Regulating Alcohol: Should We Still Be Interested In Temperance?

Jeff Alworth

The Oregonian kicked off an excellent three-part series yesterday on the thicket of regulations that govern the distribution, taxation, and sale of liquor in Oregon. Every state has its own strange nest of regulations, all built on certain goals and assumptions, and until very recently Oregon's seemed to be untouchable. But then a funny thing happened: the people of Washington state decided to modernize their laws, bringing them more in line with California, and Oregon is now the West Coast's odd man out on booze laws.

The whole series is going to be worth a read, but today I want to tackle some of the issues raised (and not raised) in part one. Political writer Harry Esteve penned the series, and he used three main informants about how the system works--A to Z Winery in Dundee, Galaxy wine distributor, and the Oregon Liquor Control Commission. (Esteve has written about the OLCC before, and it's worth noting that A to Z has long been an OLCC foe.) Esteve does a fantastic job of illuminating why a bottle of wine costs as much as it does. It's not because the winery (or brewery) is getting rich. It's because so many people get a piece of the action along the way:

Each time it's handled, the price of a bottle goes up. The storage warehouse gets its cut. The state gets its cut. Distributors tack on anywhere from 15 percent to as much as 40 percent or more. And retailers tack on their margin. On a recent delivery trip, Galaxy applied its markup to a bottle of A to Z pinot gris and then sold it to Safeway for $8.99. Safeway put it on sale for $11.99, a 33 percent markup.

This is a theme he address more fully in today's column (which I'll comment on tomorrow). The paper also published a great infographic that breaks down the cost of a bottle of wine by percentage:

2% - Taxes 4% - Bottles, corks, and labels 5% - Winery profit 7% - Grapes 9% - Wine production 18% - Sales, marketing, administration, shipping 25% - Distributor markup 30% - Retailer markup

All of this is great info, and info I'm pretty sure is completely lost on the average consumer when she sees a $30 bottle of Oregon pinot noir made just down the road. All very good. However, where Esteve falls down a bit on the job, though, is in buying the OLCC's gilded rationale for its own existence:

Yet it's also one of a dwindling number of states where the government exerts near dictatorial control over an alcohol system designed 80 years ago to prevent the likes of Al Capone from horning in on the trade....

"What's interesting is the OLCC has done such a good job of preventing the abuses that came up during Prohibition," [Cassandra SkinnerLopata, OLCC chair] says. Other countries, and even some other states, continue to see health problems from "adulterated" liquor, including blindness and paralysis. Counterfeit brand-name liquor continues to be a problem, she says.

Well, yes, in 1933, Oregon was worried about bootlegging. But that's not what legislators were principally worried about--or anyway, not all they were worried about. Here's the full rationale from the 1934 Liquor Control Act that established our system of liquor laws:

(1) The Liquor Control Act shall be liberally construed so as:

(a) To prevent the recurrence of abuses associated with saloons or resorts for the consumption of alcoholic beverages.

(b) To eliminate the evils of unlicensed and unlawful manufacture, selling and disposing of such beverages and to promote temperance in the use and consumption of alcoholic beverages.

(c) To protect the safety, welfare, health, peace and morals of the people of the state.

(2) Consistent with subsection (1) of this section, it is the policy of this state to encourage the development of all Oregon industry.

I have bolded the relevant portions to illustrate the point: the state of Oregon may have been compelled by the 19th amendment to allow liquor sales, but they sure weren't going to make it easy. The OLCC may now see their role as one entirely about law enforcement, but the very clear foundation of the statute is to gum up the production and sale of booze. The language in this section--"promote temperence," "abuses associated with saloons," "peace and morals"--come straight from the temperance movement. Oregon passed its own version of Prohibition three years before the country did and this language suggests legislators hadn't abandoned the spirit of temperance, even if they couldn't make it law.

This is relevant history, because the OLCC defends its existence on the dubious notion that they're preventing criminality. But as citizens, we have a right to point out that that's not really why the laws were drafted in the first place. They were drafted to stifle alcohol sales, and for 78 years they've been doing a bang-up job. So: do we still share the goals of that 1934 law? Are our current laws accomplishing the goals we want them to, or are we suffering under the effects of laws designed to accomplish very different goals?

Comments

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    In the spirit of full disclosure, I'll confess that a more confused, typo-ridden verson of this post appeared on my beer blog, Beervana. But I have the sense the readership for the two blogs overlaps only a wee bit. Mark and TA, I'm looking at you.

