The business of legal pot is a clanking, wheezing, government-created Rube Goldberg machine: Neil Macdonald

I know a pot dealer in Montreal. He's been dealing weed and hash for decades. He's an efficient capitalist; he guarantees customer satisfaction. Quality product and fast, free delivery. He's never been busted, either, to my knowledge, which I guess makes him a pretty smart dealer.

In any case, you'd think with legalization, and all the new competition he's facing, he'd be a worried fellow. Well, he's not.

"Are you nuts?" he laughs. "It's the government."

What he's saying is a variation on the old joke about how to open a small business in Canada: You open a big business and wait about six months.

It is a management axiom that the bigger the organization, the more dysfunctional it is by nature. And government is the biggest of all. Did anyone seriously think that in Canada, where we have at least three levels of government barging around, regulating and taxing everything in sight, duplicating each other, and more often than not actually competing, that consumers would have access to a properly functioning, competently managed retail system for marijuana and other cannabinoids?

(I must confess I use the words pot, marijuana, weed, hash, etc. deliberately, because I know the federal government now wants everyone to call it cannabis, because the Liberals think that term changes the narrative, as they love to say, and sounds less, well, illegitimate, which, incidentally, is a rather recent narrative-change, because until late 2016, federal regulations were still spelling it "marihuana," because, you know, the federal government knows how to spell better than the rest of us).

Anyway. What we now have is what was entirely predictable: A clanking, wheezing, government-created Rube Goldberg machine, gaskets blowing and tie rods breaking, widespread shortages of actual product, secretive bureaucrats intent on hoarding both power and revenues, and of course of course politicians blaming each other.

The soporific Ontario Attorney General Caroline Mulroney, who once actually thought herself so politically talented she could go from private lawyer straight to Progressive Conservative leader and then premier, was on CTV recently, stolidly repeating talking points about how the federal government's licensing system is to blame for the shortages.

Which is no doubt true. The federal government, fearing conservative anger, tried to make its entire legalization scheme sound like a crackdown. As Trina Fraser, an Ottawa lawyer specializing in cannabis, puts it: "Their message is 'You can now buy this legally, but don't!' They're sucking and blowing at the same time."

Still, let's look at Ontario. The former provincial government decided that only the provincial alcohol monopoly could be trusted to retail pot, because never mind, it's Ontario and that's the way it has to be. Then a new premier took over, and decided to let the private sector compete with government. Then he hit on the idea of creating a "lottery" that conferred a total of 25 dispensary licences to serve his 14 million constituents.

How Ontario decided on 25 licences is a mystery. But that's what it did, claiming supply issues. It also decided the winning businesses will not be allowed to buy their pot from federally licensed growers, but from the Ontario government, which will buy from the growers. Except the Ontario Cannabis Store, the government agency set up as the province's official pot dealer, won't tell the winning entrepreneurs how much they'll have to pay for the product, or how it will be allocated.

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"It's ridiculous. It's just ridiculous," says Fraser. "Those 25 retailers are trying to get up and running by April, because they'll be fined if they aren't ready, dealing with leases and putting down rent deposits and trying to meet the rules for security standards and hiring people and they still have zero understanding of what their profit margin is going to be because the Ontario Cannabis Store won't say what its markup will be. How are they supposed to have a proper business plan?"

The answer: Bureaucrats couldn't give a toss about business plans. It's all about control and taxation.

So now, the lottery winners are probably just going to cash in and accept millions of dollars to be silent partners with big powerful companies that want to take over the industry. It's sort of like owning a taxi medallion in the pre-Uber era, if only 25 medallions were issued for the whole province.

Oh, and let's not forget that various ex-law enforcement figures, the most prominent being former Ontario Provincial Police commissioner and former tough-guy Conservative politician Julian Fantino, are now players in what will become Big Cannabis. These characters spent much of their lives criminalizing people for using pot. Now, evidently, any concerns about marijuana being a gateway drug to things like heroin have evaporated, in the face of lovely profits. Their thinking has evolved. Big surprise. Could it possibly be they never really believed that, but encouraged pot busts while in government service to justify expanding their budgets and salaries? Because that's what government does, and, clearly continues to do post-legalization?

Problems in legal pot market

5 years ago

Duration 2:47

There has been a lot of demand for legal marijuana since it was legalized in October, but supply hasnt caught up. One legal producer may have even turned to the black market to meet demand. Three executives are out of their jobs.

But back to the widespread shortages.

Pre-legalization, supply expanded to meet demand. Dealers like my friend in Montreal had no problem laying in supply (he still doesn't). Dispensaries, operating in grey legal territory, had lots of product, different strains with weird names like Alien Asshat and Purple Kush, and vape pens, and edibles, and oils; everything a pot user could possibly want.

It was only after government got involved that supply problems erupted.

Ontario, meanwhile, determined to stamp out competition, has been systematically shutting down dispensaries, for our own good, of course. (So have other provinces). The one at the end of my street in Ottawa has now renamed itself a "cannabis educational centre," a weird bit of legal semantics its owners seem to think will protect it from the monopoly police.

Follow the law if you wish to become a retailer, says Ontario sternly, but Fraser, who has multiple clients seeking licences, says they exist in a "legal abyss. It's kind of a mess."

Kind of?

Let's put this in some perspective. Government in Canada made pot a perfectly legal product, and then, in true Canadian fashion, effectively went about making it illegal again, or accessible largely through illegal means. It tried to appoint itself the dealer, just with lousy service and moral dictation.

None of us should have expected anything different. My pot dealer friend understood that from the beginning.

He just chuckles.