Everyone Needs to Make Sacrifices on Alcohol Privatization

Beer drinkers of Pennsylvania would no doubt find it convenient to purchase six-packs in a supermarket, or order beer at any restaurant that wants to serve it.

So why don't they have this freedom? And why isn't the state's political system delivering the change?

Morning Call reporter Scott Kraus recently did the alcohol privatization debate a huge favor by taking a look at the politics of liberalizing PA's beer laws.

As you might expect, any effort to change the law will run into a buzzsaw of opposition from the businesses who benefit from the current regulations.

Any effort to change the laws will find beer drinkers and supermarket chains teaming up in an epic political struggle against the beer distributors and the Pennsylvania Tavern Owners.

Supermarkets, through their lobbying organization the Pennsylvania Food Merchants Association, support changing the law to allow supermarkets and large retailers like Wal-Mart to sell six-packs and cases.

Beer distributors hate this idea, because they don't want to compete with supermarkets. 

Bars and restaurants also hate this idea, because they currently have a monopoly on six-pack sales, and don't want to compete with supermarkets or beer distributors. Supermarkets with dining areas now count as restaurants, thanks to a recent court decision, so their interests are not perfectly aligned with consumers.

Usually when business interests oppose a policy change for self-serving reasons, they at least try to make it sound like a good deal for consumers. But the beer distributors and the Pennsylvania Tavern Owners aren't even trying. They're straightforwardly saying that they don't want more competition.

But so what? Since when is it the government's job to protect incumbent firms from competition? 

It's true that the changes beer consumers want would make for a more competitive market, but I think that's an unambiguous benefit. There are plenty of things to dislike about unfettered capitalism, but better bars and more craft beer choices aren't among them. 

In this case, I think it's Harrisburg's job to promote competition by eliminating any competitive advantages derived purely from regulatory rents.

Another way the state keeps beer fans down is anti-competitive licensing laws. The PLCB only prints one retail liquor license per 3000 people in each county.  

By capping the number of bars, the state makes liquor licenses very expensive, creating a barrier to entry. This leads predictably to  and more mediocre bars hanging on who might have been out-competed by better places.

It's going to be politically difficult to get the beer laws changed, but you can be sure that any potential deal is going to require side payments.

Bar owners made a large investment in purchasing their licenses, and if Harrisburg is going to devalue them by allowing more competition, they should try to reach a settlement with the owners.

Ideally, Harrisburg would negotiate a settlement between the Pennsylvania Food Merchants Association and the Pennsylvania Tavern Owners that didn't involve any taxpayer money.

Someone more clever than me will have to plot the political course of that deal, but it's not futile. Republicans are attempting an even more difficult political feat with the state stores, where 3000+ unionized state store workers are organized in opposition.

The odds are certainly against any reforms passing, but Republican representatives have the agency to vote for it if they really think it'll make their beer-loving constituents better off.

This gets to something really perverse about the politics of the liquor privatization debate, as it has played out so far.

Rep. Mike Turzai, the bill's author, appears to be fine with liquidating thousands of state store workers - a Democratic constitutency - in the face of 9% unemployment.

And yet Turzai doesn't have any appetite for challenging the anti-competitive laws that benefit a Republican constituency - business owners. But the state store workers' claims on the regulatory rents are no weaker than those of the beer distributors or the Pennsylvania Tavern Owners.  

The truth is that all the service providers' claims are weak, all of their wages and profits are artificially inflated by anti-competitive laws, and everybody should have to eat a little poison so we can finally have a real root-and-branch overhaul of the alcohol market. State representatives need to design this law through the eyes of the beer drinker