So Who Controls Liquor Trade?

Frontier Centre, Regulation, Uncategorized, Worth A Look

Ted Heath died on Sunday, at 89. Liquor-store workers in Ontario could be on strike next week. The poisons that once contaminated the body politic still linger.

Mr. Heath was an accomplished yachtsman, a gifted musician and a terrible prime minister, the penultimate member of a line of British statesmen who presided over that country’s long, agonizing decline. When he took office in 1970, Mr. Heath knew that state control of major sectors of the economy, combined with the labour movement’s veto over the economic agenda, had crippled Britain.

He tried reform, then accommodation, then — finally — confrontation. But his Conservative government lost the battle with the miners’ unions, which had reduced the country to a three-day work week and rotating power outages. In the 1974 elections, Britons gave Labour one last chance at taming labour, returning Harold Wilson to office. The Conservative caucus, seeing the light, replaced Mr. Heath with Margaret Thatcher. Mr. Heath never forgave her, his party or the British people.

We know the rest of the story. The past 25 years have produced a miraculous transformation of the island kingdom. When Ms. Thatcher took office in 1979, the British economy had been surpassed by Italy’s. Today, Britain’s GDP is larger than that of France. Tony Blair, a Labour prime minister, acknowledges that Thatcherism saved Britain.

One of the things that all Western governments, including Canada, learned from Britain is that, while the market imposes its own discipline on the power of private-sector unions, public-sector unions are a different matter entirely. If the government is the employer, and the industry or service is either protected or a monopoly, then look out: Union militants will extort every available dollar and every available protection for their workers. That is why governments throughout the developed world, to greater or lesser degrees, followed Britain’s example and sold off state-owned enterprises, while contracting out government services. The sales brought in needed cash, improved competition and productivity, and curtailed union power. Privatization and contracting out was, overall, a huge success.

But rotten pockets remain. One of the rottenest in Canada is the liquor business.

In Ontario, the Liquor Control Board controls the sale of wine and spirits. (A separate monopoly controls beer.) Until a decade ago, drab stores offered lousy service with limited selection and short hours. Inspired by Alberta, the incoming Mike Harris government vowed in 1995 to sell off the stores.

But the LCBO brings in $1.5-billion in revenue a year. And the unions, realizing that the Conservatives meant business, offered to compromise. Stores expanded, their selection improved and they stayed open longer. Mr. Harris declared victory and retained the improved status quo.

When Dalton McGuinty’s Liberals took office, they appointed a panel to study the future of liquor sales in Ontario. The panel, which reported yesterday, urged the government to sell off its LCBO franchises. Finance Minister Greg Sorbara instantly scotched the report’s recommendation, vowing to keep the liquor stores in public hands.

Nonetheless, the union representing the liquor-store employees is recommending that its workers reject the government’s latest contract offer, claiming the Liberals have a secret plan to privatize. (If only it were true.) Workers could be on strike next week.

Quebec recently endured a long strike at its liquor-store outlets. But at least in Quebec, wine (of a sort) and beer is always available in corner stores. If the LCBO’s close, not even the cruellest vin ordinaire will be available in moments of distress.

“Who governs Britain?” Ted Heath asked in 1974. We do, the unions replied, and brought down the government.

Thirty-one years later, in most parts of Canada, the question is: Who controls the liquor trade? The answer is still uncertain.