Michigan’s laws governing the market for alcoholic beverages are largely designed to enrich a handful of people, in the name of public safety. That’s why the state needs to change its alcohol control policies, which ought to be about protecting the public against the intoxicant’s harms rather than allowing a select few to collect monopoly profits.
How alcohol policy became about enrichment rather than safety is an old story. When Prohibition ended, alcohol didn’t automatically become legal; it became the subject of state control. State legislators, ostensibly worried that there would be liquor monopolists, mandated that the production, distribution and retail aspects of the alcohol business be separate. Thus, for example, anyone engaged in the wine business couldn’t be winemaker, wholesaler and wine bar operator at the same time. Separate businesses had to provide the different functions.
In addition, state policies restricted the market by requiring intermediaries and retailers to be licensed and limited in number through a licensing scheme. The licenses for intermediaries — wholesalers and distributors — became the basis for regional monopolies. This means that beer brewers have to make a deal with regional wholesalers and distributors if they want retailers to carry their products. They can’t just make a contract with the wholesaler of their choice, or even move their products themselves to local retail outlets at will. Likewise, bar owners can only get the products they want through these intermediary monopolists.
The separation of duties and limits on licenses created legally sanctioned monopolies, and thus, powerful interests that seek to protect their privileges.
The profits of having a state-guaranteed monopoly can be substantial. The people who own these rights tend to have the biggest homes in the nicest neighborhoods for a reason, and it’s not because they’ve discovered new, more effective ways to get alcohol from manufacturers to retailers. Often the other people engaged in the industry get protected wages and benefits as well, giving labor interests some incentives to preserve the laws that give them an advantage.
Businesses and unions that benefit from state alcohol laws are not afraid to bend the truth when fighting against threats to their privileged position. My favorite instance comes from Pennsylvania, where the union employed by distributors used this ad to fight against a bill to allow more stores to sell beer and wine, alleging that it might kill a child a week. It’s an extreme case, but any loosening of rules that cuts into established interests’ gains is treated as harmful, even if there is no connection between the reform and its alleged harm.
It’s tough to get lawmakers to revisit alcohol control policy. People understand that alcohol is a dangerous product and want policies to protect the public, which lowers the appetite for reform. The idea that separating producers, middlemen and retailers, and putting limits on middlemen and retailers can provide some safety is plausible, even if it does not work out that way in reality.
It's not like the current policies are all that effective. Over 10% of Michigan kids aged 12-17 reported drinking in the past month, according to surveys done by the U.S. Department of Health and Human Services, which is higher than the national average for underage drinking. Every state has issues with the harms of alcohol consumption, regardless of their control regimes.
There is a better way to control alcohol than our current system.
Theoretically, lawmakers use alcohol control policy to do two things: To limit access to alcohol and, relatedly, to increase its price. It’s unclear that either is effective today at reducing alcohol’s harms, but both can be done better without state-sanctioned monopoly profits for alcohol wholesalers.
Lawmakers can limit the places that sell alcohol and the amount sold, and they can do it without granting exclusive monopolies to the state government for liquor or to beer and wine wholesalers. They can raise prices through a more transparent means — taxes — so that the financial benefits of alcohol sales go to the state treasury rather than to the bottom lines of wholesaler monopolists.
There are plenty of businesses that provide wholesaling and distribution for other products, and they ought to be allowed to compete over the distribution alcoholic beverages as well.
While lawmakers may think that the little extra boost in government revenue is a good reason to look at reform, citizens ought to care for a different reason. Alcohol control policy should be about public safety, not about enriching a handful of monopolists.
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