Publicly-Controlled Liquor Systems Remain Superior to Private Counterparts
Nov 09, 2012
A new study by the Canadian Centre for Policy Alternatives (CCPA) and the Parkland Institute has looked at the effects of liquor privatization in Western Canada.In Impaired Judgement: The Economic and Social Consequences of Liquor Privatization in Western Canada, David Campanella and Greg Flanagan review the results of liquor privatization in Alberta in the 1990s and expanded privatization in British Columbia a decade later.
Since it’s often claimed that private liquor retailers offer alcoholic beverages at cheaper prices than their public counterparts, an informal price survey was undertaken in Saskatchewan (which remains entirely under public control), Alberta and BC. The survey found that BC’s private stores “almost consistently averaged the highest price out of the four groups, and stores in Alberta the second highest.” The publicly-owned stores in BC and Saskatchewan were found to have the lowest prices for the products measured.
Another common argument in favour of liquor privatization is the financial benefit that would result from the selling off of government assets (ie. liquor outlets), while still maintaining revenue from taxes on liquor. However, the study found that even though Alberta had the highest per capita consumption of the three provinces in 2011, it realized the lowest per capita revenue from liquor sales. Indeed, “the tax revenue generated per litre of alcohol sold in Alberta has declined dramatically in the years since privatization.”
The revenue governments get from liquor sales are anything but a windfall. In fact, the liquor industry is rarely a net earner for governments when the costs of managing alcohol consumption are included in calculations. Research has made it clear that increased access to liquor leads to increased consumption which in turn leads to increased public costs. The World Health Organization has stated that the most proven and effective methods for controlling the health consequences of alcohol consumption include limiting the physical availability of alcohol “through minimizing the density of retail outlets and the hours of retail operation, as well as restricting the access of minors.” The study found that the retail privatization experience in both Alberta and BC “contravene these policy prescriptions.”
Since outlet privatization began in Alberta and BC, outlet density has increased significantly in each province. And although Alberta has a minimum legal purchasing age for alcohol, the ability of the province’s regulators and private retailers “has been weak.”
In sum, in Alberta and BC, liquor privatization has meant higher prices and lower government revenue. In the words of the study, “the increased availability of alcohol and its lax regulation contravene recognized methods for protecting public health. Seeking to boost economic activity by privatizing the liquor industry is a losing game – there are always more costs borne on the general population than the benefits accruing to the government from increased tax revenue, if there is any.”
Managing the supply of alcohol has been demonstrated to ensure the greatest degree of social welfare, and evidence continues to indicate that a public liquor monopoly is “institutionally superior” to succeed at this objective.
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