Bootleggers and Baptists Part XII: Dual-Role Actors on Both Sides of Proposition 205 (Arizona, 2016)

Photo by Mauru00edcio Eugu00eanio on Pexels.com

Back in 2016, election cycle Proposition 205 (Arizona) sought to establish a regulated market for recreational Marijuana. The measure failed to pass by a slim margin. Expounding upon the strategic flaws of the ballot question has already been thoroughly exhausted by local commentators.  What truly is interesting in retrospectively analyzing this failed legalization campaign was the coalition building. These strategic alliances were forged on both sides of the aisle.  Everyone from puritanical prohibitionists to cannabis aficionados teamed up with orthogonal allies to hedge their bets on achieving their desired policy outcome. Naturally the formulation of such coalitions invariable leads to Bootlegger and Baptists policy dynamics. By the very nature of regulations and policy decisions, someone stands to gain and someone stands to lose. Government action is never neutral. Even inadvertently a policy can provide a downstream benefit to an invested interest group. Sometimes these concentrated benefits are nontangible. Such as a positive public image or gaining notoriety. As the great moral philosopher, Adam Smith reminds social incentives to present us with powerful motives.

One of the more predictable opponents of legalization would be manufactures of prescription painkillers. Insys Therapeutic donated $500,000.00 to the 2016 opposition campaign in Arizona. Insys is a well-known producer of opioid-based medications. Their true motivations are somewhat puzzling.  Medical Marijuana was legalized back in 2010 which would have been a golden opportunity time for funding opposition. This could potentially be a strategic form of revenge. A thinly veiled attempt at settling a score with the Marijuana dispensaries that cost them business.  Why? Because the medical dispensaries would be among the first economic actors to enter the recreational market. It would take much in the way of resources to make a transition to selling both medical and recreational cannabis. In theory, this institutional form of retaliation would provide the benefit of instinct satisfaction to upper management within Insys. This theory assumes little to no economic benefit from this action.

An alternate theory could be Insys does finically benefit from keeping recreational Marijuana illegal. This move could signify a circuitous acknowledgment of the black-market for prescription painkillers. Whether big pharma wants to admit or not, recreational users do make up a portion of their profits. Their main customers need to operate as mid-level distribution. Either through an unscrupulous physician prescribing opioid narcotics to recreational users or through patients reselling the medications on the secondary market. Through going attacking recreational Marijuana they can protect their indirect profits made through the demand on the illicit secondary market.  Opioids are already in competition with alcohol, tobacco, kratom, Salvia Divinorum, and potentially marijuana. By eliminating a whole category of legal and accessible options they gain a slightly larger share of the quasi-legal American intoxicant market.

The question becomes whether this specific economic agent is a Bootlegger or a Baptist. They are unquestionably both. The company possesses some sort of murky incentive for keeping recreational marijuana illegal. Making them a Bootlegger. They assume the role Baptist when publicly justifying their generous donation to the counter-campaign. Citing the danger of marijuana to children. Also, expounding upon the dangers of ingesting substances that do not have FDA approval. All of these are arguments are laughable when you think about the pharmacological risks of the products Insys manufactures. Regardless, assuming good faith on the part of the firm, it is still a moral argument. Which may or may not be factually accurate. For this reason, they are a Dual-Role Actor.

In this scenario, there is another Dual-Role Actor that is on the other side of the fence. That would be the media. Numerous publications pick-up with this story and ran with it. Function as a Baptist through exposing the callous self-interest of pharmaceutical companies. This provides the appearance of a moral crusader who is attempting to reveal how big business attempts to manipulate the system. However, this public service is not done out of pure altruism. Media organizations are frequently willing to dispense with accuracy to be the first outlet to break a news story. Editors often do not focus on important stories but rather those that captivate their viewers/readers. Making news outlets more of a vehicle for entertainment than obtaining information. The best means of gaining and retaining viewership in an age where mainstream media is currently on life support is through sowing outrage.  Exploiting the public’s salient bias against corporations is a great means of generating click-bait worthy headlines.  Utilizing this tactic becomes much more imperative when your industry is presently clinging to life on a shoddy ventilator. The Schumpeterian gales are presently gusting. The creative destruction of alternative media is drawing many viewers away from FOX News and CNN.

