Issue #36 June 2024

This issue is a modified and updated excerpt from “Buzz Kill: The Corporatization of Cannabis”.

In the previous issue, I addressed some of the economic benefits of drug trades, legal and illegal. But the benefits are only part of the story. The harmful use of drugs is an enormous economic liability for Canada. Health economists have devised statistical techniques for estimating these costs to the economy, and the results are shocking.

The Canadian Substance Use Costs and Harms (CSUCH) Scientific Working Group’s most recent analysis is with data collected in 2020. The Group estimates the total costs of harmful drug use in Canada for that year at $49.1 billion. I want to emphasize that is for just one year. There is no reason to believe it was an atypical year. In Issue #6 of this newsletter (2020), I discussed the long-term persistence of drug-related harm in Canada. The same persistence also prevails for drug-related costs to the economy. The harms and costs have been rising for three decades. There is no cause for optimism that this rise will plateau anytime soon.

These expenditures represent lost opportunities to assign the funds elsewhere – to chronically underfunded health and social services for low-income seniors and the disabled, programs to address income disparity, housing affordability, adult education and training, employment and food security, and much needed enhancements for municipal infrastructure such as public transit, sustainable energy, and schools. Think about what we might accomplish with even half of $49 billion, or more, annually.

The $49.1 billion in costs to the Canadian economy is distributed across four categories in the following proportions:

  • lost productivity 44.8%
  • healthcare 27.2%
  • criminal justice 20.4%
  • other  6.7%

Canada’s expenditure of $10 billion in one year on drug-related criminal justice activities is a controversy of its own that I will save for another issue.

By drug type, the proportional distribution is:

  • alcohol 40.1%
  • tobacco 22.7%
  • opioids 14.2%
  • cocaine 8.5%
  • other stimulants 6.22%
  • cannabis 4.9%
  • other depressants 2.8%
  • other substances 0.5%

Legal drug industries – alcohol and tobacco – account for the largest portion of the total costs. In 2020, alcohol accounted for $19.7 billion and tobacco $11.2 billion, for a total of $30.9 billion. That amounts to 62.9% of all drug-related costs to our economy – approaching double the costs related to all illegal drugs combined. It should be noted that a small portion of the 62.9% would arise from illegal trades in alcohol and tobacco. The legal portion would be increased by contributions from the pharmaceutical industry (opioids, stimulants, depressants, and others) as well as a contribution from the legal cannabis industry. In sum, those additional amounts would increase the total costs related to legal drug industries beyond the determined 62.9% – perhaps far beyond. As I have asked many times before: “What was the war on drugs (the illegal ones) all about?”

Recreational drug use, whether procured from licensed or unlicensed sources, remains an expensive pastime for the economy. We are unable to use the CSUCH data to calculate the proportion of the $49.1 billion in costs that is attributable to purely recreational drug use, as opposed to therapeutic use. The proportion would certainly be more than the 62.9% figure for alcohol and tobacco combined. Even a conservative guess of the cost of all recreational drug use would place a high price tag on the self-indulgence of playing with our body chemistry.

Concern about high levels of harm from the products of legal drug industries has been expressed by investigators and public health authorities throughout much of the world for a long time. Beyond alcohol and tobacco, we now have similar expressions of concern about the pandemic of opioid deaths which was initially fueled by the monetary ambitions and criminal activities of legal pharmaceutical companies. Pharma has a legacy of regulatory malfeasance and corporate crime that goes far beyond opioids. For the Canadian story, see Joel Lexchin’s book “Private Profits vs Public Policy: The Pharmaceutical Industry and the Canadian State” (University of Toronto Press, 2016).

Each of our long-standing, legal, government-regulated, commercial drug industries is linked to an international public health crisis involving their respective drug products. We are prompted to consider the potential role played by these businesses in the extent of harms and costs. It cannot be conclusively proven that the model of a legal, commercial drug industry is solely responsible for the high levels of harms and costs observed. However, as we have seen, the harms and costs from legal drug industries by far exceed those attributable to all illegal drugs combined.

Another pertinent question is whether the economic benefits of legal drug industries outweigh the liabilities. A paper published by Adam Sherk at the Canadian Institute for Substance Use Research (CISUR) compared Canadian government revenue from alcohol sales in 2014 to the costs, as tallied by CSUCH, for 2014. Statistics Canada reported government revenue of $10.9 billion which was offset by net societal costs of $14.6 billion. Thus tax-payer-borne costs exceeded government revenues by $3.7 billion.

Admittedly, there are other, less-tangible aspects in a full comparison. The various personal benefits enjoyed by people employed by our drug industries is not part of that analysis, but then neither is the suffering of people close to those with alcohol problems. Inclusion of such factors would require a much more complex and difficult analysis. At the very least, we know that the taxes collected by government do not cover the costs incurred by government from alcohol consumption. That is something we all pay for – in tangible and non-tangible ways. We all need to ponder the possibility that the alcohol industry, as it currently exists in Canada, may be a net economic loss.

From the analyses of drug-related harms and economic costs, we see that legal drug industries are not benign. What are the implications for a new legal, expansionist industry for cannabis? And for psychedelics, and for others yet to come? None of this is presented as a case for prohibition and criminalization of drug use. It is just a caution that legalization of a drug trade should not be mistaken for a policy panacea. As we continue to move from a drug policy world dominated by prohibition to one of legalization, we will have to adapt to new perils and a new set of regulatory challenges. I will begin to unravel those perils and challenges in the next issue of DPA. We must also find alternate approaches for supplying people with drugs for their recreational use. I present some ideas for that in Chapter 9 of Buzz Kill.

Order: “Buzz Kill: The Corporatization of Cannabis”
Canada / USA:   University of Toronto Press
UK / International:  Central Books
Or at your local bookstore. They will appreciate your support.

Mike DeVillaer
Hamilton Ontario Canada
June 26 2024