Friday, June 29, 2012

Someone's Popping the Bubbly

Trey Smith

Look. Privatization schemes are not rocket science. They usually work like this: there is money in the public sector that the private sector would like to get its hands on. It does so by playing on the popular conception of inefficient government bureaucrats and that “more choice” and “more competition” will magically lower prices, improve customer service, and so on. On the rare occasions when the cost of purchasing legislators does not pencil out with the financial benefits involved, corporations now know that they can go directly to voters to get their scheme approved, as Costco discovered.

So, privatization takes place. And we are shocked – shocked, I tell you! – that prices go up and the consumer experience gets worse.
~ from It’s Enough to Make You Want to Drink by Geov Parrish ~
What Parrish is referencing is Initiative 1183 which was passed by voters in Washington last fall. It privatized liquor sales in our state (before this summer, all hard liquor was sold from state liquor stores).

The initiative campaign overwhelmingly was founded by Costco. They sold voters on the idea that privatized hard liquor sales would mean greater competition and, more importantly, LOWER PRICES.

But something funny has happened to the price of hard liquor since the measure went into effect: prices have shot up! In some cases, by as much as 40 percent. Consumers are hopping mad because a good deal of them now realize that they were hoodwinked! Costco wasn't interested in aiding consumers; they wanted to fatten their bottom line and too many dupes voters acquiesced.

(For disclosure purposes, I voted against Initiative 1183. I was able quickly to figure out what Costco was up to.)

So, why have the prices gone up so precipitously?
Prices go up because large corporations have a legal obligation to return the greatest value possible to shareholders. Price points aren’t determined by competition so much as they are by what the market will bear. And in the case of hard liquor – which is an industry with huge markups over cost even before the high additional rates of taxation – the market will bear a lot.
Even worse, as Parrish laments,
Moreover, because most big box stores, supermarkets, and pharmacies have an aisle of hard liquor now – not a whole store of it – selection has suffered, too. If you want one of the most popular brands, you can now find it in many more places. If your tastes are more eclectic, well, good luck with that. And good luck with finding knowledgeable counter help, too.
You see, this isn't some aberration. This is how privatization generally plays out. It costs consumers/taxpayers MORE for LESS service. One would think that voters wouldn't fall for these gambits again and again, that they would begin to smell a rat.

But, too often, they don't...until the genie is already out of the bottle!

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