A modest economic proposal

by | Oct 30, 2013 | Economic Development, Editor's Blog | 9 comments

Rural North Carolina is at a crossroads. Many counties face double-digit unemployment and almost half are losing population. The loss of manufacturing to trade deals and tobacco to common sense, has left those regions with few viable alternatives. Bribing companies to relocate there hasn’t worked well and luring companies based on low wages, low taxes and few regulations is a race to the bottom.

So how about trying something bold? The region needs an instant shot in the arm. Start with an infrastructure program that repairs bridges and highways, improves water and sewer treatment facilities, upgrades schools and community colleges and expands broadband. In the process, we can target bicycle tourism. With hundreds, if not thousands, of miles of scenic byways, we can attract the rapidly growing population of recreational bicyclists by adding wide shoulders to rural roads. States like Minnesota and Wisconsin have made investments and are seeing returns. Bicycle tourists add $1.5 billion–with a b– to Wisconsin’s economy every year.

Let’s look for new revenue streams. Like it or not marijuana is now legal in some form in 21 states and the number is growing. We don’t necessarily need to legalize consumption in North Carolina, but we should legalize production. Over the next 25 years, it will likely be legalized in most states. We shouldn’t pass up a huge economic opportunity because of self-righteous moral standards. We’re the state that defended tobacco and cigarettes throughout the 20th century, remember?

We should focus on energy. The country is shifting its economy from one based on carbon-based energy sources to one based on renewable sources. North Carolina is primed to take advantage of that opportunity. We have the land and conditions for large scale solar farms and wind turbines. And, yes, we have natural gas. The current legislature is bound and determined to get it out of the ground, so we should make sure that it is done in the safest way possible. And really, natural gas is part of the transition. It’s responsible for lowering carbon emissions that contribute to climate change.

Finally, let’s get over our moral opposition to gambling. Neither the state lottery nor the casino in Cherokee has caused the social and moral decline that critics predicted. There’s a relatively good chance that Cleveland County is going to have a casino in coming years.  With proper federal recognition, the Lumbees could have one right off of I-95, attracting people from both the north and south.

And we should introduce horse racing. Moore County is already horse country. A track down in that area could attract people from the Triangle, Fayetteville and even Charlotte. The expanded horse industry would provide needed jobs to counties throughout that hard-hit region. The tax revenue from pari-mutual betting would provide another source of income for the state.

There it is. A rural economic development plan with something for everybody to love and something for everybody to hate. At least it doesn’t rely on the same strategies that have failed so far. With the exception of the infrastructure project, it requires relatively little government investment and allows for creation of homegrown industries. It’s at least worth a thought.


  1. Alex Jones


    I didn’t say legalization was a bad a idea. At any rate, the point is moot because it’s guaranteed to happen. You are also right that prohibition incurs social costs aside from the effects of use. In fact, incarceration due to marijuana infractions partially nullifies one health benefit of prohibition. Marijuana helps trigger schizophrenia, but so does imprisonment.

    That said, the costs of legalization are real and cannot responsibly be ignored. That marijuana is dangerous is beyond dispute. Prolonged use can make a man with an IQ of 100 fall to a score of 90–from “average” to just above “low average.” Such a decline is NOT trivial, including in the sense that it impedes educational potential. Still worse, both the biological effect and the impact of wider availability would disproportionately harm young people, whose learning capacities are vitally important. The NYT article I linked to catalogues numerous other, RECENTLY DISCOVERED dangers.

    Anyone with minimal economic literacy can see that these problems will multiply along with legalization. Legal drugs are much easier to acquire, so you’d have to repeal supply and demand to keep prices from plummetting. In concrete terms, marijuana prices should fall from their current levels to the marginal cost of production– less than sugar. Again, this change will disproportionately impact teenagers.

    For the same reason, the fiscal benefits of marijuana are oversold. Colorado’s 25% tax sounds lucrative, but in fact the revenue take will be trivial. To produce as much revenue as cigarette taxes, the rate would have to be several hundred percent. With tax rates that high, a black market is guaranteed to emerge. Consequently, marijuana taxes couldn’t come close to “self-financing” treatment programs or the like.

    While the fiscal benefits are limited, the economic risks are significant. Why is alcohol so socially corrosive? Because its availability is unrestricted and it is produced on an industrial scale. The alcohol companies have huge lobbying clout and keep it that way. A similarly structured marijuana sector would pose huge dangers.

