Toastrider made this comment on Are you effing kidding me? Pot Industry Bailout?

It has to do with California’s regulatory landscape, which could be compared to a vampire, or a huge blanket of strangling kudzu.

I find it darkly hilarious, myself. California was oh so proud of how forward thinking they were, and then they turned around and strangled the legal suppliers so badly it’s still more profitable to grow pot and sell it on the sly.

This reminded me of a story I believe I told already but bears repeating. I am not a fan of the European Union. It is what happens when you leave a bunch of mid level bureaucratic idiots with a low-level real life IQ have to much power controlling people.

In the early 90s IIRC, the EU went full blast regulating the production of grape-based alcoholic products. The old joke about you can only call it champagne if it comes from that region of France? Yup, that EU effort.  So they decided in Brussels to control every single aspect and quantity of the production in order to preserve the quality and reputation of the wines and spirits, at least that is what they said.

Now wine in Spain is like soda in the US: Everybody drinks it in almost every meal and some in every meal, including breakfast. There are no Soda-like manufacturing industries, nor they could be done as we are talking different processes and basic products other than water. So what was done back in the day is that towns would depend on local vineyards for their regular supply of wine and a lot of times it would take several small vineyards to keep the equivalent of a county happy with the red liquid.

To make a long story short, the EU decided those mom & pop places could no longer operate “out of boundaries” and they had to follow the same procedures as they imposed on the big boys. One particular vineyard was owned by a family of a dear friend of mine. It had been in the family for almost a century and the owner at the time was the uncle of my buddy. He got the notification from the EU alongside a trio of 4 inch 3-ring binders full of rules and paperwork he had to follow so they would not be fined and shut down. After going through the binders, he decided that keeping the local county in wine was not worth his effort or patience in dealing with the EYU, so he retired and passed the torch to his three adult kids.

The kids, all grown ass adults with university degrees in real fields, had to hire “experts” to help them understand the reams of bureaucratic bullshit and what would financially take to comply. After several months of planning, they reached a decision with the father’s consent: They bulldozed the vineyard, sold some of the property to developers and used that money to create a landscaping farm to grow decorative bushes and flower plants and anything related to gardening which was unregulated by the EU.

As for the town’s wine supply? probably and as it happened with many other towns, they had to buy the less quality and more expensive stuff sold by mass producing facilities.

And to make it more identifiable for us, imagine DC regulating the BBQ industry to include your local family BBQ pits that has been source for pulled pork and ribs since your grandpa was a boy.



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By Miguel.GFZ

Semi-retired like Vito Corleone before the heart attack. Consiglieri to J.Kb and AWA. I lived in a Gun Control Paradise: It sucked and got people killed. I do believe that Freedom scares the political elites.

14 thoughts on “California Pot Bailout or the Idiocy of Government Regulation”
  1. The bulldozer of regulation is often liberally run over even the smallest nails of business.

    This is literally the current pain in my ass as I grapple with numerous .gov requirements. Many are simply best practices that any reputable business should already be doing, many are on a scope that would be easy for huge orgs with thousands of employees that can dedicate dozens or hundreds of people to compliance to comply with but is absurd to ask small companies to do. Many of said regs are also full divorced from how the industry operates and has operated since the begining of time. Regardless, uncle Sam says from the biggest mega corp to the smallest mom or pop only shop, you all gotta do the same.

    Gonna be a rude awakening when lots of these small businesses don’t comply and can’t produce and a significant percentage of the industry looses it’s many small sole suppliers to regulation issues.

    1. “Gonna be a rude awakening when lots of these small businesses don’t comply and can’t produce and a significant percentage of the industry looses it’s many small sole suppliers to regulation issues.”

      You say that like it’s a bad thing.

      From the perspective of the government, especially those who make purchases, it’s really not. Fewer suppliers means more convenience for purchasing agents. Easier searches for sole-source procurements, easier databases to maintain of “approved” suppliers, fewer bidders responding to RFPs (so you don’t have to spend as much time documenting why the less expensive small business isn’t really a good deal for the government), etc. Bigger suppliers means they likely have a stack of “compliance” documentation, so you don’t have to work with the company to get all of the compliance documentation in order for the contract to be let, et cetera.

      1. Bad for us when life grinds to a halt, but certainly not the gov. They don’t give a shit.

        When I say sole source, I’m not just talking about sole currently authorized source, I’m also talking about the cases of this is literally the only source that can make it and its two guys with a computer from 1998 and about 100 years of experience between them. You can’t replicate that easily or quickly.

