The city of Oakland, in California, is bidding to become the Silicon Valley of marijuana cultivation, following a council vote to approve four huge cannabis factories, taxed and regulated by the authorities.

The contentious measure passed 5-2, despite the protests of small-scale growers, who argue that industrialisation will drive family farms operating at the margins of the law out of business.

Oakland, the impoverished sister city of San Francisco, has long been at the forefront of the legalisation movement. It already taxes the sale, at dispensaries, of marijuana for medical purposes with an annual turnover of $28million. With a state-wide referendum on legalising possession for recreational use due in November, Oakland is positioning itself to take full advantage of the increased tax revenues from this growth industry.

The coalition seeking to relax laws governing the sale of cannabis is essentially unchanged since the 1960s. Libertarians find common ground with left-wing pot smokers, while civil rights campaigners argue that because of disproportionate arrest rates for young black men, current drug statutes perpetuate racial inequality.

Opposition to decriminalisation, from religious groups, conservative law enforcement organisations and the self-described ‘moral majority’ is as vehement as ever. But across America, in legal and electoral battles the balance is tipping in favour of those who want to treat marijuana like alcohol or cigarettes: as a drug to be licensed, taxed and sold under state supervision.

The most important factor driving the rush towards legalisation, by far, is a nationwide fiscal crisis that has seen city and state revenues collapse. Politicians cutting taxes, coupled with the recession, have created huge local government budget deficits. California is $19m in the red, despite slashing public services for the past two years.

Tom Ammiano, a member of the California state assembly, said debt-hit councils find the idea of a new revenue stream irresistible. “The issue has become seductive in a way that perhaps it had not been before,” he said. “People see their schools closing, they see furlough days and reduced health care, and then they see this $14billion industry that’s untaxed and unregulated.”

Oakland’s initiative would charge each of the new facilities a flat fee of $211,000 annually, plus sales tax, plus payroll taxes, potentially bringing in millions of dollars each year. Other struggling cities, including Detroit, are considering similar measures.

In November, California’s voters will consider Proposition 19, which would legalise possession of up to an ounce of the drug for personal use. Harvard economist Jeffrey Miron, a veteran proponent of legalisation, has estimated it would generate up to $7billion a year in revenue, while saving $13billion in law enforcement and prison costs.

Governor Arnold Schwarzenegger announced that “it’s time for a debate” last year, and with the freedom of a film star whose time in office is almost up, told journalists he has frequently enjoyed smoking marijuana. According to a recent poll, Californians who disapprove of the proposal outnumber supporters by 48% to 44%. Its backers say that in the anonymity of the ballot box, people are more likely to vote yes.

Medical marijuana has been legal in California since 1996 when patients and primary care providers have been allowed to cultivate the plant. This has been extended to cover farming co-operatives and dispensaries, but because it is still a federal offence to grow, distribute or sell cannabis, these operate in a legal grey area.

Anyone who wants to get a prescription for marijuana can do so, from shady doctors who charge around $200 for a diagnosis of insomnia, back pain or minor ailments requiring ‘treatment’ with the drug.

In northern California, where much of the state’s marijuana is grown, drug enforcement agency busts and robberies are a threat to growers. Mexican cartels plant huge cannabis crops in remote forests protected by armed guards. It is a risky, violent business.

All that could change if the tide of legalisation continues to sweep across the US. A recent study estimated that a $50 an ounce tax would generate around $1bn a year for California, that the price of marijuana would drop by up to 80% and that consumption would rise as a result. That is a prospect anti-drug campaigners say is too scary to contemplate.

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