Social equity marijuana licenses — fool’s gold?

Social equity licenses have started to seem like fool’s gold to me.

They are a new and fresh idea, with no successful precedent I have found.  (Let me know:

Don’t cite standard preferences or set-asides that unlike social equity licenses can deliver protected and sure benefits.  A requirement that a contractor employ X% minority subcontractors delivers a non-contingent benefit to the minority subcontractor who gets the plumbing subcontract on a construction project.  Good business is guaranteed.  Similarly, an assignment of electromagnetic spectrum delivers a benefit that no one can take away – and that the holder can profit from in all events.  

But a license to sell cannabis – in a general pool where other sellers are well-funded capitalists, often with experience in other states or Canada – may turn out to be worth less than nothing.  I was on a panel for Connecticut state government where a woman spoke of Minority Marijuana Millionaires that social equity licenses would create.  Well, I think John Boehner is doing just fine, and there are plenty of millionaires, but I’m looking for a list of millionaires who were casualties of the War on Drugs. Governments are throwing money at social equity licensees, with training, mentors, loans, etc.  Maybe that will work.  For now, though, the lucky applicants for social equity licenses may be the ones whose applications get rejected.

But a new iteration of social equity licensing is emerging:  ring-fencing opportunities so that only social equity licensees get them.  Massachusetts has started this, with delivery licenses – no competition from wealthy folks (unless they pass themselves off as social equity licensees, or are the real parties in interest – a pattern all too familiar – “Falsely claiming disadvantaged business status, or using sham subcontractors or other structures to circumvent small business, minority/women-owned business, or service-disabled veteran-owned business programs”).

The Massachusetts plan may well cause casualties of the War on Drugs to prosper – though maybe some will lose their shirts.  But ring-fencing seems like a better plan that putting social equity licensees in the general pool with the sharks.

Still, will it work?  In Colombia, “regulations require that cannabis companies purchase 10% of their raw material from small- or medium-sized cultivating communities . . .  However, this approach has not delivered the expected outcome either.” 

Picking winners to profit seems like Crony Capitalism, but nobly, with a heart.  But if it doesn’t produce winners, it’s not good.  And making different people wealthy may not be the goal to seek. 

Rather than try to create huge profits for a few, government stores or high taxes would fund programs for the general good.  


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