Bootleggers and Baptists- Part III: Holy Rollers and The Beer Industry Take On Pot Legalization in The Bay State.

 

two smiling women sitting on wooden bench
Photo by ELEVATE on Pexels.com

 

Introduction:

 

The 2016 election cycle in the United States was one for the ages. It had all the markings of poetic drama or a sardonic comedy. Either way, it was a surreal slice of political theater. Many journals and political analysts’ predictions were defied by the electoral results. This upset left half of the country in jubilation and half reeling in horror. The quirks of the 2016 election was also a result of many of the state-level ballot questions. A historic five states having ballot initiatives to legalize recreational marijuana.  Ironically, four out of the five states passed the measure. Naturally, this was not met without some resistance from special interest groups. The shared opposition to marijuana legalization has made for some strange bedfellows in the political arena.

 

Even in deep blue Massachusetts (my home state), there were fierce opponents of legalization. As well as some peculiar alliances. One fine example was the Archdiocese of Boston and the Beer Distributors PAC. Two unlikely forces working to squash ballot question 4. Their efforts were futile as the measure passed by a margin of 53 % of the collective votes. This crusading duo seems like a bit of a stretch in terms of having any common goals.  After all, this was the election cycle in which America elected a reality-television star as president. If we invoke the wisdom of public choice economist Bruce Yandle we start to see there is nothing odd about the partnership of the local leadership in the Catholic church and beer distributors.

 

Bruce Yandle formulated the concept of Bootleggers and Baptists while he was on the Council on Wage and Price Stability.  These observations were summarized in his 1983 paper. To Yandle’s astonishment, many industry lobbyists opposed deregulation. Due to this fact, these restrictions helped reduced competition by increasing the cost of operations. In many situations, you will have seemingly opposite factions joining together to champion regulation. The segment that does so out of moral concerns, the Baptists. Those who seek to benefit economically from the regulation of decreasing competition, the Bootleggers. Hence, why the church and beer industry forming a united front against Cannabis isn’t so outlandish after all.

 

 

Our Bootleggers and Baptists:

Bootleggers: Beer Distributors Political Action Committee

Baptists:  Archdiocese of Boston

 

Parameters of Recreational Marijuana in Massachusetts:

Ballot question 4 passed by a slim majority back in November of 2016.  The legislation was effectively signed into law on December 30th, 2016 by Governor Charlie Baker. Passed with a dizzying array of ordinances governing the sale of Cannabis. There the standard parameters of age requirements.  Not operating a motor vehicle while under the influence. Prohibitions on the possession of marijuana-related products within the vacuity of a school zone or substance abuse rehab facility. Requiring specific licensing to sell or produce marijuana products. Regulations regarding purity and proper labeling. Limitations on the amount of marijuana that can be possessed 1 oz in your possession in public no more than 10 oz in a private residence. The establishment of the Cannabis Advisory Board. A 10.75 % excise tax applied to the sale of recreational marijuana. Rest assured the state has broadly defined earmarks for allocating these tax dollars.

Thereafter, money in the fund shall be expended for (i) public and behavioral health including but not limited to, …. substance use prevention and treatment  …. ; (ii) public safety; (iii) municipal police training; (iv) the Prevention and Wellness Trust Fund established in section…; and (v) programming for restorative justice, jail diversion…

 

If the contours of the state regulations weren’t enough local municipalities have the option to implement local ordinances. Needless to say, marijuana sales in Massachusetts are highly regulated which is to be expected from the Bay State. Also, this demonstrates that this abolition of prohibition would be far from a lawless affair.

