No, California Does Not Need a Cannabis Cartel

Joe Mathews penned an editorial for the San Francisco Chronicle entitled, “California needs a cannabis cartel.”

Mathews reminds us, “I am not smoking anything,” when he calls for a corporate cartel.

He says, “The California cartel would need to be a legal corporate oligopoly with the size and resources necessary to control the distribution of cannabis so that our state can properly track, regulate, price and tax America’s largest marijuana market.”

Without central control from the Californian government (which is so efficient and insusceptible to corruption) Mathews fears “motley cannabis players who operate in remote corners of the state… could quickly spawn yet another of the convoluted regulatory messes for which our state is famous.”

Of course, the Californian government doesn’t need to be famous for “convoluted regulatory messes.”

The California government could stop regulating everything in site.

A quick look at their history, as well as economic logic, debunks any notion that government bureaucracy is responsible for anything but destroying prosperity.

Government meddling is also an effective means for regulatory capture by top-producers in a given industry.

It’s precisely this latter, negative aspect of government regulation that Mathews suggests is a good thing and should be openly embraced.

He writes, “attempts to design regulation around cannabis are worrying,” and therefore the state should institute a one-size-fits-all distribution system.

And so, to answer the straw-man he’s created, “a cartel is by far the best answer.”

He cites alcohol as a working model, where “powerful distributors” connect brewers with vendors.

Mathews says the cannabis cartel will be the only legal buyer for the growers. The cartel will also be the exclusive seller to the retailers.

All so the government can track supplies and — apparently — provide quality assurance.

Because, obviously, there’s no demand for safety and quality and so a corporate cartel, immune from competition and bankruptcy, needs to step in and create redundancy.

But since legalization “could produce a dangerous drop in prices and encourage more people to use marijuana… Distributors, as middlemen, would by their existence keep prices higher.”

Unbeknownst to Mathews, consumers don’t like high prices.

Keeping legal cannabis sales artificially high would incentivize the black market. In fact, this whole scheme incentivizes everybody to go around the distributor-cartel and undercut them.

Unless, of course, a multitude of small farmers and vendors profit at the expense of larger firms.

That in itself entails a series of unintended consequences I don’t think Mathews has thought out.

But he’ll know when the system is working because, instead of connoisseurs complaining about the “chaos in their emerging industry” they’ll start complaining about “the decision of the cartel in charge.”

But that doesn’t mean anything is working. The regulatory chaos is not a market failure, but a government failure, starting with prohibition.

If Mathews is right, why stop at cannabis?

Why not have all journalists register with a cartel distributor of news? Why should columnists and bloggers be allowed to write and publish unregulated content?

We’ll know it’s working when, instead of complaining about the first amendment, journalists complain about the cartel in charge.