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    After seeing the way private interests jumped on jacked up the price of liquor in Washington, I'm not all that thrilled about the idea of changing. Liquor, one of the few pleasures I can afford, is expensive enough as it is.

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    The second section says:

    "(2) Consistent with subsection (1) of this section, it is the policy of this state to encourage the development of all Oregon industry."

    Which to me says that the State wanted to encourage the development of the beverage industry, as long as it doesn't get out of hand...

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      Gus, I think the OLCC has a mixed record on this. I'm mainly familiar with the beer side of things. In the 1980s, they were slow to see the benefit of emerging microbreweries, and many of the early ones suffered by not being able to get their product to market.

      That has completely flipped now, and Oregon is one of the states where it's easy for very small breweries to find distribution and get on supermarket shelves.

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    As a freedom loving "Classic Liberal", I'd love to see the OLCC abolished.

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    So I actually haven't read the articles yet. I'm looking forward to reading them all at once when the series is done. I really don't have a lot of preconceived notions about what should happen so much as I'm starting to think a public policy debate about this might be healthy.

    If there is a problem with OLCC it's that it has two missions which are fundamentally at odds: it is to both sell and regulate liquor. It can't do either perfectly as the public needs so long as it does both.

    As to the three tier system in general: as you point out brewers and vintners aren't getting rich. Yet retailers aren't getting rich either. The wholesalers seem to benefit from Oregon's laws the most. There is a lot of government regulation in alcohol control. Should it be revisited? Absolutely and I hope Washington's poorly thought out reform helps initiate a discussion here in Oregon. Should it be changed? Heck if I know.

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    Looks to me like there's room for higher taxes on that $20 bottle of vino.

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    Jeff, When you say OLCC has a mixed record, that's because it has a mixed purpose (like a number of Oregon agencies that are supposed both to regulate and promote).

    Temperance isn't prohibition. It is temperate use of alcohol. After the 1880s prohibitionists hijacked the word.

    If Oregon had wanted to continue prohibition, it could have (Kansas did) or created municipal local option (Massachusetts did, the town I grew up in was "dry" and surrounded by private "package stores" on the borders on all sides -- no alcohol sales in grocery stores though, beer & wine with liquor). This law didn't do that. It's motives and purposes can't be reduced to prohibitionism in disguise. It was an effort at regulation in light of the combined facts of the failures and perverse consequences of prohibition, and the continued reality of social problems caused or intensified by some kinds of alcohol use and marketing.

    Your emphases in reading the statute seems to me at least one-sided.

    In the list, safety is the first word, morals the last -- generally considered by rhetoricians the power positions in a list. "Safety, welfare and health" are conceptually linked in a lot of areas of U.S. public life.

    I see no reason to question the genuineness of those concerns in legislators' motives in writing the law. Likewise with peace -- excessive alcohol consumption does contribute to violence, by reducing inhibitions against it. Check out the statistics on assault in Oregon -- highly linked to bars. Nor was the old temperance/prohibition movement wrong about the link between alcohol and domestic violence.

    Drunk driving remains a genuine public safety issue. Alcohol addiction creates serious health issues and interacts with others to contribute to other social welfare issues.

    On crime, beyond violent crime, in Massachusetts in the '70s and '80s there was considerable association of private package store ownership with crime and political corruption. Alcohol sales and profits are a perennial source of such issues and remain so. Those interests are not generally enlightened sources of support for progressive policies (cf. Oregon Restaurant Association)>

    The main change in society and culture from the 1930s that I see in relation to this law is reduction in individualized moralism about drinking. There is greater recognition of alcoholism as medical and addiction issue, and concomitantly as a distinct phenomenon from moderate drinking.

    I can't say I'm aware that Oregon beer & wine or booze prices are all that different from anywhere else. If they are a little higher, I'm not that fussed about it. Both the wine and beer industries in the state appear to be thriving.

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    So, I don't support mischaracterizing the OLCC as merely an antiquated artifact of outdated moralism. Neither should we exaggerate our current state of social and cultural wisdom about use of intoxicants as obviously superior to that of our ancestors, to the point where we should just dismiss their concerns.

    Conversely, I support temperance in its original sense, and the health, safety, welfare and peace goals of the OLCC stated in the 1934 law.

    I'd be open to talking about whether the current regulatory structure is the best way to achieve those goals. It may not be.

    But I want to talk about those goals, and don't much care about the profits of wine (or beer) makers. They're doing fine.

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