Mercantilism and Ontario’s Wine Industry

LvMIC:

The policies of mercantilism that harken back to the days of the 17th century are alive and well in modern day Ontario.  But in this case, the industry in favor of the so-presumed enlightened public officials is not one normally considered of great need or “public necessity.”  It’s one of simple recreational enjoyment known as the wine industry.  Via National Post:

In Ontario’s wine industry, the grapes have all the gravitas. It took John Rufa three decades to grow his passion for fruit wine from a basement-dwelling hobby to a thriving small business producing more than 20,000 litres of 100% Ontario-made product each year.Now that the retired Toronto public school teacher has hit the limits of foot traffic into his winery in Buckhorn, Ont., he has received an unofficial message from the province: This is as far as you go.
“They limit our access to markets, they stifle it, they completely suffocate it,” says the founder of Kawartha Country Wines.
The “they” he is referring to is the Liquor Control Board of Ontario, which monopolizes all alcohol sales in the province, and the Vintners Quality Alliance of Ontario (VQA), which certifies certain wines as “made-in-Ontario”; a distinction that comes with major economic privileges.
It is because of them, he says, that he must offer a 10% discount to any bar or restaurant willing to buy his wine and give 58% of every LCBO sale – which includes all direct commercial sales from his own store – to the government.

It is laws such as the 1999 VQA Act that allow VQA-member wineries to keep the cash from their sales to bars, restaurants and LCBO locations and force non-VQA members to pay.

To qualify for the VQA, wineries must use only grapes grown on the Niagara Peninsula, Prince Edward County, the north shore of Lake Erie or Pelee Island. Non-grape wines don’t qualify and in addition to giving up the majority of the revenue they generate outside their own vineyards, those who fail to qualify for VQA status cannot put “made in Ontario” on their labels.

What better way to gain a competitive edge than lobbying for governmental privilege over outproducing and outwitting your competitors?  Government power centers, rather than acting in the “public good” (a dubious term in itself) which they are often formed under the guise of, are the perfect tool for intervening in the free transactions of individuals.  As Mises showed, such policies, though beneficial for those in political favor, are always strikes against the overall welfare of an affected society:

Restriction of production means that the government either forbids or makes more difficult or more expensive the production, transportation, or distribution of definitive articles, or the application of definitive modes production, transportation, or distribution.  The authority thus eliminates some of the means available for satisfaction of human wants.  The effect of its interference is that people are prevented from using their knowledge and abilities, their labor, and their material means of production in the way in which they would earn the highest returns and satisfy their needs as much as possible.  Such interference makes people poorer and less satisfied.

There is no doubt that the policies of the Liquor Control Board of Ontario fall under Mises’ apt summation.  By privileging one group of wine producers over others in terms paying taxes, free competition is stifled.  As the article points out, the seal of approval from the Vintners Quality Alliance of Ontario (VQA) brings “major economic privileges.”  Rather than relying on the true indicator of economic superiority, that is customer satisfaction, aspiring wine producers must direct their efforts and resources toward appeasing those who are bestowed with a governmental monopoly and have little stake in customer vindication.

The simple question must be asked: what legitimate role does government have in the wine industry?  The obvious answer to the rational observer is none.  Its involvement is based on placing a coercive barrier on aspiring entrepreneurs to enrich current producers.  Hillary Dawson, president of the Wine Council of Ontario, claims that the VQA “is important enough and has driven value enough that we don’t want to dilute it.”

But who, in actuality, determines value in market economy?  If a wine is judged as inferior to similar brands, is it not the consumer and wiling purchaser who holds final say over that which he chooses to trade his income for?  Thoughts and tastes are unique to individuals.  Certainly councils, acting as rating agencies, can develop in a free economy to offer specialized recommendations on specific products.  Like producers, these agencies must develop a reputation among its audience.  Monopolistic grants of  franchise to these types of agencies distorts the market process by mandating that public officials and council members are above the distinction of rendering their position of authority from willing market participants.

As long as such a policy remains in effect, the people of Ontario are limited in choice of wine and therefore limited in their freedom to engage in mutual transactions to improve their current lot.  Impoverishment such as this is invariably the result of governmental economic interference.