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Privatization plan not a free-market solution

November 23, 2011 - Mike Maneval
As October drew to a close, more details about an initiative to privatize the state's government-owned and -operated liquor stores. But the approach Gov. Tom Corbett has endorsed is not a free-market solution.

Instead, measures the governor and state Rep. Mike Turzai, R-Bradford Woods and the leading advocate of privatization in the state legislature support would arbitrarily limit the number of liquor stores that could operate. Such restriction would replace Pennsylvania's system of state-operated stores with a system of state-sanctioned monopolies, and over time reduce the principal pressure within the free market on preserving affordable consumer prices - the risk consumers will abandon an operation and give their combined market share to competitors. A network of state-sanctioned monopolies also, a late-October editorial in the Express-Times in Easton notes, "builds corruption into the system." A similar system is applied to beer sales in Pennsylvania, under which "rules" to reduce the risk of monopolization limit ownership of distributors - and are flaunted by placing blocks in towering monopolies under legal ownership of spouses and family members, in a corrupt system that subverts efforts at reform into injecting nepotism into the construction of monopolies.

None of this is to say a proposal that truly introduces free-market reform to liquor sales in Pennsylvania couldn't work. Or that such a system couldn't effectively curb proliferation of liquor stores in low-income areas. A system that establishes barriers to entry based on practical concerns such as surveillance and security requirements, stringent minimum employment and training standards to reduce the risk of sales to minors both helps preserve public safety and shrinks the pool of potential business operators to those most mindful of the impact of their industry. But a numerical cap on liquor stores leaves the state in the position of deciding which would-be businessmen and businesswomen gets to enter this sector and which don't, while shifting the balance of power away from consumers toward this small number of the politically-favored who are granted entry.

 
 

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