Pricy wine pays for equal health

Stella writes*

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.

Systembolaget Opening Hours by Geir Olsen 

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 :).

Author: David Zetland

I'm a political-economist from California who now lives in Amsterdam.

5 thoughts on “Pricy wine pays for equal health”

  1. Hi Stella, this is a super interesting blogpost and topic! Some thoughts that I am left with that you could incorporate when you’re writing your essay:
    It would be interesting to actually look at some data/evidence of statistics related to some of the potential consequences of removing the alcohol monopoly in Sweden (ex. reported abuse, cases of drunk driving, alcohol-related deaths) compared to other countries that do not have this alcohol monopoly. How do these stats in Sweden compare to those in Norway, for example?
    How effective is the Swedish alcohol monopoly within the context of free travel between Sweden and neighbouring countries such as Norway. I know that in Norway, for example, there is a tax on sugar and so many Norwegians (especially those living near the Swedish border) drive over the border into Sweden to buy chocolate and sweets there.
    Also, how does the government decide which products to monopolise? Why alcohol and not sugar, for example?
    Furthermore, what are the trade-offs between the Swedish government’s current regulation (monopolising the alcohol industry) versus other strategies such as a tax (as Norway has done on sugar products) or just stricter regulations for purchasing alcohol?
    Hope this helps! 🙂

    1. Thank you for the comment Noa, indeed that is something I would like to pay more attention to, however, all the numbers are modelled based on differences seen in for example Canadian provinces after introducing province-wide monopolies and are adapted to a Swedish context. It is near impossible to know what effect it would have in Sweden as the country has had local monopolies throughout most of the country since 1850. What we can see is the expected increase in consumption and the expected health consequences of such consumption. On your second point, all nordic countries (apart from Denmark) actually has a state monopoly on alcohol, although not as severe as Sweden. Sweden has the highest legal drinking age, lowest alcohol percentage allowed to be sold in grocery stores and so on, however, what Sweden does not have is the most expensive alcohol. Norwegians do in fact drive to Sweden on what is called a ‘Harrytur’ to buy cheaper alcohol and other goods. Sweden did use to have a monopoly on pharmacies as well but that was disbanded a while back, alcohol monopoly has remained mainly because of its long history and the uncertainty around increasing consumption I think. Sugar and other “harmful” substances are quite heavily taxed. There are indeed Pro’s and Con’s of those methods, I hope to explore that more in the paper.

  2. Hi Stella!
    What a super interesting post and topic to discuss! I was left with one mayor thought: what about the illegal markets and distilleries. You mention the way alcohol is marketed and sold, and that that does not lead to more consumption as it’s not made “attractive”. However, in alcohol becoming so expensive and in ways unattainable, it’s in danger of becoming a “forbidden fruit”. Exactly because it’s treated as a danger and something the government does not want you to have, that can make it all the more desirable. Even more so, this could lead to dangerous consumption due to the level of exceptionality of alcohol. Thus, the idea being that if something is special you binge whenever you’re “allowed”, this would mean that the alcohol consumption taking place is more irresponsible because of the psychology behind being restricted. Furthermore, the high costs could in fact drive people to brew their own or engage in criminal activities at a cheaper price. Not only would homebrewing be a grave danger for public health, taken with circuits of smuggling it can contribute to an underground network that is wholly preventable. I am unsure as to the extent this already holds true for Sweden, but increased mobility and costs could prompt this behaviour. Lastly, and connecting to Noa’s point: the “importing” by going over the border could be disadvantageous for the buyers as imperfect information provides ground for scams and unsafe transactions. I hope this helps and that the concerns voiced prove useful for evaluating your paper 🙂

    1. Hello Nora, thank you for your thoughts! This is of course a very important issue and something that many articles I have encountered overlook. This is where the context of the policy becomes crucial I think. Alcohol monopoly in Sweden from the start had impressive support, and rather than a government or head of state implementing it, it started as an initiative of local businesses supported by locals. Although the support may have declined since it is still a system that is valued by many. In my experience, the few instances of illegal markets of alcohol are people buying and selling to minors and this is not an isolated case but happens in every country, whatever the market system. For solving that it is even more important to pay attention to the legal drinking ages, in Sweden it is 20 for buying at Systembolaget but only 18 for buying in restaurants and bars, thus, in that sense I believe that the United States has a larges issue of minors drinking.
      In regards to importing and mobility, Norway buys alcohol in Sweden, Sweden buys alcohol in Denmark, and Denmark buys alcohol in Germany, there’s no escaping that people will go on trips and buy alcohol in countries where it is cheaper. Nonetheless, Systembolaget maintains other incentives for Swedes to buy within the country (apart from legal limits on importation etc.) which is for example its extensive range of products provided that you wouldn’t necessarily be able to get across the border. But these risks are definitely something that I will have to pay more attention to throughout my research so thank you for bringing my attention to them.

  3. Hi Stella! Really interesting topic! What I am wondering is how do studies calculate possible impacts of lifting the monopoly on society/alcohol consumption? These studies might have skewed or biased results if their assessment is based on comparing statistics across different countries. Since the monopoly has been in place for a very long time, it could be argued low levels of alcohol consumption have become institutionalized among the Swedish populations. I saw that traditions of alcohol rationing and/or regulation go back several centuries. This shows not only that alcohol regulation seems inherent to Swedish governance, it might also have resulted in institutionalization of lower alcohol use among the Swedish population. Of course, alcohol use would still increase if the monopoly was to be lifted, people tend to like alcohol. However, I think it should be taken into account that comparing Sweden with other countries to assess possible increases in alcohol consumption would thus not be giving the right answers. I don’t know to what extend you have already thought about this, but I think it is interesting and something worth discussing in a section of your paper!

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