Beer and the Free Market

On February 7th, Ontario Progressive Conservative Leader Tim Hudak made some off-hand remarks about the price of beer in Ontario. “I do hear from people who say, ‘Come on, I can’t even get a buck a beer in this province thanks to Dalton McGuinty’s policies,’” said Hudak. Pundits loved the story and ran with it. Newspaper articles proclaimed the return of the 24 for $24, and the Toronto Star ran an editorial entitled “Beer 1 – Health Care 0.” The editorial criticized Hudak’s comments in light of an absence of healthcare policy from the PC Party of Ontario.

As usual, the mainstream media picked up on the most trivial parts of this story and ignored the bigger picture. Portraying Hudak’s comments as prioritizing the price of beer over healthcare policy is simply bad journalism. The PC Party does need a healthcare policy; however, this far from an election that has nothing to do with the price of tea in China or beer in Ontario. The story is, and should have always been, about the extremely simple principle that government intervention in the market is not a good thing.

Mr. Hudak’s 24-for-$24 comment is the tip of the iceberg of what he should be saying: that the Ontario legislature should, and does, have better things to do than micromanage the price of consumer goods. Government regulation of alcohol, ostensibly to protect us from ourselves, is nothing but a cash cow. The Liquor Control Board of Ontario (LCBO) website boasts an absurdly high profit margin: 50%.

Despite this, there have been over 2,000 deaths due to drunk driving alone in the past decade, which tells the casual observer that while high beer prices may be a deterrent to some alcohol-related fatalities, what we really need is better enforcement and harsher punishment for alcohol abuse. Even if the Pigovian tax on alcohol had an extremely strong correlation with preventing alcohol abuse, it is highly unlikely that the $1.95 extra for every 24 will prevent that many more drunk drivers. What is more likely is that the big brewers sought to end the use of the “Buck-a-Beer” slogan that many smaller companies used to promote their products and the Finance Ministry caved to their pressure.

Market principles tell us that the distribution of goods is more efficient when it happens through the free market. Government intervention in the free market process is sometimes necessary, when it serves an overwhelming public interest, but in this case, it simply does not. The huge profit margin boasted by the LCBO is not the product of innovation, marketing or the excellence our society seeks to reward. It is the product of a government-enforced monopoly, costing society a surplus that could be used to purchase any number of things — perhaps guns or butter? The power to fix prices has hurt competition in Ontario and made it hard for local breweries to compete against the massive companies that dominate the Beer Store, their only outlet other than the LCBO.

The price of beer is not, as Premier Dalton McGuinty put it, “a bright, shiny object which is designed to attract our attention.” Nor is it the most pressing issue of the day. It is one case of the many infringements of the province on the free market. Here’s hoping that if elected Mr. Hudak has the courage to take his speculations about the price of beer further, and tackle the deeper issues.

Ben Singer is a graduate of the University of Western Ontario’s Political Science Department and loves the free market.

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Beer and the Free Market

by Ben Singer

13 February 2011