Legalizing Cannabis Using the Winery Model

Also available at Cannabis in Canada.ca

As we move towards the inevitable end of prohibition, the discussion has moved from “when” to “how”. In consideration of the various options, modeling cannabis regulation off BC's winery model may not the best approach to take. First, the wine model requires one obtain a license. While voluntarily funded accreditation agencies are perfectly capable of licensing certain industries, throughout the 20^th century governments have monopolized this function and now we have a population that doesn't understand its tyrannical implications. Licensing is when the government takes away your right to do something (like opening a business) and then sells it back to you. In this era of postmodern mercantilism, when the government licenses or regulates your industry, we're supposed to welcome that with open arms.




The second issue with BC's winery model is the list of requirements in the Liquor Control and Licensing Act. The argument here is the same as above: in a free and fair market odds are consumers will value and pay for third-party regulation in order to ensure product safety and prevent fraud. There is simply no economic calculation process in government bureaus that can determine what is “best practice.” And if many of the requirements in the Act are commonsensical, then why bother writing them into law? The third issue arises from the rules imposed by the Liquor Distribution Branch (LDB), which technically doesn't have the statutory jurisdiction to regulate the manufacturing of wine.

In a free and fair market, ineffective regulators must either provide a worthy service or face bankruptcy. Government bureaucrats don't have to worry about this. So long as people keep voting for more market intervention, the more economic chaos will ensue, especially in the industries where regulations are stifling competition and interfering with consumer demand. Often, this interference is mistaken as the fault of private enterprise, and thus calls for more government action only exasperate the problem.

If BC's legislators follow the wine model for cannabis regulation, then we expect the following:

A bureau (the Cannabis Control and Licensing Branch?) will issue licenses for cannabis farmers and derivative producers. The conditions for issuing the license, if it is like the winery model, will require the producer to use specific types of equipment that must match a certain product quota. New winery applicants, for example, must intend to ferment at least 4500 litres of wine per year. Why 4500 litres? Whatever the reason, it cannot be checked by consumer demand since we're talking about a government bureau that lives off taxpayer money. The 4500-litre requirement is arbitrary.

There is some leeway for crop-failures, but all in all, if the applicant does not produce at least 4500 litres of wine, his or her license will not be renewed. For a complete description of why BC's bureaucratic regulators know more about your business then you do, be sure to check out all 68 pages of the regulations.

But once you're licensed, everything is good, right? Not so, because to actually operate your winery business, you are forced into a contractual agreement with the LDB. Of course, being forced into a contractual agreement is to neglect the definition of the term 'contractual agreement'. Only the government can put a gun to your head, force you to sign, and then get away with calling it voluntary.

And the bureaucratic madness doesn't end there. The LDB categorizes wineries as either “Land Based Wineries” or “Commercial Wineries,” with the latter essentially being lower hierarchical bureau of the LDB. For example, at the end of each business day Commercial Wineries are forced to deposit all of their sales revenue directly into an LDB bank account! Only later will the LDB pay the winery a commission on their sales. Add to this all the wealth-destroying and bureaucrat-job-security paperwork, and BC's wine model looks more draconian than the Marihuana for Medical Purposes Regulations (MMPR).

If cannabis regulation follows BC's winery model, will farmers and derivative producers be forced to deposit all of their sales into a “Cannabis Distribution Branch” account?

Of course, you could categorize yourself as a “Land Based” winery but you wouldn't be avoiding the tyranny of the LDB. While Land-Based wineries operate more or less like an independent business, they are still required to report to the LDB. However, in order to become Land-Based, one must meet all the stringent requirements the LDB demands. They include:

• Wine must be made from 100% BC-grown grapes. In other words, you can't use grapes imported from Washington, California, or elsewhere.
• Wineries must have at least two acres of vineyards at a licensed winery site and use those to produce wine.
• At least 25% of the grapes used must come from land owned or leased by producer.
• "Traditional" wine-making techniques must be employed.
• Wine or juice may be purchased from other LB wineries but not from Commercial wineries.
• No common ownership with a Commercial winery.

The BC winery model is perhaps the worst to emulate. Traditionally, such conditions are imposed through statutes or legal methods of regulation. The LDB is a monopoly that enforces these requirements through mandatory contracts. So even if the idea of government regulation was sound, which it is not, the BC wine model does not hold up under scrutiny. Which just goes to show you, legalization does not mean the end of prohibition, and government regulations, once they are written, are nearly impossible to change.

So what's the solution? It's clearly not the BC winery model. The free market – that is, individuals engaging in consensual decisions – should provide regulatory services. The free market's destruction and chaos is entirely conjectural. Any examples of “market failure” are actually failures of government regulation, or a lack of enforcement of private property rights. So while shortages, pollution, and other discrepancies may appear to be the fault of capitalism, closer examination reveals the true culprit. So if cannabis cannot be left to a free and fair market, if it requires government regulations, then the burden of proof is on the statists.