This blog contains posts and comments written by students in Dr. Tufte's economics classes at Southern Utah University.
10/11/2007
What To Do With A Wine Surplus?
These two articles explains that there is a surplus of wine in Europe. Over the past few decades consumers have decreased their drinking habits and new competitors have entered the market from the US and Australia. Currently European governments are subsidizing grape farmers to help them get through a difficult period as wine sales get harder. Now they are suggesting that they distill the wine surplus into an alcohol that can be sold at 1/10 of the normal price, and they want to destroy many of the grape vines to get rid of the future surplus. Why don’t the winemakers just sell the wine surplus for less money? Why do they have to distill it into alcohol in order to get rid of it? It seems to me that in most situations when you have a surplus, you can cut your prices and get rid of it. I am sure that Americans will buy the French wine if it is half the price of the US for the same or better quality. Also, it does not make any sense to me why they would rip out perfectly good grape vines. That is just stupid. Why don’t they either just stop harvesting the grapes, or still harvest them, but not for wine? Why would you waste money and man-power to actually rip out the vines unless you were going to use that soil for something more profitable? I think that it is ridiculous to pay/subsidize farmers to produce something that no one wants just to keep the farmers going. That may help the farmers transition into a different job, but it is only a short term solution. Hello! The world is going through a change. Let nature do its thing. They are just going to have to sell their product for less and get out of the business, or try to find a special niche.
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5 comments:
Agreed.
The problem when politics intersects with economics is that labels are important in the former, while reality is important in the latter.
The governments definitely need to let the markets work here. It is counterproductive to subsidize these grape farmers. The winemakers need to either find another market like Dominic suggested or find another industry to move into.
Can't we ever find a politician that can push through a policy that is economically viable instead of immediately jumping to subsidize, subsidize, subsidize.
This whole scenario seems like the classic buggy whip example. If the demand for the wine is not there, then the supply should be reduced until it equals the new desired level of demand. The government trying to subsidize this industry is only making things worse for the long run. After personally living in France for awhile though, I believe that a surplus in wine is the least of the country’s problems right now.
Perhaps the government should attack the bottled water industry as well since they have been dominating the liquid refreshment market. Less people drinking bottled water, cheaper wine, hey now that is how you get rid of a surplus!
Now seriously, the government intervening with the market all the time is getting on my nerves. Open up the market to the invisible hand and let the less efficient companies drop out. That way all of society is better off because we will have only the best wine available at only the quantity demanded.
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