Fred McKinney (opinion): The future for Black and brown cannabis entrepreneurs

Marijuana plants inside a grow operation in California.

Marijuana plants inside a grow operation in California.

File photo

“For decades, the war on cannabis caused injustices and created disparities while doing little to protect public health and safety. The law that I signed today begins to right some of those wrongs by creating a comprehensive framework for a regulated market that prioritizes public health, public safety, criminal justice, and equity.”

Connecticut Gov. Ned Lamont

Legalizing cannabis in Connecticut and the country is long overdue. Gov. Lamont and the state Legislature should be commended for drafting a law that legalizes adult recreational use in the state and addresses the harm done to thousands of men and women convicted of possession, and importantly realizes that the marijuana industry in the state should make an extra effort to include opportunities for communities that were particularly harmed by marijuana prohibition.

The legal history of marijuana prohibition, and recreational drugs in general, is a history that has had significant disparate impacts on Black and Hispanic communities in the state and the nation. Most of this disparity is the result of disparate enforcement of the laws. White Americans use marijuana at about the same rate as Black Americans. Data from the Brookings Institute shows that Blacks are over three times more likely to be arrested for marijuana possession compared to whites. These disparities persist in many communities even today. According to a report by the Legal Aid Society in New York City, 94 percent of marijuana arrests in 2020 were people of color.

These disparities have significant implications for employment, household formation, use of public services, education, community development and family separation because of incarceration. The harm done by marijuana prohibition has cost Black Americans hundreds of billions of dollars over the past 50 years in the form of lost wages and the cost associated with arresting large swaths of Black and Hispanic men.

Looking back at the legal history of marijuana prohibition, these disparate impacts are not surprising. The early proponents of marijuana prohibition, particularly Harry Anslinger, the first commissioner of the Federal Bureau of Narcotics was publicly transparent in his racism when it came to marijuana. Anslinger served as “drug czar” from presidents Hoover (1930) to Kennedy (1962). According to his biographers, Anslinger believed that marijuana encouraged interracial relationships between white women and Black men and made Black people believe they were equal to white men. His solution was to lock up Black men.

This racial history of marijuana prohibition is critical when it comes to the effort by the state of Connecticut to specifically encourage the development of marijuana businesses by Black and Hispanic marijuana entrepreneurs. The “social equity” portion of the legislation calls for 50 percent of those granted licenses to qualify as “social equity licensees,” who must meet two primary requirements. The first is that the SELs have household income less than 300 percent of the state average. In 2019, the state median household income was just under $80,000, therefore setting the upper household income limit at just under $240,000.

The second qualifying characteristic is place based. The SELs must have lived in census tracts that suffered significantly higher marijuana conviction rates. The combination of the two qualifiers will have the effect of limiting access to SELs to urban entrepreneurs.

The intention of these restrictions is to create a narrow window that the state hopes will be filled with Black and Hispanic marijuana entrepreneurs without specifically calling for a set number of licenses to go to Black and Hispanic marijuana entrepreneurs. Why not do both?

The state should specifically allocate half of all licenses to SELs as defined and allocate some portion of the licenses to Black and Hispanic entrepreneurs who do not meet both the income and location requirements. This should be done as a matter of racial equity and practical business realities. Without setting specific goals for Black and Hispanic marijuana entrepreneurs, the legislation in effect creates a 50 percent set-aside for white marijuana entrepreneurs.

The racial/ethnic targets are justified because the racial history of marijuana was not based on income or location. Police and the criminal justice system targeted Blacks and Hispanics regardless of where they lived, and arresting officers did not ask victims for a tax return when they were arrested for proof of income. These drug arrests were purely and simply race based.

For practical business purposes, the state should be more concerned with which marijuana businesses survive than which are formed. Reserving licenses to higher-income Blacks and Hispanics who have better access to financial and social capital will likely result in Black and Hispanic marijuana businesses that survive and become profitable. Unfortunately, many SELs that meet the criteria may start, but will be ill-equipped to survive given what will be a highly competitive market.

The state’s new cannabis law will create a billion-dollar market for the cannabis industry. There will be retailers, cultivators, microcultivators, transporters, delivery services, manufacturers and other businesses in this new industry. Upwards of 10,000 new jobs and tens of millions in new revenues will be generated for municipalities and the state. Unless we encourage Black and Hispanic marijuana businesses who have the connections and the resources to grow cannabis enterprises, the state’s social equity goals will not be met in the long run and the marijuana industry in the state will look like every other industry — white-owned and white-controlled.

Fred McKinney is the co-founder of BJM Solutions, an economic consulting firm that conducts public and private research since 1999, and is the emeritus director of the Peoples Center for Innovation and Entrepreneurship at Quinnipiac University.