Moral Hazard in Utah: The Department of Alcoholic Beverage Control

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Moral Hazard in Utah: The Department of Alcoholic Beverage Control

Posted by Connor on May 18th, 2011

After years of flirting with various amounts of alcoholic prohibition, Utah created the Department of Alcoholic Beverage Control in 1935. This department is granted statutory authority to conduct, license, and regulate the sale of alcoholic beverages within the state.

This is a government-enforced monopoly that exhibits the same corruption and failures that all such monopolies inevitably produce. The most recent example is the loss of $300,000 in taxpayer dollars. Uncovered through a legislative audit, the revelation that the DABC has been subsidizing a debt-laden and bankrupt distribution company led Senate President Michael Waddoups to tell the department’s director that the loss “shows terrible management skills on your part….You’re the person responsible for this debacle.”

Wrong.

Those responsible for this debacle are Waddoups and his legislative cohorts who allow this moral hazard to exist in the first place. This is akin to a parent providing alcohol to his teenage son for a party with friends, and then blaming the son for drinking, driving, and causing an accident. While the teenage son made poor choices and shares blame for the damage, the ultimate responsibility lies with the parent who provided the opportunity for the damage to even occur in the first place.

When the legislature empowers a few bureaucrats to play fast and loose with taxpayer dollars, they cannot legitimately feign outrage when those individuals make poor decisions and abuse the misplaced trust they were given. This circumstance can be considered a microcosm of what we’re seeing at the federal level, where the Federal Reserve is creating a monetary moral hazard by throwing money at the banks and institutions which helped cause our current economic crisis, further perpetuating the problem. At some point, and unless the supply is cut off, the moral hazard will cause the system to implode.

The government’s monopoly over alcohol and intervention into the marketplace is a relic of the failed prohibition era and demonstrates the hypocrisy of any legislator who simultaneously supports the arrangement and also claims to champion the proper role of government. For under what rational argument can it be considered the government’s legitimate role to be involved in business, strong-arm potential competitors out of the market, and mark up the product by at least 86%? What does that nefarious arrangement have to do with securing individual liberty?

The DABC, and Utah’s corrupt control over an entire sector of the marketplace, is a stain on the fictional image that Utahns are somehow a liberty-loving, limited-government, self-reliant people. Rather than acting surprised at this audit’s findings and expressing frustration at the reckless teenager types trying to manage what the legislature has tasked them with, government officials should instead put their legislative pens where their alleged principles are and turn alcohol distribution over to the private market.

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7 comments so far. Care to chime in?

Thanks for posting this. I agree %100. Although I don’t drink, I definitely think that the Utah system is broken. There are major issues when it comes to the DABC. Thanks for calling them out on this issue.

#1 Jared Fulgham | May 18th, 2011 9:42 AM

This issue needs to be dealt with once and for all. There is no rational argument in which a legislators champions individual liberty and freedom, the free market, and self accountability, and at the same time supports the state monopoly on liquor distribution.

#2 JJL9 | May 18th, 2011 11:07 AM

From the DesNews:

Gov. Gary Herbert downplayed a new legislative audit that found a privately run liquor package agency lost $300,000, saying it’s not clear there’s a need for more oversight.

“I’m very comfortable that we’re going to handle this issue fine. This is not a big problem,” the governor said during Wednesday’s taping of his monthly news conference on KUED Ch. 7.

#3 Connor | May 18th, 2011 2:10 PM

When was the last time there was a “good” governor in Utah? Frankly, I’m disappointed with the people Utahans choose to represent them, in general. Not a great track record.

#4 Eric | May 18th, 2011 7:12 PM

It’s nonsense – if alcohol is legal, let the supermarkets and private liquor stores take care of it. The way the Utah legislature does it now – messing around with Utah’s liquor customers (of which I am not one but a sympathizer) by using the state’s monopoly as a political football whenever it suits them – is one of the most childish aspects of a highly childish state government.

#5 Clumpy | May 18th, 2011 11:57 PM

“monopoly”? Are you sure? While I don’t drink, I’m fairly certain that I’ve seen alcoholic beverages for sale at Smith’s and/or Walmart in Utah County…

#6 Brian | May 19th, 2011 5:09 PM

Brian, see here. Utah code controls, regulates, and licenses the distribution and consumption of alcohol. Drinks below a certain alcohol limit are available for public purchase through retail outlets at the good graces of the legislature. Drinks over a certain limit are sold only in state-owned stores. But it’s all regulated through state law.

#7 Connor | May 19th, 2011 8:43 PM