Article by Herbert Grubel, Financial Post
When Bill C-45 was passed in 2017, making the sale and recreational consumption of cannabis legal, politicians proudly announced that Canada’s legalization of cannabis and the regulations around its sales and production would provide a guide to the world on how to legalize.
However, 19 months after the bill passed, and nearly eight months after legalization took effect on Oct. 17, 2018, provinces have failed to licence enough retail stores and suppliers to meet the demand of consumers. As a result, unlicenced retail stores and black-market dealers continue to operate. Supplies come from unlicenced growers, some of which may have links to criminals and organized crime.
Nor are these conditions likely to improve soon. The reason is that politicians are involved in the design of regulations of the market, which allows interest groups to ask for special favours in return for electoral support: Labour groups have pushed for retail stores to be owned by the government and operated by unionized workers. Potential producers and retailers of cannabis want licensing rules that protect them from domestic, foreign and internet competition.
Then there are regulations ensuring the purity of cannabis products, the correct labelling of the amount of active ingredients, prohibition of sales to youths and the creation of proper enforcement procedures for these regulations. These regulations in the public interest are needed, but the process of creating them is unnecessarily politicized and delayed.
The irony is that these delays in the licensing of producers and sellers and the adoption of regulations of the cannabis market could have been avoided almost completely if politicians had been wise enough to copy regulations that currently exist for the market for alcoholic beverages.
This market once also involved total prohibition, but through time has been deregulated to where in most American states and European countries, and a slowly growing number of Canadian provinces, the production and sale of alcohol are almost totally run by private firms free from special operating requirements. (In other provinces, the free market remains stalled by the entrenched interests created by government liquor monopolies.)
In all jurisdictions that have moved to the use of private sector production and sales, government regulations are used to ensure the proper purity, alcoholic contents and labelling of alcoholic beverages. Laws restrict the sale of the beverages to youths and the operation of vehicles by impaired drivers is prohibited.
Alcoholic beverages and cannabis have in common a serious problem. It is widely believed that prices for these products determined in private markets would be so low as to lead to high levels of consumption and accompanying major health and social problems. For this reason, governments impose so-called sin taxes on alcoholic beverages and are expected to impose sin taxes on cannabis products eventually, too.