Pa.'s failed liquor-store system

Pennsylvania is one of only eight states in the country that award citizens their driver's licenses and also sell them liquor.

There are variations among the states - Alabama, Idaho, New Hampshire, North Carolina, Pennsylvania, Utah, Virginia, and Washington - that operate their own liquor stores. The Keystone State's operation is among the most restrictive.

Regardless of their location, government-operated monopolies like Pennsylvania's liquor stores drive prices higher, restrict choice, and make the purchase of liquor less convenient.

The roots of the argument against Pennsylvania's monopolistic liquor system are hardly new. They can be traced to debates that took place during the founding of the country.

In 1776, the Scottish moral philosopher Adam Smith published 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 prices 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 railed against government-supported monopolies such as the British East India Co. and similar state-sponsored monopolies, as did the Founding Fathers. In the same year, those revolutionaries wrote the Declaration of Independence and started the American Revolution partially to free the new country from British monopolies.

It is hardly realistic to suggest that 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 the lack of competition. In other states, private 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 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 on 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 2005 book by Mark Noon on the history of the Yuengling brewery. 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 those who are under 21 years of age. But 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 that those savings are passed along to consumers.

It is true that in any one year, the commonwealth 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. Keep in mind as well that the Sunshine State does not produce wine and Pennsylvania does.

Opponents of privatization also argue that 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 are truly 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.