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Take steps toward privatizing ABC

Why the Virginia government shouldn’t have a monopoly on liquor

The Virginia state legislature is currently considering bills which would partially privatize the Virginia Alcoholic Beverage Control, a department of the Virginia state government that controls the possession, sale, transportation and delivery of alcoholic beverages in the state. This department has existed since the end of prohibition in 1934.

Del. Dave Albo, R-Springfield, and Sen. Ryan McDougle, R-Hanover, have proposed separate bills in the House and state Senate, respectively. Both bills would accomplish the same thing: replacing ABC with a new authority — in the House’s case, the Virginia Alcoholic Beverage Control Authority — and allowing ABC to operate outside the government. They would not entirely privatize ABC stores, but make it easier for them to run like private companies.

Currently, ABC’s success is limited by bureaucracy: the department runs like a government agency and not like a business. Because of this, running ABC stores can be very difficult. According to Albo, it can take up to six months for ABC stores to procure products — a turnover time private businesses do not face.

During his term in office, former Gov. Bob McDonnell proposed privatizing these liquor stores, arguing against a government monopoly over liquor — what the current system essentially is. His proposal never got underway, as critics of privatization worried about increased alcohol consumption and the obvious loss in state revenue privatization would create.

Studies differ on whether there is an increase in alcohol consumption in states with privatized liquor stores. But, when it comes to partially privatizing ABC stores, the economic argument is highly persuasive. With these two bills, the newly-established ABC Authority’s profits would still benefit the Virginia government, preventing the loss in state revenue that plagued McDonnell’s proposal. Quite possibly this change could increase state revenue, since liquor stores would be run more like businesses, operating more efficiently and taking in more profit — which would ultimately enter the General Assembly fund, an arm of the state government.

By maintaining a government monopoly on the distribution of alcohol, the current system effectively excludes entrepreneurship — a foundational value for the state of Virginia. This halfway step between government control and full privatization would allow room for creativity, economic growth and do no significant damage to the government’s ability to profit.

There is also an underlying philosophical argument against the government’s control over this enterprise. Theoretically, government monopolies exist to provide public goods — something liquor is not. In this case, a government monopoly exists to prevent a public bad (the bad, as implied by the government, being alcohol). But this monopoly does not actually prevent use or purchase of alcohol — it simply limits it. Since there is no undisputed evidence to suggest such limits have a mitigating effect on binge drinking, consumption in general or alcohol-related accidents, these limits are an unnecessary infringement on Virginians’ ability to consume a perfectly legal product, as well as the efficiency of the overall market.

Since the bills suggested by Albo and McDougle do not fully privatize ABC stores, economic arguments about state revenue are irrelevant to their proposals. It appears their suggestions will both satisfy the state and its citizens’ needs, and therefore will constitute good policy in our state.