Should the Commonwealth of Virginia sell its Alcohol Beverage Control stores (“ABC stores”)? These are state-owned and operated stores that sell packaged spirits, such as whiskey and vodka. Private merchants are prohibited by law from competing against Virginia’s ABC stores in the retailing or wholesaling of distilled spirits.
During the 2009 Virginia gubernatorial campaign, then-candidate and now Governor Bob McDonnell proposed such a sale. Mr. McDonnell predicted that the sale of the ABC system would reap about $500 million for the state government, funds that he promised would be used to pay for transportation projects.
Currently in Virginia, consumers can buy spirits only from the state’s monopoly system.
In contrast, Virginians can buy packaged beer and wine from any retailer with a license to sell these beverages and such licenses are readily available and held widely, including by supermarkets and big-box retailers such as Target and Walmart.
In short, in Virginia the sale of spirits, but not of beer and wine, is a government owned and operated monopoly.
Opposition to the state government selling its ABC stores is based chiefly on public-health concerns. Opponents argue that the sale of such stores will encourage the excessive consumption of spirits as well as more under-aged drinking. Because spirits have higher alcohol contents than do beer and wine, opponents insist that government has a special obligation to keep a tighter rein on spirits sales. Supposedly, the monopoly system of ABC stores provides government with the ability to keep this rein tight.
The presumption that alcohol consumption poses unusually high risks to public health is not unreasonable. Consumed excessively, alcohol impairs its users’ judgment, making them more dangerous drivers and sometimes inciting them to violence. Excessive consumption of alcohol also can damage users’ physical and mental health.
However, such generalizations form far too weak a foundation to support the continuation of the ABC monopoly.
Not only is the above reasoning incomplete, it also is not supported by key facts. In this short paper we summarize the factual evidence on some of the chief public-health concerns raised by those who oppose the liberalization of spirits retailing.
Fortunately, such evidence is readily available: it comes from the fact that 18 states, including Virginia, are “control” states; 32 states and the District of Columbia are “license” states – that is, jurisdictions that license private retailers and wholesalers to sell packaged spirits in competitive markets.
Such differences in policy regimes offer a “natural experiment” to test the claims of those who insist that government-monopoly retailing of packaged liquor provides public health benefits.
If government ownership and operation of monopolized spirits retailing or wholesaling really reduces alcohol-related problems, states with these government monopolies would have fewer such problems than do states that allow spirits to be sold by private, competitive businesses.
In fact, however, the data show that control states suffer just as many alcohol-related problems as do license states.
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