Dark Side of B.C.'s Economy Grows Like Weed

Dark Side of B.C.'s Economy Grows Like Weed
Posted by CN Staff on November 06, 2003 at 08:00:03 PT
By Mary Lynn Young
Source: Globe and Mail 
When a home in a tony Vancouver neighbourhood makes an international marijuana magazine because it houses a large growing operation, you know that things aren't necessarily what they seem on the West Coast.The provincial economy is no different. British Columbia is experiencing a financial downturn, at the same time that it is home to the most vibrant underground economy in Canada, according to the Business Council of B.C. The economic dark side is estimated to account for 15 per cent of the province's GDP or $20-billion a year. This figure exceeds the annual sales of its forest industry.
What does this economic alter ego mean for the struggling province? The B.C. government isn't realizing a lot of income that it would usually receive, and some sectors, such as housing, are being inflated. In the end, this financial yin and yang -- which tend to work in tandem with both going up and down at the same time -- misrepresent British Columbia's fiscal picture and cost its residents money.Some of the largest effects of the underground economy, which includes both legal and illegal activity, can be found in the drug economy and the booming B.C. housing market.According to the RCMP, British Columbia has become a huge producer and exporter of marijuana, which by some estimates now ranks as the province's largest cash crop. The provincial drug economy is such a boon -- pegged at almost $7-billion or 40 per cent of the total marijuana trade in Canada -- that Forbes magazine made B.C. bud its cover story for its recent issue. The article contends that high-tech marijuana growing operations are already big business here and about to "get bigger." In legal industries, a percentage of revenue would wind up in the tax stream as support for the provincial economy. In an illegal industry, such as the drug trade, some of the money still trickles down into the economy, but not enough to avert a bigger tax burden being placed on those B.C. residents who are already paying their share.The hot B.C. housing market is another area that has been affected by the underground economy. Recent Canada Mortgage and Housing Corp. figures project that British Columbia will have the highest percentage of growth in housing starts nationally in 2003-04. Here, the effects of the underground economy are more subtle -- but important nonetheless.Cheerleading from the local media and real estate industry pundits aside, the already overpriced Vancouver real estate market is probably receiving a boost from the underground economy. For instance, Jock Finlayson, executive vice-president of the business council, questions where the money for new sales is coming from, when key economic indicators such as output per person, long considered a benchmark of economic success, indicate that the province has been performing abysmally.Local analysts have suggested that income from the total underground economy is partly fuelling the housing boom. British Columbia's economy includes the highest proportion of self-employed people in Canada, a large service industry and the well-known marijuana trade. Self-employment offers opportunities to conceal income that are unavailable to most people with paid jobs, while service sector industry transactions are often difficult for tax officials to police.The underground economy has another impact on housing sales that relates to labour and quality. McMaster University PhD candidate Lindsay Tedds, who is one of five specialists in the underground economy in Canada, says a large proportion of new-home builders in British Columbia have reported the financial dark side to be a critical issue. Their worry arises from concern that an overheated housing market will increase the demand for an underground labour supply from the construction industry. Ms. Tedds says that houses built by builders and construction workers using underground labour may not be as structurally sound as those built by reputable builders, and this could lead to a greater incidence of problems with new homes.In the end, British Columbia may have the most vibrant underground economy in Canada, but it is also part of a nationwide alternative economy, which analysts suggest is alive and growing. The reason for this boom is related to the overall tax burden in this country. Academic studies on the underground economy have found a significant link between high taxes and the size of the underground economy, with reductions in the tax burden related to lower illicit activity. "It is important for the government to understand the relationship between all policies, such as taxes, the regulatory burden, perceived fairness, and enforcement of tax evasion," Ms. Tedds says. And it is incumbent on policy makers to address these issues to encourage people to participate in the larger tax structure.The B.C. government would be well advised to consider examining these tensions and the erosion of its tax base provincially. Accessing some of the undeclared income generated through the underground economy would be a welcome boost to provincial coffers.Mary Lynn Young is an assistant professor at the University of British Columbia's School of Journalism.Source: Globe and Mail (Canada)Author: Mary Lynn YoungPublished:  Thursday, November 6, 2003 - Page B2 Copyright: 2003 The Globe and Mail CompanyContact: letters globeandmail.caWebsite: Articles & Web Site:Cannabis News Canadian Links Hails B.C.'s Marijuana Economy Canada's Most Valuable Product Dope - Forbes Magazine 
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Comment #10 posted by mayan on November 06, 2003 at 18:27:51 PT
Overgrow Em'
Cannabis has become so profitable that our governments have to at least be considering outright legalization, regulation & taxation. There are more people producing,distributing and using cannabis than ever before. The underground economy has "overgrown" the legitimate economy. Shouldn't that scare the hell out of the powers that be? It makes one wonder if the U.S. government isn't sending it's own "growers" up north to cash in. We all know that they will do anything for the almighty buck!The way out is the way in... 9/11: The BCCI Connection 9/11 case before high court: Prior Knowledge/Government Involvement Archive:
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Comment #9 posted by FoM on November 06, 2003 at 09:34:24 PT
Thank You!
