It's Time to Abolish the LCBO

Following the end of prohibition in Canada in 1927, the government passed the Liquor Control Act. Howard Ferguson, who was then Premier of Ontario and main proponent of the act, claimed that its goal was to “allow people to exercise a God-given freedom under reasonable restrictions… and promote temperance, sobriety, personal liberty, and above all, respect for the law.” The result of the Liquor Control Act was the establishment of a Liquor Control Board of Ontario, the LCBO, which monopolized the sale of liquor in the province. Prohibition in Canada was a failure just as it had been in the United States. Widespread smuggling, bootlegging, prescription-abuse, and illicit production ensured that nobody was actually prohibited from drinking alcohol. However, when the United States ended prohibition in 1933, they privatized their industry, whereas in Canada, we opted for a more half-hearted solution. The Liquor Control Act of 1927 ensured that the ugly ghosts of prohibition are still lingering with us in the form of the LCBO. This system we are left with gives drinkers a lot to be desired; LCBO stores have poor selection, inconvenient hours, and unreasonably high prices. The current proponents of the LCBO argue that having a monopoly on liquor sales will allow the province to control alcohol abuse and prevent underage drinking. To its credit, the LCBO does a good job in that respect. Anyone who has ever shopped there knows how stringent most employees are with checking ID, and the LCBO also runs many campaigns aimed at promoting responsible drinking and healthy choices. Many people also argue that because the LCBO charges such a high mark-up on most of their products, that this discourages drinking. I believe that people who make such arguments underestimate the ability of the free market to prevent alcohol related abuse. The current system of province-enforced liquor control is antiquated, inefficient, unreasonable, and should be abolished to make way for privatization of the sale of alcohol.

To get an idea of the effects privatization would have in Ontario, we should look to Alberta. When Alberta privatized its alcohol industry back in 1993, many people argued that alcohol abuse, violence, and drunkenness would become rampant as a result. However, crime statistics indicate that violent crimes such as theft, murder, battery, and sexual assault declined sharply in Edmonton during the years following privatization. Instances of impaired driving fell nearly forty percent from 1993 to 1995.[1] A decline in violent crime can occur for a variety of factors, and I am not suggesting that the privatization of liquor sales in Alberta directly caused this drop in crime, but nobody can make the argument that privatization leads to more crime. Arguments that privatization would encourage alcohol abuse are also unsubstantiated.  From 1993 to 1997, Alberta witnessed a substantial decline in alcohol sales[2][3]. Although alcohol consumption per capita is high in Alberta, alcohol abuse is still much higher in Saskatchewan, a province which maintains a liquor monopoly similar to that of Ontario.[4]  I fail to see how the social ills attributed to alcohol are mitigated under a government monopoly. Provided they are over the age of 19, alcoholics, drunk-drivers, and those with violent tendencies can still access alcohol at the LCBO just as easily as the many responsible drinkers.

The "world's finest beer", according to the LCBO.

Arguments of public safety are not substantial enough to justify the enormous deadweight loss caused by the LCBO. Since it has no competition, the LCBO has no motivation to be efficient or price its merchandise according to supply and demand. LCBO has been known to reward suppliers by voluntarily paying them a higher wholesale price than is dictated by the market, which not only ensures retail prices are higher, but also that less revenue is being collected for the province.[5] The way LCBO justifies these astronomical price mark-ups is that they discourage people from drinking, but they also mean that the province is not maximizing their tax revenue. It would be pointing out the obvious to suggest these policies may not have been devised in sober judgement. Another inefficiency of the LCBO should be apparent to anyone who has shopped at any of the locations in the past twenty years—namely that the stores are all so well-decorated, staffed, stocked, and maintained. It may seem trivial to complain about how nice the stores look, but it demonstrates the inherent inefficiencies of having one firm supply the entire market. A monopoly has no competition and thus cannot be held to the same standards of accountability as in a market with multiple firms. If the staff at McDonalds piss you off, you can go to Burger King. If the décor at Home Depot makes you noxious, you can shop at Lowes. If a firm fails to live up to the standards of its customers, then the customers will go elsewhere, ensuring that every firm is held accountable to the needs and tastes of the market. However, LCBO faces no such competition, so why do they spend so much money to make the stores look pretty? People would still shop at the LCBO even if the stores were covered with bloodstains, broken glass, and the cashiers spat in your face as you left—simply because we have no other option.  The LCBO are profligate spenders, and everything from their lavish stores to their glossy magazine, Food & Drink, to their myriad of employees (many given $100, 000 salaries[6]) testifies to the inefficiencies of the liquor monopoly. All these resources being needlessly spent to maintain Ontario’s control on liquor sales could undoubtedly go to a better cause.

Privatization will be beneficial because it would open the sale of liquor in Ontario to market competition—providing consumers with a wider selection of alcohol, and more convenient ways of obtaining it. If alcohol is taxed and sold in stores like tobacco products, then it can still be kept out of the hands of minors, and the province can still make revenue off it. Since, the province of Alberta took in $11-billion off liquor mark-ups.[7]  Without the deadweight loss and inefficiencies incurred by the LCBO, Ontario would likely take in more revenue if liquor sales were privatized. Not only that, but the retail price of alcohol would likely decrease as it did in Alberta[8], even with government mark-ups taken into consideration. Everyone will benefit from privatization. The free-market can serve the needs of the public better than any monopoly—even one that is conceived with good intentions such as the LCBO. The ghosts of prohibition have haunted us for long enough. It’s time to abolish the Ontario liquor monopoly.

Now it's time to have a drink.

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[1] http://choiceforontario.com/uploads/ALCB_Privatization_Study.pdf, pg. 60-62

[2] http://choiceforontario.com/uploads/ALCB_Privatization_Study.pdf, pg. 65

[3] http://www.fcpp.org/files/9/70.%20Ending%20Saskatchewan's%20Prohibition-Era%20Approach%20to%20Liquor%20Stores.pdf

[4] http://www.fcpp.org/files/9/70.%20Ending%20Saskatchewan's%20Prohibition-Era%20Approach%20to%20Liquor%20Stores.pdf

[5] http://www.thestar.com/news/canada/2012/01/09/cohn_lcbos_pricing_policy_doesnt_add_up.html

[6] http://winesinniagara.com/2011/04/lcbo-sunshine-list-in-case-you-were-wondering/

[7] http://www.huffingtonpost.ca/mark-milke/alberta-privatized-liquor-stores_b_3984754.html

[8] http://oldfraser.lexi.net/publications/pps/5/s6_economics.html