Prohibition usually arises out of one emotion. Fear.
It’s a knee-jerk response to societal issues with root causes that are too complex to tackle. So instead of addressing the issue in a nuanced way, vices are named and shamed as the underlying source of all dysfunction and depravity.
Naturally, this method is fraught with difficulties because the prohibited act is usually, well, fun.
Strict repression is always destined to fail. It stifles personal freedom and the market, and fosters an environment where underground activity thrives. Many unlikely criminals have been made out of people who simply made a personal choice about their enjoyment and wellbeing.
Nowhere is this more apparent than with the use of marijuana.
Marijuana is a plant that, based on misinformation and scare campaigns, has been demonised since the 1920s.
It’s been called an ‘assassin of youth’ and an ‘evil sex drug’ in the Reefer Madness campaigns of the 1930s. And this conception of marijuana as a highly addictive, dangerous substance has been peddled in the media and by politicians of all classes.
But after the colossal failure of the ‘War on Drugs’ in the US, and as education campaigns started to improve, our prudish attitude has begun to subside. So much so that in Australia our government has warmed to the idea of legalising and exporting marijuana on a global scale.
As we already know, the use of medicinal marijuana has been legal in all Australian states under varying guidelines since 2016. And this year, the government revealed their plans to begin exporting medicinal marijuana globally. As health Minister Greg Hunt confirmed back in January:
‘We would like to be, potentially, the world’s number one medicinal cannabis supplier.’
Marijuana for recreational use?
On the back of this, there has been growing optimism about the prospect of recreational legalisation in Australia.
Greens leader Richard Di Natale recently brought the issue to light. He proposed legalising cannabis for Australians over the age of 18 in order to take the drug ‘out of the hands of criminals and dealers’. He stated that regulating cannabis would also lead to it becoming a taxable commodity, which could be spent on government projects and the health sector.
Major players in the cannabis industry have also indicated their high hopes for the recreational cannabis market in Australia.
Canopy Growth Corporation, a Canadian company worth $5.6 billion, has recently taken out Australian patents for a range of marijuana products geared towards recreational use.
They are also consulting with political lobbying firm Crosby Textor to aid their discussions with state and federal parliaments about cannabis use in Australia.
Canopy Growth’s founder, Bruce Linton, believes it’s only a matter of time before the Australian market opens up to recreational marijuana use, stating:
‘Every country that’s federally legal, we think someday will start with medical.’
As testament to this, Canopy Growth has also set up a cultivation and production headquarters in Victoria, which will cost $16 million and create more than 200 jobs.
Venture capitalist Ross Smith, who has invested heavily in the cannabis industry, corroborates this optimistic view.
‘There’s no question in my mind that medical cannabis is the Trojan horse for recreational cannabis and I don’t believe it’s a bad thing.’
This is based on an emerging trend of marijuana legalisation that we are seeing globally.
Canada led the heard by legalising medicinal marijuana back in 2001. And with recreational use set to be legalised in August this year, various companies like Canopy Growth are enjoying exponential gains.
The US has also begun to relax its laws. And with recreational use now legal in nine states, the American cannabis market has been booming.
Just across the pond, New Zealand will also be holding a referendum on recreational cannabis legalisation before the next national election in 2021.
As for Australian attitudes, the 2016 National Drug Strategy Household Survey found that cannabis was the most commonly used illegal drug, and that 35% of Australians support the legalisation of cannabis nationwide.
What’s important to take away from this is that as attitudes change and markets open, fortunes can be made on legal cannabis — both medicinal and recreational. So live and let live. And if you’d like to take advantage of the kind of gains that can be made in this growing small-cap sector, you can check out our publication Australian Small-Cap Investor. It provides you with a list of ‘rocket stocks’ set to soar, which you can access here.
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Until next week,
Editor, Markets & Money