There is a good chance that the Pennsylvania House of Representatives will vote today on a proposal to privatize that state’s alcohol sales and distribution system. If the measure passes the house, it will move to the Senate. If the proposal successfully passes through the PA Senate, it will be signed into law by Governor Corbett, the person who has pushed hardest for privatization.
If the privatization effort is successful in Pennsylvania it will be among the most successful, pro-consumer reforms to occur in the wine business in decades. We hope it succeeds.
The selection of products available to PA residents as well as the conditions under which they may purchase those products is currently completely controlled by the state of Pennsylvania and it has been for 80 years. The upshot is that Pennsylvania wine lovers possess none of the benefits that derive from a free market in wine sales. There is no competition among stores to better serve and attract customers because the stores are all owned and operated by the same entity: the state. There is little in the way of innovation in the retail sale of wine in PA because the retail outlets have no competition-driven motivation to innovate.
The primary roadblock to the privatization of wine sales in PA are the unions. All the govt-owned and operated stores are unionized and stocked with union workers. The fear of the unions is that their members will lose their jobs. Some estimate suggest that 5,000 workers will lose their jobs if privatization is allowed to occur. In the past, the power of the union has stopped any privatization effort in its tracks. Not this time. I’m a pro-union guy. But at some point one must ask who ought to take priority? The served or the server?
The unions are playing the role that wholesalers and distributors have played in most other states when reform efforts are afoot. Unions benefit from the current PA State monopoly on wine sales just as wholesalers benefit from the monopoly they possess in most states where various versions of the three-tier system guarantee them a cut of nearly every sale that takes place. It’s understandable why the union would oppose the privatization effort, just as it is understandable why wholesalers oppose most efforts to give consumers better access to wine.
America’s wholesalers have long said they do not take a position on privatization efforts. However, they spent millions of dollars trying to stop the privatization of liquor sales (and failed) in Washington State two years ago. Additionally, wholesalers and their representatives have spent a great deal of time since then attempting to paint any effort to reform a hideously archaic alcohol distribution system as “deregulation” of alcohol.
Of course, what’s happening in PA with its privatization effort is nothing like “deregulation”. It’s reform. The PA regulatory apparatus will continue to regulate all sales of alcohol in PA if the privatization effort succeeds. It will simply no longer hold a monopoly on the sale of alcohol.
If the privatization effort in PA succeeds politically, the real effort will then begin: transition to open markets and free trade. No matter how smooth or bumpy this transition to the free market goes, typical opponents of free trade and fair markets will point to any bump and say, “see, what a bad idea”. This is exactly what the losers in the Washington State privatization fight have done since the citizens there decided to reform an archaic system of alcohol distribution and put it in private hands. Ignore the naysayers if it comes to that.
Consumes in PA will be the winners if privatization succeeds. They will have better access to goods, better choice of products and better hopes of benefiting from a free market that breeds and encourages consumer-oriented innovations.