    I hope “Big Weed” never exists. But only such a threatening entity could revitalize our agricultural sector. The ideal marijuana industry, where producers would be small and market power fragmented, would provide limited production opportunities outside of a few markets/consumer niches. Unless we abandon all restraints on sales and use, our rural areas will see limited benefit. This is as it should be.

    Thus: Prohibition raises prices and in so doing restrains use and dependency. Legalization will eliminate these effects by causing prices to plummet. Prohibition’s costs, in terms of crime and so on, nonetheless give legalizing some merit. But the form of legalization that would boost our rural sector is not worth the social costs massive sales would impose.

  2. Paleotek

    Voters in Colorado will probably approve a 25% tax on recreational marijuana next week. Voters in Washington already have. It’s very unclear what revenue this will produce, since we don’t have good economic models for moving something from the underground economy to the mainstream economy. In 2010, NC recognized $750 million from taxes on liquor, so take that as a benchmark of the potential revenue.

    Alex, legalizing marijuana and “building an economy on addiction” are quite different things.

    The public good is a slippery concept, but it’s become pretty obvious that locking up poor kids for marijuana is not good policy. Even if you allow that marijuana is dangerous (debatable, Alex, but I actually agree with you that it has dangers), harm reduction is an obvious goal. Taxing citizens rather than locking them up is a much better approach.

    I found Greg Campbell’s book, Pot, Inc. to be very informative. A long-time journalist (of Blood Diamonds fame), Campbell decided to grow medical marijuana in Colorado before it was legalized. He gets up on the soapbox a couple of times, but it’s an informative and insightful view. He persuaded me on a couple of fronts:

    1) Medical marijuana is a Good Thing. I really thought they were mostly scamming the system to get high legally. While this happens, there are a lot of legitimate medical users whose lives are greatly improved by access to marijuana. It’s real, it’s beneficial, and public policy should reflect that.

    2) The reasons for prohibition are not sound. Since weed was outlawed in the 30s, our understanding of health and biochemistry has advanced quantum leaps. The effects of THC are anomalous in several ways, but the major danger seems to be that it makes you, um, stupid. Temporarily under moderate use, perhaps longer for heavy use.

    Sanjay Gupta and I agree that we should legalize medical marijuana, and consider ending the prohibition on recreational use:


  3. Smithson Mills

    How can we justify giving tax incentives to lure jobs for legal recreational drug manufacturing (think Sierra Nevada and New Belgium Brewing), and keep another, less dangerous recreational drug illegal? Alcohol and marijuana have both been used by humans for millenia, but due to historical factors one is legal in the US and the other is not. Its time we stop this hypocrisy and start regulating and taxing the sale of pot produced in a legal and well-regulated marketplace.

  4. Alex Jones

    These are good ideas, but I’m not sure about building an economy on addiction. The “political economy of vice” dictates that such industries can only turn a profit by manufacturing addicts. Otherwise, margins are too low to cover costs. As far as commercial marijuana, the fact is that tobacco is a Weapon of Mass Destruction*. Should we go down that economic road again, even though the drug will probably be legalized?

    I don’t think that’s a self-righteous attitude.


  5. NitWitCharmer

    My understanding is that horizontal drilling and hydraulic fracturing have been used in conjunction with one another on previously unproductive lands to release from the Earth’s hold not only oil, but natural gas.

    This has been done with no reliance on tax dollars and has produced jobs not only in the petrochemical field, but in industries that support the needs of productive, industries such as the construction industry, people need homes, industries such as food service, people need food, industries such a trucking, we need to move the natural gas stored in NC, industries such as those in vested in environmental cleanup, unfortunately accidents occur.

    Note that not only is none of this economic activity dependent on government spending, but it creates taxpayers who are no longer dependent on the government dole.

    This is a win/win in tough economic times. Our financially stressed state need not invest, frees itself of dependents, grows its tax base and increases the social well being of all who benefit from the character building nature of work.

    We should never overlook our state’s inherent blessings. Thank you for not doing so.

  6. Blue Line

    Thomas, I can’t believe it, but I actually agree with you on this post. So much so, that I won’t feel right the rest of the day.

    • Thomas Mills

      I’m sorry for your discomfort. I’m sure I’ll relieve that problem in a day or so.

  7. F.G.Carter, Jr.

    It is a shame in the state that has everything in the way of resources for tourism, manufacturing, education and energy to occupy a space at the bottom of the economic barrel when we should be atop the heap. I blame leadership without focus, a legislature without foresight and a population content with second rate performance of both. It’s time for a change.

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