Leave Cannabis Distribution To The Private Market

By Samantha Goodman (AIMS on Campus 2017 Essay Winner)

The cannabis industry has the potential to be a vibrant, entrepreneurial market bursting with creativity and innovation. Look at Amsterdam where the streets are lined with pot candies and stores have a menu with drugs of the day – including specials. Despite the legalization of marijuana in Canada, it is doubtful it will flourish in this way because of the present distribution model that has been proposed.

Each province is making plans for its own distribution model. This past September, the Ontario government announced its plan to eradicate illegal marijuana storefronts and create the cannabis control board in its place. This board will open up to 60 storefronts in the first year while managing the sale and distribution of cannabis in Ontario. The idea is to follow the model of the existing Liquor Control Board of Ontario (LCBO) stores and set a precedent for other provinces to follow suit.

By being in charge of the cannabis market, the government will crush all entrepreneurial and creative spirit of retailers. Consumers will receive the bare minimum instead of the best. There will be no competition between stores to create new products, innovate the current selection, have lower prices, and stay open later.

Retailers with the incentive to keep their businesses open and know the cannabis market are the ones who will be able to provide the best service for consumers. These stores are incentivized to do everything in its power to cater to the public.

The question of public safety tends to crop up in regards to marijuana being provided by private entities. To properly ensure public safety, the government should create a licensing system where every retail store must abide by certain safety conditions such as an age restriction. After that, the government needs to take a hands-off approach in order to allow the marijuana market to thrive.

The Ontario government’s current solution is far from hands-off. The distribution model is based on squeezing out the “underground market” to ensure public safety. There is the perception only criminals sell marijuana and they must be stopped. The proposed solution is the government has to come in and control the entire distribution system. Except, why is there this idea that government control will indefinitely eliminate the underground market?

For one thing, there will be no competition for government stores to innovate and push their business models further. What will happen when there is a gap between what the consumer wants and what the government stores offer?

People will turn to the underground market. As an example, what will consumers do when they want to purchase marijuana after hours? The government stores will not be open late as there is no reason for them to be. There is no competition threatening to be open later and steal business. The underground market will do this and consumers will turn to it to fill their needs.

Aside from failing to quash the underground market, another concern within the public safety debate has to do with minors gaining access to cannabis. People believe the government will make sure this does not happen but it is not always the case.

Currently, the private sector does a better job in ensuring minors do not obtain age-restricted products. This has been proven in a study conducted testing underage secret shoppers. The results were 1 in 4 minors successfully purchased age-restricted products from LCBO compared to 1 in 8 for convenience stores. This study proves the government’s intervention is not the sole proprietor for public safety, the private sector can actually do a better job.

A different approach has been proposed by the province of Manitoba through its “hybrid model.” It includes the Manitoba Liquor and Lotteries Corp. securing the supply of marijuana and tracking it, but allowing private retail stores to be in charge of selling it. This model allows private stores to sell marijuana but controls its supply which can be a problem depending on the demand.

There is no perfect model but history has proven the government does not have the best track record. While models such as the LCBO do work, it does not provide the best experience for Canadian citizens. There is no competition for citizens to have access to the best services possible.

In Canada, there is the opportunity to create a thriving marijuana industry. By leaving it to the private market, the government can allow competition to provide leading products for its consumers while ensuring public safety through regulation.

 

 

 

 

 

What makes municipal amalgamation work?

By Ainslie Pierrynowski (AIMS on Campus Student Fellow) 

In October 2017, five communities on Prince Edward Island’s South Shore took the first steps toward potential amalgamation. Their goal: to pool the towns’ resources together, reflecting an existing political push for “fewer but larger communities” in the province. These words may ring familiar for many communities across Atlantic Canada. Municipalities in Atlantic Canada often grapple with depopulation, rising administrative and service delivery costs, and seemingly inefficient, overly decentralized, or redundant forms of local governance. Amalgamation is frequently invoked as a possible solution to these difficulties. This idea has spread throughout the region, from the much-studied 1996 merger that created the Halifax Regional Municipality (HRM), to the formation of the Regional Municipality of Tracadie-Shelia in 2014, on to talk of a potential amalgamation of Labrador City and Wabush, as of 2017. Nonetheless, several voices have questioned whether amalgamation has truly made the region’s communities better off. Indeed, a closer look at amalgamation in Atlantic Canada reveals that while it can be a powerful way to address the area’s demographic and economic challenges, amalgamation does not necessarily lower costs and produce more effective governance in and of itself. Rather, several key considerations must be taken into account for successful amalgamation to occur.

To begin, how the initial stages of the amalgamation process—research, economic analysis, and consultations—are carried out can influence whether amalgamation ultimately proves beneficial for residents. In particular, former AIMS President Brian Lee Crowley points out that relatively few municipal services have substantial economies of scale, a term referring to situations where the per unit cost of production decreases as the size of one’s operation increases. It is true that some public services, such as policing in the HRM, can benefit from increased economies of scale post-amalgamation. Yet, failure to distinguish between which services may see greater economies of scale and which services may experience few or no cost-saving effects can distort financial projections with regard to amalgamation can produce unexpected, costly challenges for newly amalgamated municipalities.

