Controlling cannabis

The debate over legalising recreational use of drugs has been on for ages. The US state of California is set to vote on Proposition 19 -  the Regulate, Control and Tax Cannabis Act of 2010 - on November 2, and it appears as if economic considerations are outweighing ethical issues. One report that supports the economic benefits of legalising marijuana has been the new report from the International Centre from Science in Drug Policy, which suggests that current US policy has no effect on drug use or price. More from TIME Healthland:

While spending on federal drug law enforcement has increased 1,200% and marijuana arrests have risen 150% since 1981, the rate of marijuana use nationwide has bounced around, with no relationship to these efforts.

For the state facing a $19 billion budget deficit, legalising marijuana will help in cutting costs and increasing tax revenues.  However, there are concerns, as opponents have pointed out in The Washington Post:

They say the referendum would bar employers from firing stoned workers without proving first that they were impaired. That would mean school bus drivers, for example, could get high before climbing behind the wheel, according to critics.

Also, while the passing of the new Act would enable those over 21 to consume marijuana under California's laws, they would be in violation of the Federal laws in the US.

The economist Milton Friedman had some strong views on prohibition and drugs. Here's a link to an article written by him on the subject in the May 1, 1972 edition of Newsweek.

The Next Media Animation group from Taiwan has highlighted most issues as well as the repercussions of legalising marijuana by way of a rather funny video. If you don't understand the language, worry not for there are English subs.



So, will the increased tax revenues from legal sales of marijuana be nullified by corresponding decreases in sales of tobacco and alcohol products? Or will marijuana sales boost the sales of the rest? Also, will the big tobacco companies diversify their product line to include marijuana-based products? If California passes Prop 19, we may find out the answers in the years to come.

Please chip in with your thoughts on legalising drugs, and other related issues.

Will India really outpace China?

Double-digit GDP growth may still be an elusive goal for India, but already analysts are predicting that the country will be growing faster than China - the champion of sustained double-digit growth in the past two decades - in a matter of few years. An article in The Economist states:

India’s GDP is expected to grow by 8.5% this year, and could grow even faster. Chetan Ahya and Tanvee Gupta of Morgan Stanley, an investment bank, predict that India’s growth will start to outpace China’s within three to five years. China will rumble along at 8% rather than double digits; India will rack up successive years of 9-10%. For the next 20-25 years, India will grow faster than any other large country, they expect. Other long-range forecasters paint a similar picture.

Among the advantages listed by The Economist in India's favour is its demography, with a strong surge expected in the percentage of the working age population in the coming years. The other is that India's growth has been fuelled primarily by the private sector and its entrepreneurs, while China's has been more state-driven.

If India keeps growing as fast as it is now, it will change the world. Optimists predict that it will be the next China, only friendlier and more democratic. Pessimists retort that such forecasts are over-spiced. They point out that India has a lot of catching up to do. China’s economy is four times bigger, so that even if India starts to grow faster, it will not overtake China for a long, long time. And they add that Indian businesses face several bottlenecks on the uneven road to growth.

Among the bottlenecks are the inadequate infrastructure, the lack of skilled workers, and corruption. Another article in The Economist lists them down:

For now, India’s problems are painfully visible. The roads are atrocious. Public transport is a disgrace. Many of the country’s dynamic entrepreneurs waste hours each day stuck in traffic. Their firms are hobbled by the costs of building their own infrastructure: backup generators, water-treatment plants and fleets of buses to ferry staff to work. And India’s demographic dividend will not count for much if those new workers are unemployable.

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Given the choice between doing business in China or India, most foreign investors would probably pick China. The market is bigger, the government easier to deal with, and if your supply chain for manufactured goods does not pass through China your shareholders will demand to know why. But as the global economy becomes more knowledge-intensive, India’s advantage will grow.