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Pennsylvania is one of only eight states in the country that awards citizens their driver’s licenses and also sells them liquor.
To be sure, there are a number of variations among those states that operate their own liquor stores. They include Alabama, Idaho, New Hampshire, North Carolina, Utah, Virginia and Washington.
The Keystone State’s operation, though, is among the most restrictive. Regardless of their location, government-operated monopolies such as Pennsylvania’s liquor stores drive prices higher, make the purchase of liquor less convenient and restrict choice.
The roots of the argument in opposing Pennsylvania’s monopolistic liquor system are hardly new. They can be traced to the debates during the founding of the country. In 1776, the Scottish moral philosopher Adam Smith published the book, “The Wealth of Nations.” In it, he laid out the most efficient system for commerce. Smith believed that unfettered competition among sellers would provide consumers with the lowest possible price and the greatest choice. He saw state-sponsored monopolies – like those in the British Empire at the time – as the antithesis of such a system.
Smith wrote: “The price of monopoly is upon every occasion the highest which can be got. The natural price, or the price of free competition, is the lowest that can be taken.” He rallied against government-supported monopolies, such as the British East Indies Co. and similar state-sponsored monopolies, as did our Founding Fathers. In that same year, those “revolutionaries” wrote the Declaration of Independence and started the American Revolution partially to free a new country from British monopolies.
It is hardly realistic to suggest the citizens of Pennsylvania will declare independence, but it is fair to draw some analogies, because 239 years later Smith’s axioms hold true. Pennsylvanians who purchase liquor in adjoining states can easily see that prices in the Keystone State are artificially high because of a lack of competition.
In other states, competition drives prices lower while still providing a significant source of state revenue by way of taxes. Pennsylvania’s liquor stores are also more expensive to operate because the clerks are state employees who draw significantly higher salaries and benefits than local labor markets would ordinarily allow.
Higher prices also support an unnecessary state bureaucracy that operates the state’s liquor distribution system. These bureaucrats’ salaries and benefits, such as health insurance and pensions, are part of the inflated price of liquor in Pennsylvania.
Needless to say, the last thing Pennsylvania needs is greater encumbrances placed upon our state retirement system.
Our system of state liquor stores is an anachronism. It was initiated as an afterthought in 1933, four days prior to the end of Prohibition. Created by Gov. Gifford Pinchot, it was designed to “discourage the purchase of alcoholic beverages by making it as inconvenient and expensive as possible,” according to a 2007 book by Mark Noon on Yuengling Brewery in Pottsville. Gov. Pinchot – a teetotaler himself – accomplished his goal admirably. Some 82 years later, Pennsylvanians are still paying for it.
Today, those who defend state liquor stores raise a variety of concerns not dissimilar from arguments against disbanding government-supported monopolies in Smith’s time. Arguments are raised about public safety, as some believe private enterprise will encourage sales to minors who are under 21 years of age. Can you buy liquor in Delaware if you are only 19?
Others suggest that the Pennsylvania Liquor Control Board’s practice of purchasing liquor and wine in bulk keeps per-unit costs down and those savings are passed along to consumers. It is true that in any one year the Commonwealth of Pennsylvania and Costco are alternately the first and second largest purchasers of wine in the United States. It is also true, though, that the same bottle of wine can be 30 percent less expensive in Florida than it is here.
Also keep in mind, the Sunshine State does not produce wine and Pennsylvania does.
Opponents of privatization also argue the free-market system will unduly harm people who have lived by and within the Pennsylvania liquor monopoly. Current privatization legislation, though, offers tax incentives for hiring state store employees. Beer distributors also will get the first opportunity to buy existing state stores. Perhaps legislators should reconsider these aspects of the proposed legislation if they truly are worried about unfair competition.
It is time to rescue Pennsylvania and its citizens from a government-owned monopoly. Modernizing a system that has failed repeatedly will not work. It needs to be privatized – and soon.