Communities should decide the rules for liquor trading

What are generally described as liquor regulations and controls should more correctly be described as people regulation and controls. It is politicians and government officials seeking to prescribe to communities how they should live their lives.

In any growing economy, freedom to trade is a fundamental right. Without any interference from government other than to ensure that there is no force or fraud involved, firms must be allowed to implement strategies that will make their businesses profitable. The market, when free, forces companies to be competitive, efficient, and above all, to supply goods that satisfy the needs and wants of consumers.

Business logic dictates that firms refrain from practices that would cause them to be regarded as societal pariahs. If the market is free to indicate that what a company is doing is not acceptable, a business will take immediate corrective action.

Manufacturers and sellers of liquor are blamed when people misuse their product but liquor is not dangerous if imbibed in moderation. Liquor abuse is not in the interests of producers who constantly appeal to consumers to use their products in moderation. Who should then be held responsible for over-indulgence, not only of liquor, but of a whole range of products? Does the primary responsibility not rest with the consumer?

There is an unjust trend of blaming producers and suppliers for the misuse of their products by consumers. From the USA come reports that producers of hamburgers and other fast foods are being blamed for obesity. Instead of curtailing their indulgences, consumers are seeking compensation from producers for consequences they have brought upon themselves. Although there may not yet be a hamburger tax, very heavy taxes are imposed on other products considered potentially harmful but highly desired by consumers. The ostensible reason for such taxes is to reduce consumption. Cynical observers, though, believe such taxes have more to do with government’s desire for more funding than with any social welfare objective.

How should government deal with a product like liquor? As with all products made for consumption, there is a case for strict health rules to be applied, and for prohibiting sales to minors and already intoxicated people. Other than these safety measures, the state should not be involved in the manufacture and sale of liquor products. How people who abuse liquor are dealt with should not determine the structure of the industry.

The pre-1994 government believed that only whites had the moral strength and wisdom to handle liquor safely. In addition to the other laws relating to “separate amenities”, the sale of liquor by blacks to blacks was prohibited, which was widely ignored. Shebeens became the places where blacks in the townships would go to meet others and be entertained. However, shebeens were raided regularly by the police, who confiscated liquor stocks without issuing any receipts, and laid criminal charges against the proprietors. Today, in our new democracy, the police continue to raid shebeens constantly, confiscate liquor stocks without giving receipts, and lay charges against the proprietors. For shebeen owners, 1994 did not stop the harassment.

Why is our government today building upon pre-1994 liquor laws? Surely they do not view the majority of the population as inferior and in need of those same paternalistic measures? Instead of continuing to raid shebeens, why not normalise the trade? Set objective rules for liquor sellers to follow and let them get on with their businesses in peace. If certain communities have moral objections to liquor, allow them to hold referendums to decide whether or not to permit liquor outlets in their areas. If noise is a problem, apply neighbourhood laws to stop the nuisance and to solve all problems locally.

It is absurd for government to prescribe how business should manufacture and distribute its products. The great economist Friedrich von Hayek describes this concept as a “fatal conceit”. It is the height of conceit for government to believe that it can devise a system that will provide a better outcome for producers and consumers than the unimpeded market. A conceit that, because of the inevitable negative economic consequences, is fatal. In the interests of SA’s producers and consumers, government must resist interfering.

Draconian liquor laws will frustrate legitimate enterprises and make the industry vulnerable to entrepreneurial criminals. The implications of this are ‘too ghastly to contemplate’. In the USA, the National Prohibition Act (enabled by the 18th amendment to the constitution and also known as the Volstead Act) enforced a national ban on the sale, transportation and manufacture of alcohol between 1919 and 1933. The unforeseen consequence was the establishment of the Mafia. Corruption was rife, even among law enforcers and normally law-abiding consumers fell foul of the law. In 1933, this policy was repealed when it became clear that instead of protecting the populace from the potential dangers of alcohol abuse, the policy had directly precipitated a host of far more serious problems

There will always be people who want to consume alcohol, and, so long as that demand exists, there will always be people ready to supply the desired product. When liquor policy is being examined, those responsible must always bear in mind that the nature of those policies will determine whether the desired goods will be supplied by law-abiding and legitimate manufacturers or by underground, criminal operatives.

Just look at the tobacco industry. Stringent tobacco policy has driven suppliers underground. Law enforcers confiscate only what seems to be the tip of the iceberg in terms of volumes produced. Underground industries are difficult to regulate. To sustain demand, they add other ingredients to the product to induce addiction and a progression to more dangerous drugs. And so it would be with the liquor industry. Consumers would become exposed to all sorts of dangerous concoctions.

Black consumers based in townships and the rural areas will suffer most from the consequences of the intended interference in the liquor industry. Those living elsewhere will continue to purchase and consume liquor at recognised outlets. The result will be most unfortunate when surely the objective should be to bring about the greatest benefit for the greatest number.

There is a disturbing lack of confidence in the people already involved in the liquor industry. If small liquor outlets in the townships were to have the yoke of illegality lifted, they would be able to build and expand their businesses and be able to start integrating upwards. They would empower themselves and those around them and that is the kind of empowerment that will grow the economy.

As far as policymakers are concerned, liquor is a product that should be dealt with just like any other. It is a product that requires responsible handling by consumers and is essential to the wellbeing of the general populace and the nation’s economy.

AUTHOR Temba A Nolutshungu is a Director of the Free Market Foundation. This article may be republished without prior consent but with acknowledgement to the author. The views expressed in the article are the author’s and are not necessarily shared by the members of the Foundation.

FMF Feature Article\6 March 2012

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