Will Legalized Cannabis Improve the Appalachian Economy after COVID-19? Ask Pittsburgh

Covid-19 has strained economic and social environments globally, nationally, and regionally. In West Virginia, the only state fully contained in Appalachia, weekly unemployment claims tripled to 146,500 (16%) in April 2020, and remain at double the 2020 rate as of November 2020. The CARES Act provided immediate but temporary relief to the Appalachians already encumbered by the struggling manufacturing and coal industries. Appalachian coal production fell 33% since the pandemic in a market where current estimates predict lower demand for the former mainstay of the Appalachian economy. Appalachia needs a new economic perspective for the post-COVID era, but how this occurs is uncertain because of lingering political and economic dynamics leftover from the extraction and manufacturing industries.

Cannabis may provide that new economic direction. Cannabis is legal for medical or recreational use in 33 states where sales have increased 46% since the pandemic. Estimates predicting a (legal) market share of $76 billion by 2028 signify great economic potential for the American economy. A variety of factors speak to the potential for cannabis to have significant influences on the post-COVID Appalachian economy.

Cannabis currently provides a significant revenue source in the shadow Appalachian economy. A 2016 report estimated that West Virginians spent an estimated $190 million annually on illegal cannabis while the region produces significantly more. This translates into millions in lost public revenue that the legal cannabis industries can generate.

Meanwhile, mayors from eight Appalachian cities, including Pittsburgh’s Bill Peduto, call for sustained long-term regional investments in Appalachia and forward-looking alternatives to revive stalled economies. The mayors do not specify cannabis, but the plant’s many medicinal and industrial values, plus its suitability for cultivation in the Appalachian agricultural climate qualify it as a serious and valid economic prospect. Estimates predict that Pennsylvania’s market share alone would be $1.6 billion. Fully legal in New York, eight other Appalachian states have legalized at least some forms of medical cannabis and have thus entered the market. Calls for expanded legalization in Appalachia only enhance cannabis’ potential to be the sought-after alternative to the previously dominant natural resource extractive economy. A coordinated regional plan to industrialize Appalachian cannabis among other proposed alternatives may satisfy consumer and economic objectives.

But a potential Appalachian cannabis industry may hinge on support from one place. Pittsburgh’s industrial barons and politicians have controlled economic and policy environments in the Appalachia economy since the late 1800s. When coal and steel dominated, companies extracted natural and human resources from surrounding areas to consolidate cash and power in Pittsburgh. Today, Pittsburgh’s diversified economic economy in technology, services, and corporate bases still contains extractive industries. Other Appalachian states have not had the same success at diversification despite incentives to draw new businesses. With Pittsburgh’s corporate presence also comes a continued alliance with growth-minded politicians. Although Pittsburgh is unlikely to produce cannabis products like it once manufactured steel, the corporate and political interests located in the city are likely to influence regional cannabis policy.

So where does Pittsburgh stand on cannabis? Several factors point to the uncertainty that Pittsburgh power holders will push for full legalization and industry expansion in the immediate future. On the positive side, national support for cannabis legalization increases yearly, as does support among Appalachians, including Pittsburgh residents. As a gentrifying city, Pittsburgh has an increasing number of residents from demographics who typically support cannabis legalization--those with more education and higher incomes, which may explain the city’s overall 66% approval rate. Public attitudes often translate to political support, and both Mayor Peduto and Lt. Governor John Fetterman, former mayor of nearby Braddock, PA, have been outspoken cannabis proponents. Pittsburgh’s political resources could be essential to developing a cannabis economy by shaping protective pricing and tax policy to mitigate black market poaching and establishing inter-state reciprocity for ease in medical acquisition. Such actions would be advantageous to both business and public interests.

However, other factors suggest that popular support may be a necessary, but not a sufficient, condition. Supportive Pittsburgh politicians face resistance from the Republican-controlled legislature who currently are anti-cannabis and who grudgingly legalized medical cannabis in 2016. While Pittsburgh is a medical hub where healthcare providers can capitalize on treatment and dispensaries, it is also corporate headquarters for several large pharmaceutical companies like AstraZeneca and GlaxoSmithKline who see cannabis differently. Analysts suggest that pharmaceutical giants may use influence to oppose legalization or alternatively acquire cannabis companies to control the medical cannabis market and protect their drugs from competition from legal recreational cannabis. Overall, Pittsburgh decision-makers have many unresolved considerations before economic and political influence lands either for or against the cannabis industry.

Yet despite the apparent leadership vacuum in Pittsburgh, it is equally questionable how another Appalachian city or state will emerge as a cannabis hub despite its potential to bring some economic relief in a post-COVID economy. A serious concern is whether small entrepreneurs can overcome obstacles like high licensing costs, discrimination from past incarceration, and complex regulations that do not similarly constrain big pharma and corporations, thus providing them market advantages. Out-of-state corporate dispensaries, processors, and growers account for nearly 80% of West Virginia permits although state law requires physical residence or West Virginian majority ownership of the business entity. If the limited number of permits go to out of region corporations, so will the profits and Appalachian influences in the cannabis industry. Any boon from legalized cannabis will only tangentially improve the lives of people who produce it. In the end, history will repeat itself as Appalachia delivers an economic product without a chance at the first fruits of its labor.

However, if the capitalistic muscle of Pittsburgh can create a cannabis industry in Appalachia, then the region could be an influential participant in the new and modern American economy, even with limited regional control. In a time where changing economic policies and markets have left Appalachia behind, and a debilitating pandemic intensified economic insecurity, cannabis is a likely alternative that can carve a path toward economic recovery.