The governance structure of amalgamated municipalities also matters. Rather than rendering service delivery more efficient, single-tier, centralized governments overseeing large municipalities may find it difficult to determine which services residents want and what they are willing to pay for. In contrast, local government structures focused on smaller communities have an advantage in this area because residents, as Crowley notes, “cannot vote themselves benefits at the expense of other taxpayers” elsewhere in the municipality. Instead, the smaller scale of such municipalities means that residents, generally speaking, solely request the services which they want and are able to pay for.

That is not to say that small municipalities are always the answer, nor that amalgamation should be taken off the table. In fact, given regional demographic trends, many small communities in Atlantic Canada have ageing, shrinking populations—and thus a declining tax base—which makes it difficult to afford public services. Instead, successful amalgamation requires a careful balance between the coordinated regional economic development afforded by centralized, unified municipal governance structures, as with the HRM’s public-private development partnership, and the key role of municipal governments in addressing specialized, community-level needs and concerns. This balance can vary due to how much power the Mayor and executive have relative to the council, whether councillors are elected or appointed by the Mayor, whether elected public officials are voted in by ward or at-large, the population distribution and rural-urban make-up of a given municipality, and whether municipal services are delivered by regional agencies or at the local level. Indeed, amalgamated municipalities seeking to reconcile regional and local concerns might adopt a two-tiered political system with provisions for local, small-scale governance like that initially proposed for the amalgamated City of Toronto—although this approach requires a clear delineation of the powers and responsibilities of each component of the municipal government, to avoid confusion and political deadlock.

Overall, Atlantic Canada’s demographic challenges and the growing political and economic importance of cities globally suggest that the amalgamation debate will continue to occupy a central place in the region’s political discourse. It is crucial to remember, however, that the decision to amalgamate is a complex one with a variety of potential outcomes. It is an option which entails significant preliminary economic analysis on a case-by-case basis. Additionally, the choice to amalgamate is merely the first step in a long process that can produce many, diverse forms of local governance, each with multiple, important implications for the futures of the residents therein. As more and more communities in Atlantic Canada opt for amalgamation, we would do well to bear these considerations in mind.

 

 

 

 

 

New Brunswick’s latest budget could have disastrous consequences

By Henry Gray (AIMS On Campus Student Fellow) 

In its latest budget, the Government of New Brunswick punted its responsibilities by projecting a cumulative provincial debt of $14.4 billion by the end of April 2019, steadfastly refusing to address the province’s looming debt crisis. In fact, in promoting their budget, neither the Premier nor the Minister of Finance devoted much time to discussing those two ‘D’ words: debt and deficit. This was akin to a sports reporter discussing the local team’s performance in the game last night without mentioning that the team was shellacked. Finance Minister Cathy Rogers even had the temerity to claim in her budget speech that the Liberals had “restored fiscal order” in the province. By all the key metrics, however, New Brunswickers lost decisively in the 2018 budget.

 

Reality has begun to set in. Last month, DBRS, a Toronto-based credit rating agency formerly known as Dominion Bond Rating Service, downgraded New Brunswick’s economic trends from “stable” to “negative”. This is not merely a symbolic categorization. It means that New Brunswick could soon be slapped with higher interest payments on its debt.

 

In a press release, the agency announced that it “questions the credibility of the current fiscal plan, given the lack of flexibility to respond to unforeseen pressures or fund new programs that are likely to arise as a result of campaign commitments in the upcoming fall election.” Indeed, electoral considerations seem to be what is motivating the government to make these policies of questionable long-term wisdom. With an election set to take place September 24, the Liberals, in crafting their final budget before the next election, have bet that voters will prefer an upsurge in government spending to the government staying the course on the balanced-budget targets that it has laid out.

 

Up until this point, the government had done a commendable job of sticking to its deficit-reduction objectives. In fact, the government managed to exceed its deficit-reduction goals the past three years. This year, however, the Gallant Liberals will be running a deficit of $189 million – far greater than the projected deficit of $117 million. This has also pushed back the date at which the government will supposedly be in surplus. The initial forecast had predicted a $21 million surplus in 2020-21. Now, the government is saying that it will run a $79 million deficit that year, and it will only return to surplus in 2021-22, which will be the first time that New Brunswick balances the budget in 14 years.

 

New Brunswick already carries the dubious distinction of having the highest debt per capita in the Maritimes. By adding $372.3 million to the net debt, the Gallant Liberals have now increased the province’s debt per capita to $19,050 for every man, woman, and child in the province. All the government is doing is pushing difficult decisions into the future. One presumes that the members of the government have told themselves that they can worry about these matters once re-election has been secured.

 

There is an old adage that says you have to spend money to make money,” Finance Minister Cathy Rogers said as she defended her government’s decision to blow a massive hole in their plans to arrive, eventually, at fiscal rectitude. The literature is clear, however. Governments that succeed in reducing their deficits and debt tend to do so primarily through restraining spending rather than raising taxes.