You’ve got to hand to Governor David Paterson — he’s good at coming up with revenue-generating ideas during a time of crises. Some of these ideas I don’t like, such as his proposed tax on non-diet soft drinks. However, at least one of his other ideas ring with the sound of free market logic, and could stand to benefit both consumers and the state in the face of New York State’s $13 billion deficit. And another one his ideas could help New York State revisit its non-violent drug user laws, which make little sense in the context of individual liberty.
The first refers to a proposition included in Gov. Paterson’s budget that would allow wine to be sold in grocery, drug and convenience stores. According to Paterson, the measure could translate into more than $100 million in revenue for the state during the first two years, due to the licensing fees that the state requires that grocers have to purvey of different types of alcoholic beverages. The bill has the added benefit of reducing price tags for wine consumers during tough times and opening new markets for New York’s vineyards — big business in upstate New York and Long Island’s East End.
Sounds like a good plan so far. Grocery stores, particularly big chains, can integrate wine shipping and delivery into their existing supply chains, lowering costs at the retail end — this is what’s commonly known as the “Wal-Mart effect.” Efficiency of the “big box stores” is often at the expense of smaller, less efficient businesses, but the result is good for consumers.
As of now, New York State law grants a monopoly of liquor and wine sales to small liquor stores. Most of their profits currently come from wine, because of the large excise taxes on liquor makes it less profitable. Opponents of the plan — mostly liquor store owners — claim that thousands of jobs will be lost, because grocery stores can start selling wine without adding more employees. So, should we accept this plea, and allow liquor stores to keep their monopoly?
Let’s examine the argument from a historical context. Technological advances are, most often, a product of profit-motivated innovation. Henry Ford did not invent the car, but his assembly line manufacturing process delivered a death-blow for the horse-drawn carriage industry. Does anyone, today, curse the Model-T for destroying an entire industry? My great-grandfather owned a small fruit store in Brooklyn. Were his children, grandchildren and great-grandchildren poorer due to the advent of the supermarket?
The development of the sophisticated supply chain is a technological achievement in its own right, but our state government grants a monopoly to some stores over others, neglecting consumer preferences. Not to mention, small, family-owned grocery stores also stand to benefit from the policy change.
Remember in your high school economics class, when your teacher told you that it is the government’s job to break up harmful monopolies, which illegally stifle healthy competition out of greedy, profit-motivated self interest? I bet you weren’t thinking of small businesses at the time, or that, this time, its the government that is ensuring the monopoly is allowed to exist. Even though there are 34 other states that permit the sale of wine in grocery stores with few horror stories to report, the “liquor store opposition” insists that New York’s economy can’t deal with change — even though freeing up markets always winds up benefiting the economy as a whole. It’s the special interest groups, which must ”adapt or perish,” that lobby the government for favors and monopolies — at the expense of everyone else.
The liquor stores purposefully ignore how the bill will help the vineyards — the growth of the retail market will provide more employment opportunities at the supply side. While liquor stores must adapt, competition provides the opportunity for the cream to rise to the top. Smaller stores will have to focus on playing to their strengths — supplying specialty items to the connoisseurs. While grocery stores tend to focus on the popular but cheap, smaller stores attract customers who want more choices and are willing to pay for obscure, but quality, names.
In the face of massive budget shortfalls, Paterson has no choice but to support this act. It’s good the economy and the economic freedom of consumers and distributors. Speaking of freedom, the economic crises has another unintended effect on individual and economic freedom. And that’s America’s antiquated “War on Drugs.” Most Americans detest drug use, but don’t realize that keeping drug-related criminals in prison is very expensive.
Paterson’s proposal to close down several upstate prisons will save about $26 million for the state. Oh, but what will we do with all those dangerous drug users? In reality, most of the inhabitants of New York’s prisons in for drug-related crimes are non-violent and first-time offenders. In addition, crime rates are falling around the country and people are beginning to think of drug use as less of an activity pursued by criminals and more as people with a medical problem.
Obama’s recent announcement that raids on medical marijuana distributors will stop and the question of legalizing marijuana use in California is being tentatively raised. While these things are being posed for economic considerations, its also an important gain for individual liberty. Although I in no way advocate drug use, the social anachronism that alcohol and cigarettes are legal, while marijuana remains taboo, is inane. Drug laws, which forbid the ingestion of “controlled substances” into your own body in the privacy of your own home, is invasive and border-line unconstitutional. Individuals should have the choice to partake in an activity that doesn’t infringe upon the basic rights of anyone else, without worrying about the moral code of the majority.
The contrast between alcohol and marijuana is, perhaps, overplayed but apt. Alcohol is more addictive, more socially disruptive but socially acceptable than marijuana, but legal. Allowing the legalization, or at least the decriminalization, of drugs has important economic implications as well. While drug laws have never prevented drug users from using, they have helped the drug cartels monopolize and criminalize the drug trade. Despite common perception, the fact that marijuana is illegal has driven its distribution into the hands of violent gangsters and criminals, which puts its users in even more danger. Pot users are not generally dangerous or violent themselves, but laws that have driven drugs underground has exposed innocent people to violent conditions.
Legalizing drugs will keep them off the streets, where the rules of the free market don’t apply. Street values for drugs are incredibly marked up, driving already addicted users further into poverty. Instead of reducing prices to compete for consumers, rival drug gangs help keep profits up violently. Meanwhile, the social stigmatism surrounding drug users prevent them from seeking much needed treatment — even when the opportunities for treatment are freely available. In addition, because the drug trade has been driven underground, it has been the source of corruption in governments and, because its not openly traded, cannot be taxed.
Revisiting our most fundamental ideas about the nature of drugs, and our right to use — or even abuse — them is a positive move for our country. The economic implication of drug trade reveals something important about markets in general: markets produce growth when they are competitive. This is true whether we’re talking about a monopoly created from a state law restricting where wine can be sold, or by laws which forbid a legitimate market from forming.
While, for some reason, the growth of alcohol markets is considered a good thing but the growth of marijuana markets is considered bad, the current economic crisis has given us something to think about — the power of consu
mer choice and personal and economic freedom.
