After living in the Netherlands for two years, returning to Sweden and its steep alcohol prices sure feels unappealing – but how would a Sweden without a State monopoly on alcohol look like really? Systembolaget (the state’s monopoly seller) says things would get worse, with 29,000 more cases of reported abuse, 8,000 more cases of drunk driving, and 1,400 other alcohol-related deaths each year. Stockwell et al. estimated there would be substantial increases in alcohol-related harms, crimes and deaths if Sweden were to privatize its alcohol monopoly. Additionally, alcohol-related harm is unequally distributed amongst the population based on factors such as socioeconomic status, education level, sex, ethnicity, and place of residence. Inequalities that would only be exacerbated by disbanding the monopoly.
But would the market really change as drastically as these numbers suggest? The idea behind the alcohol monopoly is to remove private profits from the alcohol market. Profit and competition incentivize private companies to increase their sales. This is desirable for most goods as it ensures market efficiency i.e. the market does not supply more than is demanded and this is reflected in the price of the goods. However, for alcohol, privatization, in any form, would increase competition between firms pushing the price down leading to increased accessibility – factors that contribute to elevated drinking and thus also alcohol-related harm. In fact, Systembolaget estimates that if people could buy alcohol in regular grocery stores the number of available points of sales would increase by 1500% and opening hours would extend by 68%. The WHO confirms that increased accessibility could have detrimental effects on consumption. Above all, however, dismantling Systembolaget would significantly affect the pricing systems and the way that alcohol is marketed and sold.
The removal of profit interest is evident in every Systembolaget retail point, no products are placed near the checkout, no products are on sale, no products can be bought on promotional offers, and there is no product discrimination – no beer is stored refrigerated because then they would have to store all comparable products refrigerated. All these marketing tricks and pricing systems contribute to Swedish citizens not buying more than they initially planned and will reasonably consume. In addition to this, not-for-profit monopoly retailers are more effective in enforcing legal purchasing ages because profits cannot rise. Restricted access to alcohol also helps individuals whose socioeconomic situations make them more vulnerable to alcohol and reduces impacts on bystanders.
Bottom Line: Sweden’s monopoly on alcohol is not a fabrication just to keep prices artificially high but indeed has a significant effect on the well-being of the Swedish population. Introducing a private licensing system in its place would cause a marked increase in consumption and thus alcohol-related harm. I happily pay more to keep this system going.
* Please help my Economic Growth & Development students by commenting on unclear analysis, alternative perspectives, better data sources, or maybe just saying something nice :).