursuits. Six billion in sales says demand is not going away anytime soon. Total legalization, Mulgrew concludes, is the only direction that will keep Bud Inc. from turning into Murder Inc.
Insiders have parcelled out dazzling amounts of information to Mulgrew, which speaks of both the subjects’ buzzed-out confidence and of Mulgrew’s prodigious talents as an investigative writer and street economist.
I spoke with Mulgrew about the goods delivered by his book, the benefits of medicinal Mary Jane and how Washington is keeping Canada from going Amsterdam.
This Magazine: What started you on this project?
Ian Mulgrew: I’ve been writing about cannabis issues for most of my career—generally about crime and smuggling. Also, I’ve been aware of the cannabis industry for 30 odd years, just as someone who has lived here. As I entered middle age, my friends and my mom dealt with issues of cancer. Most of them found when undergoing chemotherapy, marijuana was very useful for nausea—a lot better than the other drugs that were available.
That was occurring [personally] at a time when the government was embarking on their medical marijuana program. It struck me that the debate wasn’t very intelligent and there was a big public policy issue there that Canadians should discuss. There seemed to be a lot of books in the field of the cultural aspects of drug-use and novelty kinds of books—How To Roll a Six-Skin Spliff and stuff like that. There was very little that talked about it in a grown-up way. I wanted to put a book out there that raised issues and put it in a better place in the public policy agenda.
This: The numbers in the book are really shocking.
Mulgrew: The numbers are crazy and also it just struck me that when you look around, the idea that this is an underground economy is absolute nonsense. It’s right there, staring us in the face. I can go to half a dozen fertilizer companies in this country that are all designing products that are being sold right to the marijuana manufacturers. In Vancouver, we’ve got at least a dozen retail and coffee shops discreetly selling marijuana and it’s the same in Toronto, Hamilton, Halifax. So Canadians should talk about this openly.
This: Do the big pharmaceutical companies have any interest at all in medicinal marijuana, or doing any research?
Mulgrew: Yes, they do. Bayer has taken the lead by investing roughly $600 million into GW Pharmaceuticals, a boutique pharmaceutical company based in England that was set up precisely to investigate and bring marijuana to market as a synthetic. I think the big pharmaceutical companies have gone through a kind of process where, probably 20 years ago, none of them were interested because of the legal issues. Being able to do the research was difficult. They were also, I think, concerned, because in their world patents are the key. You have to synthesize something that can be patented. Marijuana and its efficacy as a synthesized drug…we’re not really sure how that’s going to work and whether it will work or whether it’s going to be like an herbal medicine. If it’s just an herbal medicine, they can’t recoup the costs. It’s not their cup of tea. I think today any reluctance that’s in the pharmaceutical industry about investing in marijuana research is more around those issues.
To give you an example of how serious those issues are: GW Pharmaceuticals poured tonnes and tonnes of money into the development of Sativex, the [cannabis extract] drug that’s now available in Canada. The problem that they’ve run into is that sublingual spray costs an incredible amount of money to buy in the pharmacy. There’s not much difference between it and a tincture that’s sold in the compassion clubs. So GW has begun pressuring compassion clubs against selling these tinctures because they’re claiming it infringes on their patent rights. They’ve got a bit of a point. If you were able, in your own house, to produce a kind of aspirin tincture, Bayer would be on top of you as well. To me, that’s the crux of the problem on the pharmaceutical end of things at the moment.
[The pharmaceutical companies] are wrestling with “how do we control what we develop, how do we recoup our money, how do we make profit?” Very capitalistic issues for them. But Bayer—who is probably the biggest—has taken the lead and said, “Let’s do it.”
This: Your subjects, the pot barons, reveal an amazing amount of information to you. Was it a slow process of building trust, or did they know you through your years of covering legal issues?
Mulgrew: A little bit of both. I had credibility with most of these people because of my body of work, but then, over the first year of this book project, I spent a lot of time talking to these people, letting them know what I was doing. As soon as they saw what I was doing, and the approach I was taking, the trust that was initially there grew. Most of them decided to participate further in the project.
This: A lot of them seem deeply conflicted. On the one hand, they have their own radical mandates, but on the other, because of these policy gaps, they’re forced into business with gangsters and thugs.
Mulgrew: That’s really key. All of these people are conflicted because, on the one hand, their personal knowledge of this plant and the economic, medical and recreational benefits that it brings, should be exploited. On the other hand, there’s a law in place that stigmatizes them if they really get behind it in a big way, and in fact, they can be put in jail for it.
The debate that’s happening right now in Holland is right on the money. The Dutch have been following a policy of look-the-other-way for a quarter century. That has put coffee shop owners in the unfortunate position of selling to users at the front of the store who feel very comfortable and safe and know that they’re not going to get charged or put in jail, but on the back door they have to buy their cannabis from underground dealers and underground manufacturers. So the Dutch still have had a huge problem with organized crime, the attendant downsides for society when you allow this kind of underground activity to go on. The Dutch are now saying, “Let’s just treat it like tobacco and let’s start farming it.”
