The list of states proposing and passing bills to legalize medical marijuana continues to grow. North Carolina’s House Bill 577 now seeks to amend the state’s laws to “authorize an individual to use marijuana for medical purposes as directed by a physician.”
Two years ago in The Socionomist, Euan Wilson foresaw the trend. Wilson’s in-depth, historical study of attitudes toward recreational drugs found that societies tend to ban during the bull markets and chill with the bears.
History shows that mood governs society’s tolerance for recreational drugs. A rising social mood produces prohibition of substances such as alcohol and marijuana; a falling mood produces tolerance and relaxed regulation. In the case of alcohol, the path from prohibition to decriminalization became littered with corruption and violence as the government waged a failed war on traffickers. Eventually, as mood continued to sour, the government finally capitulated to public cries for decriminalization as a means to end the corruption and bloodshed.
We predict a similar fate for the prohibition of marijuana, if not the entire War on Drugs. The March 1995 Elliott Wave Theorist first forecasted the drug war’s repeal at the end of the bear market and in 2003, EWT stated that during the decline, “The drug war will turn more violent. Eventually, possession and sale of recreational drugs will be decriminalized.”
The Case of Marijuana
Social mood influences people’s actions and their social judgments. In times of positive mood, people have the resources to enforce their social desires. They can afford to express the black and white moral issues preferred during bull markets, and drug abuse is a favorite target.
During times of negative mood, on the other hand, society’s priorities change. People have other, bigger worries and begin to view recreational drugs as less dangerous, if not innocuous in offering stress relief, pain reduction and the ability to cope with the pressures of negative social mood.
Over the past 100 years, governmental activities have manifested these changing attitudes. During periods of rising mood, policymakers stepped up regulation of cannabis. During periods of falling mood, they eased those same stances.
As shown in Figure 1, each legislative attempt to restrict marijuana use followed at least three, and in most cases four or five, bull-market years. In 1937, Congress passed the Marijuana Tax Act. The law banned casual consumption of the drug and limited its use to specific medical and industrial purposes. Franklin Roosevelt signed the law at the top of a roaring bull market, the Dow Jones Industrial Average having quintupled from its 1932 low. The real crackdown, however, came over a decade later during the massive wave III bull move. The Boggs Act, which increased drug use penalties fourfold, and the Narcotics Control Act, which increased penalties another eightfold, both came during the most powerful portion of wave 3 of III of the bull market. Then in 1958, after four more years of rising mood, Wisconsin farmers harvested the last legal crop of U.S.-grown hemp. In 1989, President George H.W. Bush’s famous “War on Drugs” speech came on the heels of seven years of net progress in the stock market. In 1999, a year before the top of the Grand Supercycle bull market, the DEA banned the importation of hemp products that contained even a trace of Tetrahydrocannabinol (THC), marijuana’s psychoactive ingredient.
Negative Social Mood Fosters Tolerance for Marijuana Use
During bear markets, pot users have enjoyed liberal social tolerance. Figure 1 illustrates that the government tends to allow—and in some cases encourage—the growing of marijuana during bear markets. In 1942, the year Cycle wave II bottomed, Congress launched its “Hemp for Victory” campaign to encourage farmers to grow the crop for industrial purposes related to the war effort. According to the Wall Street Journal, farmers planted over 50,000 acres of hemp in 1942 and 240,000 acres in 1943. In 1977, a bear market year, President Carter recommended that Congress legalize possession of small quantities of marijuana. An exception occurred in 1996, when, four years before the top of a historic bull market, California and Arizona voted to allow the use of marijuana for medical purposes. But the federal government maintained consistency with the spirit of the times, and stepped up its raids on marijuana facilities in the states where it was legalized and wrenched convictions from juries who were denied the information that the drug dispensaries were legal in those states, according to the New York Times. But in 2008, as social mood and the stock market plunged at its then-fastest rate since the 1930s, Massachusetts voters took a bigger step in passing an initiative that decriminalized the possession of small amounts of marijuana. Michigan’s voters also passed a loosening law, this one permitting the use of medical marijuana. On June 29, Oregon’s House of Representatives passed a bill in favor of licensing hemp farming. Barring a veto, Oregon will be the sixth state this year to pass pro-hemp legislation. So far, in keeping with the bear market trend, the feds have chosen not to interfere in these recent initiatives.
In February, U.S. Attorney General Eric Holder announced his view that states should make their own rules on medical marijuana use and that federal raids on pot dispensaries would cease. Then in June, Congressman Barney Frank introduced two pieces of marijuana-related legislation: the first allowing states to pass medical cannabis laws without interference from the federal government; the second eliminating federal penalties for possessing 100 grams of pot or less (but adding a fine of $100 for public consumption). According to CBS, Frank filed a similar bill last year that failed. We expect the current legislation to fail too, as it is too early in the bear market for Congress to take such contrary measures. But bills similar to Frank’s will gain traction when mood resumes its drop. Cash-strapped states will surely argue that they desperately need tax revenues from pot and that they can also save money by releasing non-violent drug offenders from prison.
The full report is available here.
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