The Mexican Lesson — Tequila in Paradise

Commentary, Frontier Centre, Regulation, Uncategorized

Manitobans with the good fortune to escape this year’s brutal winter can acquire more than a tan. In early January, in a Wal-Mart in balmy southern Mexico, we gained a bit of cultural perspective. Where mothers serenely wheeled their kids along in shopping carts, we found an aisle and a half of liquors, wines and beers for sale. As in much of the world, libations were freely available in ordinary retail outlets without massive social chaos. Over the next days I peered carefully about for evidence of a drunken peasantry in our warm and leisurely meanderings, but found none.

It was another “in your face” reminder of how backwards Manitoba remains with regard to the sale of alcoholic spirits. That comparative freedom makes proposed liberalizations of our liquor laws look laughable. Dowdy, puritanical, patronizing, not to mention expensive and inconvenient, are apt adjectives for our remaining blue laws and the entrenched monopoly that enforces them.

The Honourable Scott Smith, Minister responsible for the Manitoba Liquor Control Commission, recently proposed changes to the Act. Restaurants will now be allowed to re-cork wine served with a meal so patrons can take unfinished wine home. Bars and lounges will now give customers an hour to finish their drinks after last call, instead of 30 minutes. Private wine stores will acquire the right to offer the public free samples, and the province’s two distilleries can sell their products on site. A few other, minor changes. Big deal.

For real reform, Manitobans need only look to Alberta, which privatized liquor retailing in 1993. The initial benefit to Alberta, an injection of $51million into provincial coffers from the sale of assets, was followed by significant investment in new, taxpaying enterprises. Over the last ten years, the number of private liquor stores multiplied, as did product lists and employment in the industry, not to mention the expanded consumer convenience of locations and store hours. The price of liquor in real terms remained the same, and Alberta’s government deliberately kept the tax bite neutral. Red herrings raised by detractors, among them increases in alcoholism, consumption by minors and crime, have not materialized.

The Alberta model has existed for decades in Québec and throughout most of the rest of the civilized world. Two other provinces have since flirted with the idea. In 2000, Nova Scotia’s plans for widespread privatization foundered after highly paid, small-town liquor workers convinced thousands of citizens to sign petitions opposing reform; this year the Province plans to sell off a modest 23 stores. Even after the sale of a handful of licenses to private owners in 2003, British Columbia bowed to union pressure and failed to follow through. In the past, tight controls on the sale and distribution of liquor were a response to pressure from religious lobbies. They survive because they serve the interests of entrenched stakeholders.

In Manitoba, those interested parties include more than liquor bureaucrats and unionized workers. One hangover from the blue laws is a bizarre requirement that, in exchange for a license to sell beer, one must develop and maintain a specified number of hotel rooms. The notion at the time was that if intoxicated patrons could check into rooms and sleep it off. That seldom happens, and current owners are stuck with the upkeep and maintenance of mostly ratty, empty rooms, not to mention the stranded costs from substantial investment capital sunk into these properties. They will fight like hell to protect those redundant assets.

This further complicates the tough choices necessary to modernize the liquor industry in Manitoba. The classic argument that hotel owners have already been compensated for these essentially worthless outlays by profits from geographic monopolies does not fully apply here, because those “rents” were compromised by price controls. On the other hand, these owners will have an advantage with existing facilities in a deregulated environment, and they could convert their facilities into useful alternatives. An interim, experimental reform that should be considered is deregulation for rural Manitoba. The benefits would be immediate, as the removal of the requirement to maintain a stock of empty hotel rooms in exchange for a liquor license would spur the release of much-needed investment capital in the rural economy, where it could find more productive uses. If necessary, we should consider buying out part of the value of these stranded costs.

Blue laws have unwanted consequences. They create an allure and attraction for consuming alcohol which advertising agencies effectively exploit. More importantly, they absolve individuals from making informed choices and taking responsibility for safe and healthy alcohol consumption. They also distort investment and move it into applications with no sustainable market value. They protect bastions of privilege unsuited to a modern consumer culture.

The Alberta experience proves that opening up the liquor industry brings just as much money into the public purse, with tangible benefits for civilized imbibers, at no risk to public safety. Scott Smith offers mere tinkering with antiquated laws that should be overhauled root and branch.

This is the 21st century. If freedom is good enough for Mexican housewives in supermarkets, it’s good enough for us.