You'd think that 20 years after the demise of the Berlin Wall and the collapse of the Soviet Union, government-run stores would be a thing of the past. But alas, you would be wrong. Ten states -- including, Pennsylvania, Idaho, North Carolina, and New Hampshire -- still run liquor stores and, in fact, monopolize the retail liquor business within their respective jurisdictions.
However, according to a front-page above-the-fold story in Sunday's Washington Post, at least one of these 10 retro states, Virginia, is trying to get out of the liquor store business altogether. Thank you Bob McDonnell, Virginia's new governor, who rightly sees the state run stores as a political and economic anachronism.
Yet, far from being a slam-dunk legislative victory, liquor store privatization in Virginia is proving to be a political challenge. Indeed, the Post heralds McDonnell's initiative as a test of his leadership and whether he can unite Democrats and Republicans behind a major public-policy change that ought to have broad bipartisan support:
The consequences… are potentially enormous and would amount to one of the most noticeable changes in the relationship between Virginians and their government in years, if not decades…
And for McDonnell, who opposes government-run liquor stores on free-market principles, bringing Democrats and Republicans together on a major issue would show that he can deliver on his promises and be the kind of bipartisan leader he has pledged to be.
The Post then proceeds to catalogue the political and bureaucratic challenges that make liquor store privatization difficult to effect. These include, principally, the Democrat-controlled state senate, which is beholden to the public-employees unions. The public-employees unions oppose liquor-store privatization because it will mean fewer government employees and less state control.
There is a small minority of religious conservatives who oppose liquor store privatization because, as the Post reports, they fear it "will lead to a glut of liquor stores and a rise in drunken driving and other alcohol-related problems." But they are a distinct minority of a minority and don't hold much sway over the Democrat-controlled state senate.
Most religious conservatives recognize that if the state wishes to discourage alcohol use, there are far better ways to achieve this than by monopolizing the liquor business. The government can, for instance, heavily tax liquor to discourage its consumption; and it can limit the number of private-sector stores that can sell alcohol.
(This latter idea, though, is of dubious value. The Post reports that, according to one GOP state senator: "Studies show that having more liquor stores does not necessarily translate into more drunken-driving arrests or alcohol-related driving fatalities.")
The Democrats who oppose liquor-store privatization know this, of course. However, they feign concern for the financial effects of divestiture. They say they are worried that the state will not recoup the $220 million in taxes and profits yielded by the state-run liquor stores.
But if that's true, and if the government wishes to raise more tax revenue from alcohol, then there are two things it can do short of monopolizing the liquor business: It can increase the tax levy on alcohol, and it can allow more stores to sell alcohol.
The Post reports that, under McDonnell's forthcoming proposal, "as many as 800 companies" would be licensed to sell alcohol, meaning distilled spirits as opposed to just beer and wine. But more than 3,000 companies already sell beer and wine. Moreover, by divesting itself of its state-run liquor stores, Virginia stands to make a one-time bonanza of hundreds of millions of dollars.
There are certain things that the government does well; and running commercial enterprises that cater to consumers isn't one of them. A government monopoly, in fact, yields a substandard product and substandard service. Private-sector competition and ingenuity, by contrast, yield creativity, innovation and superior service. For these reasons, it's high time Virginia and America's nine other retro states ended their addiction to alcohol.
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