Monitored: The costs of liquor privatization

September 1, 2014

The Monitor turned 20 this May and to celebrate the milestone we’re introducing a new regular section. Monitored will delve into the archives, making connections between what we were talking about two decades ago and what’s happening in Canada’s policy debates today. With the Labour Day long weekend upon us, we thought it fitting to start with booze—the privatization of public liquor boards to be specific.   

“Liquor privatization in Alberta proves costly for gov’t, consumers,” said our cover story headline in Vol. 1, No. 4 (September 1994). The CCPA had put out a study by Gordon Laxer, Trevor Harrison and Duncan Green called Out of Control, which exposed higher prices, less selection and “significant revenue losses” for the provincial government resulting from the recent privatization of the Alberta Liquor Control Board.

The Ralph Klein government had promised Albertans improved services, more places to buy liquor and beer, stable prices, no increase in alcohol abuse and no decrease in government revenues. A jobs boom was supposed to accommodate the loss of dividends paid into the public purse from liquor sales at Crown-run depots. As reported in the Monitor, based on the CCPA study, evidence showed prices had already risen, selection was down, liquor store break-ins and sales to minors were up, and government revenues were significantly lower than under the earlier public arrangement.

The Alberta government continues to boast that its privatization was a success. It’s true that in 2001 there were more than 18,000 products in 826 private retail stores compared to 2,200 products in 208 state-run stores in 1993. But by 2009, the number of products had dipped to 16,495 in 1,158 retail stores, according to provincial stats. Contrast this to Ontario, where the public LCBO carried 22,296 products in more than 620 retail stores in 2012, according to the most recently available annual report, with liquor sales returning $1.63 billion to government revenues. There are plans to open mini-LCBO outlets in Ontario grocery stores, and Ontario wines can now be sold at farmer’s markets.  

Ontario’s publicly run outlets also pay a living wage to unionized staff compared to Alberta. In a 2003 study extolling the virtues of the Alberta program, the Fraser Institute pointed out, “for the province as a whole, the average wage paid by private liquor stores in February 1996, $7.19, was half that paid by the ALCB to liquor store clerks at the top of the scale, $14.39.” It seems an odd thing to celebrate a shift from full-time, decent work to increased precariousness, and from public revenue generation to private profit-making by the largest retailers.

Apart from perhaps convenience, there is little in the Alberta private liquor model to recommend itself—a point that, sadly, the CCPA–Saskatchewan has had to make in light of Premier Brad Wall’s musings about liquor privatization.

“Like any business, private liquor will seek to advance its economic interests through public policy,” writes Simon Enoch, director of the Saskatchewan office in his recent report, Public versus Private Liquor: The Trade-Offs, which includes price comparisons on popular products showing higher prices in Alberta. “Indeed, Alberta-based private liquor companies have been consistently contributing financially to the Saskatchewan Party since its election.”

Opposition parties in Ontario fear the Liberal government will eventually sell-off the LCBO, and other Crown assets, in a desperate move to reduce the deficit. But so far that doesn’t seem to be in the cards. A C.D. Howe Institute report in August recommended eliminating the LCBO’s public monopoly on selling wine and spirits.

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Also in September 1994, the Monitor challenged mainstream media accounts of a surge in free-trade related growth keeping the Canadian economy afloat. Our Reality Check pointed out the projections ignored the effect of imports, and the import-content of Canadian exports, which both undermine the potential of exports to create jobs. We reported on Monsanto and Ely Lilly’s (ultimately failed) campaign to introduce bovine growth hormone to dairy cow diets in Canada, found that 15 OECD nations had better employment insurance benefits than Canada, and reviewed a new book by Barry Appleton that distilled NAFTA for the non-lawyers among us.

“All international trade agreements entail some self-imposed limitation on governmental authority… However, the NAFTA appears to approach an extreme,” we quoted from Appleton’s paperback, Navigating NAFTA. “It does this by the extensiveness of its obligations which attempt to lock in one perspective of government role for all successive North American governments.”

 Appleton now makes big bucks helping U.S. companies sue the Canadian government under NAFTA’s investor–state dispute settlement process (Chapter 11). He’s currently representing Mesa Power, created by Texas billionaire T. Boone Pickens in 2007, in its NAFTA challenge to the Ontario Green Energy Act. Mesa, via Appleton, is asking for $653 million in compensation for not getting approval for a large wind project in southwestern Ontario.

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