May 12, 2016 01:36 PM UTC

Steadman beer & wine reform shows value of legislative process

• 5 Comments
• by: Voyageur

Elsewhere on this blog, our beloved Blue Cat expresses sympathy for me in the belief that the legislature’s passage of Sen. Pat Steadman’s SB 197 forestalls the far-reaching reform of our antiquated liquor laws I have advocated in numerous posts over the past few weeks.

In fact, my response to the passage of this reform is to flash a “V” — for victory, not for Voyageur.

The bill, after all, does begin to address the problem, albeit at a glacial pace, taking 20 years to fully phase in!  But remember that the cartel system that I abhor has been around for 80 years.   There is a special problem with such government-granted privileges.   They are windfalls — wholly unearned — to the original recipients.  But as time moves on and business are sold and resold, they become capitalized as a cost of doing business to the new owners.

Consider the New York taxicab medallions.  Their only purpose is to limit competition, ergo they are just a license to overcharge customers.  But their value rises over time and if you buy one now to enter the business, it costs more than a million dollars.

Say our own Mama Jama buys one from her Uncle Louie for $1 million.   He retires to Florida with an unearned fortune.   Now along comes Voyageur, the economic rationalist, who simply wants to lower prices and improve service by making medallions free.  Consumers rejoice, but our dear friend is now headed for the poorhouse,  because competitive rates can’t possibly recover the cost of her now-worthless medallion.

From what I read, Lyft and Uber are wreaking just such havoc on established taxi firms, without accepting any of the regulations taxicab drivers operate under, including fair and transparent pricing.

Unquestionably, many, perhaps most, of Colorado’s existing 1700 liquor licensees are too small and inefficient to survive in a competitive market.  Yes, they benefit from being in a cartel, however much that economically accurate term enraged some of the defenders of the status quo when I used it in my posts.  But the unearned  increment of profit provided by the ability of their licenses to shield them from the full pressure of free-market competition, in most cases, doesn’t buy them shiny new Porsches.  It just keeps them in business and maybe pays for an overhaul on that eight year-old Honda Accord they get by with.

In short, for most cartel members, their license is the difference between profit and loss.  It may even have helped pay the tuition payment for their daughter Suzie to attend CU Denver where she can — or could have a few years ago, anyway — hear me lecture about why economist Joseph Schumpater called the bankruptcy her parents face in a free market  part of the “creative destruction” of capitalism.

Yes, it’s indisputable that such destruction ultimately frees capital and labor for more efficient uses.   But if you’ve ever been through a bankruptcy — a real one, not a Trumpian defrauding of your investors —  you know it can inflict life-long trauma.

This fact was well understood by the Great Adam Smith, who wrote the “The Theory of Moral Sentiments”  a decade before his classic “The Wealth of Nations.”   Smith didn’t even use the term “economics.”  He was so aware of the social consequences of economic change that he used the term “political economy.”  And that means that fine old English gentleman was cool with using the political system to smooth out some of the rougher edges of of the free-market forces unleashed by capitalism.

Yes, this compromise delays a free market for 20 years.   But we get free-er markets in 2019 when some chains, like Soopers and Safeway and probably (ugh) Union-Buster Mart can start buying licenses from existing license owners.  The inefficient booze store katy-corner from Queen Soopers — as my gay friends jocularly call the market that anchors our diverse Capitol Hill neighborhood — might sell its license for, say $100,000.

The owners may be in their 60’s and just decide to retire, or maybe use the cash to remodel their building (they only sold the license, not their other assets) into a pet store like the one immediately west of Queen Soopers or open a law office specializing, as I once considered doing, in gay marriage and divorce.

(This is a coming field.  Gays and Lesbians now have  the right to marry but, sadly, some will run into the same problems so many opposite sex couples do and the heterosexual marriage dissolution template doesn’t always fit their needs.  In the event, a family disability forced me to abandon what I think could have been a successful field.)

Such successful transitions are what Pat Steadman, an old friend I have long admired, tried to midwife with his bill.  I will probably not live to see the 20-year phase-in completed.  But while Schumpater may grumble that an immediate reform would make us all richer “in the long run” I think my friend Pat’s approach would satisfy John Maynard Keynes, who wisely noted: “In the long run we are all dead.”

Of course, the supermarkets can still run their initiative. and push for immediate deregulation of the market.  If they do, I might yet vote for it.  But I doubt it.

Initiatives are an old populist idea designed to let the people bypass legislatures dominated by special interests.  In this case — and many others — we see a wealthy special interest funding an initiative to bypass a legislature that paid perhaps too much attention to those portions of the public that would lose in the reform.  But while the  legislature may have given too much solace to the many now economically obsolete liquor stores, the initiative as drafted gives them none at all.

Initiatives are best used as a two-by-four to get the legislature to act — and use its ability to craft worthwhile, albeit imperfect, compromises among competing interests.  If after being banged on the head by that two-by-four, the politicians still ignore  the public will — as they did with marijuana reform — then by all means bypass them and reform our corrupt and inhumane  “war on (people who use) drugs.”

But in the case of sales of beer and wine in grocery stores, the legislature did act — and there will be a chance in future sessions to further refine the reform if that proves necessary.  The consuming public has won a significant victory, albeit one whose benefits will be gradually phased in over two decades.

In politics, my great hero is Abraham Lincoln.   He was often called a moderate.  In fact, he was radical in his goals, especially his undying hatred for slavery.   But he was moderate in his means, seeking where possible to dull the pain of the radical changes he was seeking and working for a society characterized by malice toward none and charity toward all — even the former slave owners.

Obviously, the Cause Lincoln championed was far greater than that of consumer choice and convenience in the buying of wine and beer.  But in all things — including  the great passions that now threaten to rip the social fabric of America and turn us into a land chacterized by mass deportation, trampling on the rights of social and racial minorities, and aching economic inequality — we can benefit by emulating the patience and vision of the Great Emancipator.