Tim Worstall alerts us to a manifestation of government distortion of decision-making in Australia: a glut of grapes has pushed down grape and wine prices, and small producers are in danger of going out of business. The Telegraph article that Tim cites says that
The problem is so severe that the industry said yesterday that it will take a multi-million pound government bail-out to save smaller producers from going out of business.
The popularity of Australian wine in Britain and America, coupled with generous government tax breaks, encouraged a craze for establishing vineyards from the late 1990s. The Wine Grape Growers’ Council of Australia said that years of over-planting of vines and two recent bumper crops meant that up to 40 per cent of grape growers would lose their livelihoods unless urgent action was taken.
So let me get this straight: government tax policy induced people to establish wineries, which lowered the price of wine (and in particular the price for a given quality) sufficiently to lower profits (suggesting that the demand for wine is somewhat price inelastic), which is leading to bankruptcy of these small wineries, which leads to the need for government policy to solve the problem that government policy created.
Is that not some of the most convoluted logic you’ve heard in a while? That’s almost convoluted enough to sound like it’s from the ethanol industry!
Hey, there’s an idea: excess wine supplies could be a source of energy, as Dr. Vino has suggested in the past. Uh-oh, that may open up yet another avenue for inefficient, distortionary government policy!