John F. Kennedy, in reference to a New England Council slogan, noted that a rising tide lifts all boats. The concept holds that free markets, specialization and subsequent economic prosperity benefit everyone. Although right now we know that’s not entirely true, as economic booms increasingly favor the wealthy, a strong economy makes life better on average. Better access to credit, growing 401(k) balances, strong real estate values, more job opportunities, and rising wages are all associated with a growing economy.
Conversely, an ebb tide sinks all ships.
In modern times, our economic lives are increasingly interconnected. As goods and services flow across the world or localities, our lives connect with those of others. With the rise of “free markets” and globalized trade, these connections are increasingly present. A problem or disruption in one area can have a ripple effect across the world. Like it or not, this is the paradigm in which we live.
Our nation, our county and our own communities are no longer siled as they once were. We depend on and benefit from the success of other individuals and industries. It’s for this reason that the problems in the California cannabis space have people across the state worried. Here at home, more and more people are talking about the drop in cannabis prices and the ripple effects this will have on the local economy.
The true economic impact of the cannabis industry in Humboldt is misunderstood in some circles. Although it is impossible to determine the exact magnitude of the contribution, we know that it is significant. In fact, in the recent Masters in Marijuana certification I received from Cannabis Training University, it was estimated that cannabis activity represented two-thirds of the economy in parts of Northern California, including Humboldt. I believe $2 billion a year is a conservative number.
What those outside of the industry don’t realize is that with the price squeeze for books, the vast majority of cannabis farm revenue is spent in the local economy, not the lavish lifestyles or remittances abroad. Even though the operators are from outside the region, they still pay inflated property taxes and land payments. Many rent or buy a townhouse and purchase food, diesel, propane, ATVs, hardware, lumber and farm supplies locally, much like resident farmers do. Farms employ contractors, plumbers, road crews, engineers, consultants, logging companies, financial service providers and local labor with knowledge of agriculture in our region.
While cannabis opponents argue that the industry should be allowed to fail, it would create a very unpleasant economic scenario, especially here in Humboldt where the industry accounts for such a large portion of GDP. Shops, car dealerships, restaurants, golf clubs, nightlife establishments, travel agents, real estate professionals, lenders, insurance brokers and others would realize how much they were dependent on revenue from the cannabis industry.
As Warren Buffet noted, you only know who’s swimming naked when the tide goes out. In other words, during good times it is easier to make money and lose sight of the fact that economic prosperity can be fleeting. Unfortunately for Humboldt County, many of us will find out if the local cannabis industry disappears. All boats will sink with the outgoing tide and life here would be very different. Fundraising efforts for the Sequoia Park Improvement Project, the Fortuna Senior Center and other large-scale fundraising efforts in the county will be halted. Nonprofits more broadly will feel the pinch, executive directors will be out of work and, sadly, those dependent on charitable efforts will suffer.
While a Humboldt Polytechnic State and retirees moving north will no doubt help the economy evolve, it just won’t replicate a few billion dollars in lost economic output and we will all pay the price. .
Many residents feel affluent or financially independent today in the face of record asset values. Remember that investor sentiment is always best just before a major downturn. A significant stock market rout coupled with recession-induced housing declines are in the cards at some point. Add to that a huge downturn in local consumption as farms collapse, times won’t be so mild for any of us.
Along these lines, I had two rather troubling conversations last week. The first was with a retailer who claimed to have experienced a significant drop in November and December. Sales were depressed last year with Covid and this year’s numbers were much worse. This conversation reinforced what I have seen over the past few weeks. Restaurants are apparently less crowded, the mall is largely a ghost town, and families like ours are beginning to tighten their belts in the face of economic uncertainty, choosing to delay home renovations and other major purchases.
The second conversation was with a local real estate agent who specializes in ranch properties. Unlike the past few years when mountain properties were auctioned off, several listings are now going live regularly and I have seen some truly mind-blowing reductions in listed prices.
Regardless of personal opinions or political affiliation, it’s time to rally behind the cannabis community. Although we’ve all heard demonizing stories over the years, the majority of legal farmers are good, hard-working people. They love their families and their communities and are the engine of the local economy.
We need to repeal the state cultivation taxes altogether and suspend the local cultivation taxes from Measure S for a few years. This will buy some time for our farmers and the whole community until market access and prices improve. Thanks to these actions, more farms will enter the regulated market and operators will be able to compete more effectively with the illicit market. The idea of tax reform is gaining momentum across the state. In fact, a petition on change.org titled Save the Emerald Triangle Legacy Cannabis Farmers already has over 6,200 signatures, making it clear that others agree with the economic argument offered here.
In the face of a collapsing local industry and struggling real estate sales, organized crime will step in and mop up the scraps… not the best future for ourselves, our children or our communities. We have already seen this play out in other areas. Oregon experienced a major washout several years ago where an estimated 80% of original cannabis license holders went bankrupt. These farms were purchased, in many cases, by less desirable operators of whom we now hear in the press. Heavily armed criminal organizations that care little for the environment, workers or consumers. I know of workers who spent the entire season in southern Oregon in 2021 and instead of getting paid had a gun shoved in their face and told to kick after months of work and sacrifices.
This is a very real potential outcome for Humboldt if we see a major wave of farm failures. While many assume that mountain properties will fallow, I think that assumption is incredibly naïve. Other operators will step in and I sincerely doubt they will have any of our best interests in mind.
Jesse Duncan is a permanent resident of Humboldt County, father of six, retired financial advisor, and full-time commercial cannabis grower. He is also the creator of NorCal Financial and Cannabis Consulting, a free platform that helps smallholder farmers improve their farming, business and financial skills. Please check out his blog at, his Instagram at jesse_duncann and connect with him on Linkedin.