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Comment #8 posted by puff_tuff on November 06, 2003 at 09:19:15 PT
Off Topic...Sativex coming to Canada!
GW and Bayer Announce Marketing Agreement to bring Sativex(R), Cannabis-Based Medicine, to Canadian Market
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Comment #7 posted by FoM on November 06, 2003 at 09:10:14 PT
I agree with you. Each person has something that they could do and enjoy doing it. I think of Hemp fields because we have good earth and I love horses. I know the Queen of England uses Hemp bedding for her horses and grows it for their use too. If the laws were changed the skies the limit. 
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Comment #6 posted by Sam Adams on November 06, 2003 at 09:00:19 PT
I agree FOM
There are lots of articles on high-tech (computer programming) jobs being sent offshore. Programmers in other countries are willing to work for $10,000 per year. Why? The main reason is lower cost of living. I think the biggest driver of the skyrocketing cost of living in the US is the government. Every time there's a recession, jobs are permanently downsized from private industry.Conversely, instead of contracting and becoming more efficient in lean times, the government raises taxes and expands more. Then, when the economy booms, tax revenue soars and the government eagerly expands even faster. Taxes and fees permeate every aspect of our lives, multiplying and re-multiplying the fraction of gross productivity "skimmed" by state, federal and local governments.I think there are many industries that would explode with de-regulation. For instance, many sports and orthopedic injuries can be treated with icing, massage, and ultrasound. None of these skills is any more dangerous or difficult that doing a manicure or pedicure. But to get these services, I have to first see my PCP (office visit: $120), then pay $150-$200 PER VISIT to a physical therapist. In a free market, I could go to the place on the corner for $25 for a half hour. I think many areas of herbal medicine and other alternative treatments would really boom with less regs.
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Comment #5 posted by afterburner on November 06, 2003 at 08:59:38 PT:
RC's Analysis of Canada's OCA Dog's Breakfast
October 7th, the Ontario Court of Appeal ruling finds Canada's anti-prohibitionists in disarray. Canadian Cannabis Culture "must hang together or we will all hang separately."Analysis by Richard Cowan
Posted October 13, 2003 The Prohibitionist Counterattack in Canada Escalates. Blatant Drive to Create DEAland Style Police State. Phony Decrim Bill Gets Even Worse. 
Posted by Richard Cowan on 0000-00-00 00:00:00 
The Cold War may come to be remembered as a parenthesis in a much longer war against the remarkable resilience and insufficiently understood variousness of fascism.”Paradoxically, the true friends of freedom will have to take the cannabis issue seriously in order to understand that this struggle is about much more than cannabis. It is about everyone’s freedom. 
Read Full Story...
BC as the most established producer province and Ontario as the most populous consumer province must lead the way to gradual legalization. The antis must go before they do more damage to the cannabis community and the freedom of ordinary Canadians. Support your local heads in upcoming municipal, provincial, and federal elections. Consider joining the Marijuana Party of your province or running for office yourself.ego transcendence follows ego destruction, or would you rather endure another 30 years of tyranny! 
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Comment #4 posted by Sam Adams on November 06, 2003 at 08:51:36 PT
What IS she trying to say?
So one of her points is that the booming marijuana industry is the "dark side" because it's heated up the BC real estate market? I guess that makes the entire high-tech industry and financial services industry "evil" for making the San Fransisco Bay area expensive.I like her conclusion though, which is outright Libertarianism: The more government you have, the bigger the boost to the underground economy. In Soviet Russia, where most big industries were just nationalized outright, the black market economy was legendary. No surprise that today Russia and the US compete with each other for the most violence and most prisons among Western countries
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Comment #3 posted by FoM on November 06, 2003 at 08:45:53 PT
I Have Something To Say
As we get closer to changing the laws on Cannabis it opens up many questions about what will happen. The price would drop but new businesses would be developed. When I have visions of sugar plums dancing in my head I think of what those changes would bring. I see hemp fields growing in my mind. I would love to plant our fields in hemp and make bedding for horses because it is low dust and respiratory problems in horses are common and can limited their performance. The hemp food industry would blossom. Coffee shops would open and taxes paid. Even though the price would drop the opportunities would be boundless I think.
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Comment #2 posted by FoM on November 06, 2003 at 08:38:22 PT
I love your style!
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Comment #1 posted by kaptinemo on November 06, 2003 at 08:18:55 PT:
Tip-toe-ing through the cultural minefield
At least, that's what this reader seems to be observing in this article.Quit dancing around the maypole and say it, 'Perfesser': legalizing cannabis means tax revenues that BC Province desperately needs. Even with a 40-fold reduction in present prices in US terms brought about by legalization, the Provinces could *still* see the money pouring into their coffers in double-quicktime from taxes. It's so bloody simple, even a dumb ol' ex-grunt like me can do the math without removing my shoes to count toes.
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