 

The Baptists:

The  Archdiocese of Boston back in late October of 2016 provide an $850,000 donation to the opposition campaign against Ballot question 4. At the time it was the second-largest donation accounting for approximately 30 % of total funding. This gesture was quite generous when you consider that “archdiocese lost $20.5 million in operating income between 2014 and 2015″. In the eyes of the Archdiocese, this investment was worth the cost. Cardinal Sean O’Malley expressed his concerns about legalization from a public safety perspective. Invoking the “gateway” hypothesis how this could potentially compound the opioid epidemic. O’Malley stated back in 2016 “..  thinking how do we get people to back away from these addictive drugs, rather than making it more attractive and accessible..”. He even urged local religious leaders outside of the Catholic church to take a stand against legalizing Marijuana.

The Catholic church of Boston does not benefit economically from their opposition. If anything they are willing to incur a loss to support this cause. Superficially it is a laudable goal. It is admirable to voice concern for the youth and the health of the community. Whether or not it is scientifically or socially misguided is another issue. It is difficult to find another incentive outside of moral concern that would drive the church to fund this cause.

 

The Bootleggers:

 

Companies that market, produce, distribute, sell, and market alcohol have a lot to lose from marijuana legalization. Not really.  This is a misconception. Per a 2019 study, the states with the longest history of legal Marijuana have not seen an impact in sales. While beer sales are down, distilled spirits have seen an increase in sales. However, back in 2016, this data wasn’t so clear. The urge to engage in rent-seeking advocacy proved too strong for the Beer Distributors PAC. Alcohol before Marijuana had little competition in the arena of legal recreational intoxicants. The natural inclination is to fear for your bottom line. This results in the knee-jerk reaction of joining the holy rollers in advocating against Pot. The moral guise of concern for public safety provides the ideal smokescreen for the representatives in alcohol-related industries to hide behind.

 

It was well documented that the Boston Beer Company (maker of Sam Adams beer) voiced concerns about legalization. Spirits conglomerate Brown-Forman (Jack Daniels, Woodford Reserve) expressed concern about recreational Cannabis back in 2014.  The Beer Distributors PAC in 2016 contributed $25,000.00 to the Campaign for a Safe and Healthy Massachusetts. Not the exorbitant amount that the Archdiocese of Boston donated. It is still a sizable contribution to the anti-pot coffers.  Ranking the association the third-highest contributor. It is quite transparent that an association of beer distributors are not truly concerned about public safety. Rather seeking protection from legal Marijuana chewing into their profits. Rational? From a cursory assessment of the incentives to keep pot illegal, yes! Prohibition would work as protection from the marijuana industry without having to engage in product innovation.

 

Conclusion:

 

It would be reasonable to question why single out this specific instance of opposition to the legalization of Marijuana back in the 2016 election cycle?  After all,  alcohol-related trade associations were one of the factions that helped snuff out Proposition 205 in Arizona. For one, this would be an example were the invested interests did lose.  Then again, on the other side of there were probably pro-pot investors funding the legalization campaign. However, back in the early 1980s Massachusetts was home to one of the pioneering faces of the craft beer revolution, Sam Adams. The irony is that the Boston Beer Company may not have ever existed if President Jimmy Carter hadn’t signed  H.R. 1337 into effect. Lifting the prohibition on home brewing. It would be reasonable to speculate that the big brewers of the day (Miller, Pabst, Anheuser-Busch, etc.) felt threatened by this loosening of restrictions. Fast forward nearly 40 years later and the past beneficiaries of deregulation want protection from the new wave of innovators.

 

It would appear that the tides may be turning in the other direction. Many alcohol producers are starting to embrace the legal Cannabis market. Even the Boston Beer Company who back in 2016 exhibited irrational trepidation of facing the prospect of legal Pot is joining the party. Last August the CEO expressed interest in developing a Cannabis-infused product. It appears as if some breweries have already beat them to the punch. Craft beer veterans such as the Flying Dog Brewery and Lagunitas have already made inroads in this new niche market. As a homebrewer and craft beer aficionado this was a possibility I was toying with back in  2012 (conceptually, due to the legal status). Seeing the lack of foresight and vision in the complaints of the rent-seekers, perplexed me.  Legalization would have presented the golden opportunity to experiment with infused-beer. If done correctly it could be a gold mine. Then again, I suppose the Hashish Porter was ahead of its time.