How the Drug War Destroyed Over $11 Trillion in Wealth, in Addition to Costing Us $5.3 Trillion | The Bengal Bite 🐯
In last week's Bengal Bite, we found the Lost $5.3 Trillion U.S. Sovereign Wealth Fund by looking at the massive costs of the drug war at just the federal level. We looked at a pretty direct question: how much did it cost, and what could have happened if we’d taken the money spent and redirected it elsewhere?
This week we look at a more indirect cost, but one just as real: how much less did people that were caught up in the drug war earn as a result of their arrest, conviction, etc.? How much economic value was lost by society as a result of drug enforcement - as a result of the almost 80 million drug arrests (33 million of which were marijuana-related) since 1971?
In drug offenses, recidivism has a rate of 70%, so the total amount of drug war arrests we estimate affected about 23.7 million individual people. We tried to estimate for all of those arrested, and not just those convicted and/or imprisoned. Based on some quick research and napkin math, we ballparked that on average someone arrested in the drug war lost about $250,000 in lifetime earnings, or $7000 per year for an estimated 30-year lifespan post-arrest or prison.
The Brennan Center for Justice, a liberal think tank, actually estimates almost a half-million in lifetime earnings loss for those imprisoned, or about $13,000 per year over our 30-year estimate, with just about $100,000 lost for those convicted. Our math likely underestimated some factors that the Brennan Center is more familiar with, so we averaged Brennan’s $484,000 estimate with our $250,000 estimate to arrive at $367,000 in lifetime wages loss. Multiplied by 23.7 million drug war arrests, that’s over $8.7 trillion in lost earnings. $8.7 trillion that never trickled down through communities, never built businesses or livelihoods.
Unfortunately, it gets worse: let’s say that these folks saved 10% of the wages they would have earned and put them away in an index fund compounding at 8% (the S&P return was roughly 11% since 1971). By the time we arrive at today, the loss of those wages means the loss by those 23.7 million people to on average build $113,000 in wealth each - about $2.7 trillion in lost wealth, likely much of it concentrated in minority communities.
The loss of over $11 trillion in wages and wealth is over double the loss of $5.3 trillion in pointless federal spending - and that’s before you even think of the human costs like missed birthdays and funerals.
There may be room for debate on what the right way to address drug issues is, but it seems to us that there shouldn’t be much debate on what the wrong way was and in many places still is.
This Week's Bite:
Big bank take little bank: Between being unable to access bank accounts or Federal bankruptcy protections, banks have been a source of huge headaches for the cannabis industry. Contrary to popular belief, cannabis companies can actually work with federally compliant financial institutions, but relatively few financial institutions have pushed into the industry. The issue is that the costs for banking compliance costs are high, with bankers having to file an anti-money laundering report every single time any transaction is done by a cannabis-related company. Bankruptcy on the other hand is out of reach because courts are still not allowed to offer chapter 9 bankruptcy protection to federally illegal businesses — that one we believe will need a legislative fix. (Reuters | Forbes)
For Delta-8, some not-so-great news: Hemp’s fastest-growing product/category, Delta-8 THC, has started to come under scrutiny by local and state regulators. From Colorado to New York, regulations banning Delta-8 sales or limiting them from cannabis dispensaries are popping up (you’ll have to go to your local smoke shop to find your Delta-8). (Hemp Industry Daily | Missouri Greenway)
Source: mogreenway.com
Legal weed facing supply squeeze: Gamestop is not the only one around here facing a short squeeze. As legal cannabis markets come online, producers are struggling to meet the latent demand. This has led to prices that have been north of $3,500 per pound wholesale, which has led to eye-watering retail prices like $17 per gram before taxes. (NYTimes)
Source: New Leaf Data Services & Leafly