We’ve seen a coalition in the Dutch parliament of conservative and left-wing parties now pressuring the Christian government, saying, “Hey, we want this law changed. It’s time to fix this. It’s time to move forward.” I think that’s exactly right. Decriminalization does not work.
This: Do they have the same problems as we do with the difference between federal laws and municipal and who covers what and what trumps what?
Mulgrew: They do. In the ’70s, the city of Amsterdam just decided, “Look, we’re not going to enforce the federal law against marijuana.” That’s what Vancouver is now debating. The city of Vancouver has a policy that was unveiled [in 2005] to move to a “we won’t prosecute, we won’t charge them, we’ll tell our police to leave smokers alone and we will allow cafes and discreet retailers of marijuana.” Very much a Dutch idea.
The BC Offices of Health produced a report that basically says, “Look, forget about that stuff. Legalize it.” We’ve got to improve our drug programs in the schools. As long as it’s illegal, we’re forced to tell kids it’s evil. If we change that, we can then improve our drug education policies so we’ll better protect our kids, we will eliminate the problems in our neighbourhoods, and we will cut a huge revenue stream for organized crime. We can retask our police agencies to crimes that are really of more concern to Canadians: terrorism, people smuggling, crimes of violence.
This: Putting the book out there, did you find that people had a romantic image of the pot industry? Was there a notion of the ethical dealer?
Mulgrew: That’s part of the reason I wanted to write the book. The book doesn’t dwell on it, but the book says, there’s organized crime involved here. You run into the romantic marijuana smokers who want to tell you that it’s all mom-and-pop, it’s all love and peace and grooviness, and to a large extent it is [laughs]. However…it’s now an industry built on huge manufacturing plants and that’s what has to be addressed by Canadians. It’s one thing to have mom-and-pop operations, it’s another thing to have a situation like the Barrie brewery being turned into a marijuana grow operation capable of pumping out $100 million worth of product.
We are seeing operations of that size in Nova Scotia and New Brunswick. We’ve seen thousands of plant operations in Saskatchewan, and I can tell you there’ve been operations in BC that are at least as big as that and sometimes bigger. Those kinds of operations, the kinds of illegal muscle that it requires to run them and operate them, are insidious to our social fabric. That’s what’s happening. The mom-and-pop guys are not the issue. The issue really is: The growth of organized crime in Canada has clearly been fuelled in the last 10 years by the money that marijuana has provided. Marijuana provides money for organized crime to diversify, to expand its other activities—heroin smuggling, people smuggling, prostitution, illegal gambling.
This: What would you say is the biggest stumbling block to total legalization?
Mulgrew: Washington, DC.
The Bush administration out-and-out lies about the dangers of marijuana, about the problems marijuana presents in policing, and equates marijuana-growers and -users with terrorism.
Yes, marijuana is used by a lot of terrorist groups as a funding device. The way to combat that is to adopt legalization, and to take that funding away from them, give the taxpayer back some of the money that’s being drained from the economy. Also give the taxpayer some instruments to both protect the kids and neighbourhoods and to deal with some of the problems that are associated with the cannabis industry. The Bush guys don’t just lie about the industry…they use it as political juice and they’ve created a false sense of American public feeling about cannabis.
One of the startling things for me in doing the book was to go to America—California, Oregon, Washington state—and see that in a lot of these places they are far more progressive than British Columbia. In downtown Oakland the cannabis dispensers are everywhere in the cafes. They have been a catalyst for the urban renewal in the heart of Oakland, and the Oakland voters have said, “Hey, this is great! Let’s sort this out and do this properly.”
The city of Denver told its police, “Stop enforcing this.” Chicago’s gone the same way. Washington state has had a great conference among the lawyers, judiciary and police about an exit strategy for the War on Drugs.
One of the bad things that Washington does, aside from all the lying about this area of public policy, is squelch a lot of the discussion that’s happening at a state level in America that would tell the rest of the world, “Look, we’re as conflicted as a lot of your constituents are, and you maybe shouldn’t be listening to Washington on this.”
This: Maybe legalization will come from that, a massive municipal and state upwelling.
Mulgrew: Let’s face it: Prohibition ended in much the same way. If you look at a couple of years before the end of the alcohol prohibition, the rhetoric and the Eliot Ness sort of raids on the illicit producers, skyrocketed. And then, it just collapsed. The public wasn’t supporting it. They were outraged that the unregulated sale of liquor was causing so much damage to their communities. Well, gee whiz, what do we have today in terms of marijuana?
This: That and a better price mark-up.
Mulgrew: The price won’t change. That’s the funny thing. People think there will be a fluctuation in the price; it costs about the same in Amsterdam for a gram of cannabis as it does in Vancouver. The cost of producing it is not going to change much. What we’ll see though is that the profit that’s currently taken by the illicit dealers and growers will really become the tax profit.
This: So it will be just like skimming that surplus off the top…
Mulgrew: You got it…and putting it into better schools, better education, and hey, better law enforcement!
