Tuesday, November 1, 2011

Privatizing Liquor?

We've come a long way since Prohibition. In Washington state there is a proposal to privatize all state liquor sales and according to the Seattle Times the measure is supported by Seattle voters. The measure would sell off all of the state's liquor warehouses and related assets and accept bids from liquor distributors to take over and permanently privatize all of the state's liquor sales. Further, it would allow liquor to be sold in grocery stores and retailers across the state have flooded Washington airwaves with ads in favor of the initiative. Costco has spent an astronomical $20.8 million which set a Washington record for the most money from a single donor on a voter initiative.

Washington voters will decide on privatization on November 8th.

4 comments:

  1. This comment has been removed by the author.

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  2. I am not sure I would agree with the author's stance on this issue. I have lived in states where all beer, wine, and liquor sales were owned and controlled by the government, and also in states where it was left to private enterprise.

    The system worked much better when it was privately run. Much better prices due to competition, better store hours, better selections, etc. In fact, on borders between two states taking opposite approaches, you will invariably see consumers driving across state lines to purchase from the private stores.

    Having an appreciation of a glass of fine wine, I really enjoy going into a great wine merchant, and hearing their stories about touring the Bordeaux region and barrel-tasting samples from the vintages to be released in a couple years. I have even purchased "futures" by ordering certain selections two years before they are released, based on the weather that year, and the tasting notes of the wine merchant.

    I don't think a state government will ever provide that level of competition, passion, knowledge, and convenience. I would encourage any state that still has state-controlled liquor outlets to switch to a privatized approach.

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  3. Thank you for posting the link from the "Allentown Morning Call" stating that convenience is the main benefit of privatization (as if that didn't matter to consumers).

    A careful read of that article shows how untrue the headline actually is. First, the article clearly states that "some of the more popular items may be less expensive due to discounting." So, convenience may not be the only, or even main, factor after all.

    What the article ignores is that in the neighboring state of Delaware, one of the more successful liquor merchants has grown by discounting nearly all of its products. They don't have the broadest selection, but almost everything they sell is at least slightly below the prices of their competitors, due to their volume purchasing power. Therefore costs are lower at that chain of stores on almost all products that they carry.

    Of course, not all merchants follow that strategy. Another successful Delaware merchant prides themselves on having the widest selection of great wines from around the world, along with the most knowledgeable sales people. A family owned business started in 1933, their slogan is "A walk through our store is like a trip around the world".

    This illustrates the benefits of competition and free enterprise. To one consumer, convenience is the issue... location, store hours, close parking. To another, they have one or two favorite items and want the best price, even if that means joining Costco to get it. To another, finding an unusual small-batch wine from a remote region across the globe makes their day.

    However, the truth in the article was revealed when the research paper noted that the only reason they did not predict that pricing would become significantly lower under privatization, is that the State of Pennsylvania would SIGNIFICANTLY RAISE TAXES to make sure the costs stayed high and that they didn't lose their revenue stream.

    That is disingenuous at best. What that tells us is that privatization would absolutely result in lower prices unless the State jacked up taxes to keep it from being so.

    If we want to have a debate on the impact to state economies through privatization, that is a good debate to have. But to avoid that debate by trying to convince voters that the government is just as efficient as the private sector, and therefore there won't be a price benefit, is misleading at best.

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