The writer is an FT contributing columnist
The US is scrambling to build black wealth as a way to tackle its race problem. And what better way to attack the racial wealth gap than in a brand new industry where the rules can be written from scratch to make sure minorities face fewer barriers to getting rich?
Recreational cannabis was legalised in the state of Illinois in January 2020, right before the pandemic hit, and sales have risen to nearly $1.2bn. Since African Americans and Hispanics suffered more from the war on drugs than white people, the state wanted to make sure they would benefit disproportionately from legalisation.
According to the American Civil Liberties Union, black people in Cook County, Illinois, where Chicago is located, were 10 times more likely to be arrested for marijuana possession than white people before it was legalised. So legislators tried to write rules to give “social equity applicants” — those who have lived in areas affected by the war on drugs, many of them black or Hispanic, those with marijuana arrests and even some with convictions as weed dealers — a leg up in the business of selling cannabis legally.
But despite promising to give “social equity applicants” an advantage in winning licences, Illinois has no majority black-owned cannabis dispensaries. And according to a report first published by marijuana industry newsletter Grown In, as of September 2020 just one African American, two Hispanics and 12 Asians held equity in a state cannabis dispensary, compared with 204 white people.
This is partly because the law allows some white-owned concerns to obtain licenses by hiring people from social equity groups rather than making them owners. Last month, the Illinois legislature tried to fix the problem by creating 115 additional dispensing licences and trying to make it easier for social equity applicants to prevail.
“This is a huge social equity issue . . . this was supposed to have a positive impact on people of colour but we have not yet seen that,” says Kimberly Hollingsworth, president of Olive-Harvey community college on Chicago’s south side, one of the leading Illinois colleges training students to work in the cannabis industry.
But she believes the sector can still provide well-paying jobs for minority students. Olive-Harvey recently launched a programme funded by marijuana taxes to train those with violence and cannabis arrests for employment in the sector.
Angelique Nieves, 24, earned a certificate from Olive-Harvey in cannabis dispensary operations and has just landed a job with a marijuana company. She recounts how she was hurt by drugs growing up in Chicago’s Humboldt Park neighbourhood. “I’ve seen friends and family who have spent years away [in prison], an uncle who spent 15-plus years away for marijuana and gang life,” she says.
Before training at Olive-Harvey, Nieves worked in a restaurant, but then lost her job because of the pandemic. She would have struggled to save working as a server but notes that her new job offers stock options and says she is “on course to wealth if I stay in this industry”.
Marijuana industry insiders say it’s too soon to tell if minorities will become business owners. Michael Malcolm, an African American realtor and cannabis consultant who qualifies as a “social equity” applicant because he has a marijuana conviction, estimates it takes $1m to open a single pot shop. He says many of those competing against him in Illinois’ new dispensary licensing lottery won’t have the capital or expertise to operate a business.
“We are going to see a lot of licences sold off as soon as they are awarded,” he says, which could leave the industry still largely in control of better-capitalised white people.
“I think it’s an opportunity to build intergenerational wealth,” Malcolm adds, “but it’s not the only one. A lot of governments are focusing on cannabis as though no other industry had anything to do with the lack of black wealth.”
But if Illinois can’t tackle the racial wealth gap, even with windfall profits from a clean-slate industry, it’s hard to see how the breach can be bridged in industries where vested interests have had a lot longer to dig in.