The 10-year hangover

Albertans are paying the higher social, financial costs of liquor retail privatization
June 4, 2003

EDMONTON--Ten years after the government of Alberta privatized the province's liquor retailing industry, the decision has proved to be a serious policy mistake. That's the conclusion of a study released today by the Canadian Centre for Policy Alternatives and the Alberta-based Parkland Institute.

The study--"Sobering Result: The Alberta Liquor Industry 10 Years after Privatization"--examines what privatization has meant for the province, both socially and economically, considers how the private liquor market has developed since September 1993, and draws "sobering" conclusions about the benefits and costs.

Overwhelmingly, the evidence points to liquor privatization having resulted in significantly more costs than benefits to both the people and the government of Alberta, says the study's author, Calgary economist Greg Flanagan. The higher costs are social as well as financial.

Despite some increased convenience to consumers, privatization has had serious negative outcomes, including a loss of effective control over the industry by the government and an increase in alcohol consumption.

Social issues related to alcohol consumption, Flanagan notes, include family violence and divorce, fetal alcohol syndrome in pregnant women, and impaired driving. Alberta has the second highest driving charge rate in Canada, with Edmonton and Calgary ranking first and third, respectively, among Canadian cities in this category.

Commenting on the study, CCPA Executive Director Bruce Campbell calls it "a clear and sobering analysis of the many negative effects of turning the control and sale of alcoholic beverages over to the private sector. Any other province contemplating a similar privatization of its liquor retail system would be well advised first to read this report of the effects of such a decision 10 years ago in Alberta."

The study exposes the many inefficiencies in the market that have occurred in Alberta, such as excess capacity, higher retailing costs and prices, and reduced government revenue. The government, in order to keep liquor prices in Alberta comparable to those elsewhere in the country, has had to sharply reduce provincial liquor taxes. In other words, the privatized system has been massively subsidized by the province's taxpayers through reduced liquor tax revenue.