        I think you also vastly overestimate capacity and lead times when the big guys farm out all the little work to the small guys and thus no longer have the capabilities or the man power to do the small work. The lead time now goes to infinity for an item that used to have the effective availability of buy it off the shelf, now that the small guy can’t sell it to the gov direct or the big guy that contract him because of arbitrary regulation.

        The most realistic and likely outcome is going to be some fines and loss of suppliers, some waivers and variances, and some cases of the big guys and the gov looking the other way for those little guys they desperately need. Wow what effective regulation.

  2. “After going through the binders, he decided that keeping the local county in wine was not worth his effort or patience in dealing with the EYU… They bulldozed the vineyard…they (locals) had to buy the less quality and more expensive stuff sold by mass producing facilities”

    Which may have been the point of all of the regulations to begin with.

    1. Yep. If there’s a “too big to be allowed to fail”, it logically follows that at the other end of the spectrum there’s also a “too small to be allowed to succeed”.

      And I’ve seen nothing in recent history to convince me otherwise.

    2. Probably not. Even by bureaucrat standards, the EU parasites in Brussels appear to be unusually brain dead. I doubt they have the capability to hatch a plot that evil, or any plot.

  3. Years ago the company I worked for, 1 dev, 3 modelers put together a bid on a government contract. The actual contract was about 3 pages long. Go here, do this, deliver that, do it in this time frame.

    Our first four bids got zero response, even though we’d been asked to bid. We finally “rented” a dude that had done government contracting. In order to get this small contract it required us to provide almost 200 pages of boiler plate stuff stating that we were not violating any laws and that we had all the correct policies in place.

    We then had to hire a person to handle security and compliance. Our overhead went from 10% of one person or 2.5% over all to nearly 25% just to get the contract.

    Our next contract was easier, but we almost went out of business just trying to keep up with paperwork that first contract.

  4. Miguel, you quoted me! I feel a fuzzy feeling in my chest. Wait, that may be the spicy food from last night. 🙂

    Jokes aside, I bet I know exactly why the EU got that impetus to regulate winemaking. There was a bit of a scandal back around ’85 in Austria over such; it seems that to help produce sweet wines, the winemakers had decided to adulterate their vintages to ‘improve’ them and make more.

    Such adulteration included diethylene glycol, which (while not actually related to the stuff in your car radiator) gave rise to the term ‘antifreeze wine’.

    (If you’re curious, there’s a pretty good analysis by Fred Knudsen in his Down the Rabbit Hole series on Youtube about it. Look up ‘Austrian Wine Poisonings’.)

    As always, someone does something bad, and then the government gets involved and makes it WORSE.

    1. (Paraphrased from a “demotivational” poster.)

      GOVERNMENT — If you think our problems are bad, just wait until you see our solutions!

  5. Washington state was the first (IIRC) on the West/Left Coast to legalize recreational marijuana, and though they haven’t had to bail out the industry (yet), they did the same thing.

    They charged a 25% excise tax on sales of marijuana products. At every step in production.

    So the grower grows it, and can only sell the raw material to a processor, who packages or makes it into whatever they produce and sells it to a wholesaler/distributor, who sells it to a retailer, and finally the retailer can sell it to the public.

    At every transfer, the government collects a 25% tax. (Sometimes the processor and wholesaler/distributor are the same entity, which skips that transfer and associated tax … but not always.)

    Yes, legalizing it was billed as the way to eliminate the black market by introducing fairly-priced competition — if people can do it legally, they won’t want to risk doing it illegally — except that with all the taxation on the legal stuff, the black market remains lucrative enough that people still risk it.

    Oregon also taxed the crap out of marijuana, but not as extreme as WA or CA, and so the legal market here CAN compete and is booming. There are more legal pot shops in my town than Starbucks and McDonald’s combined; no matter where you are there’s probably at least one within reasonable walking distance.

    1. 25 percent each time? Holy crispy crap. Talk about ‘how to throttle your legal market in one easy step’.

      1. Yeah, the combined taxes made the legal stuff about twice the cost of the illicit stuff.

        Which gave the street dealers room to mark up their prices and still significantly undercut the legal shops. Selling illegally became even more profitable.

        “I’ll take ‘Unintended Consequences’ for $1000, Alex.”

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