The Role of Control States in Today’s Society

By James M. Sgueo
Executive Director
National Alcohol Beverage
Control Association

America’s experience with alcohol is based upon the deep-rooted traditions, beliefs and ideals of our communities. Throughout our American history, alcohol has fueled the debate between personal responsibility and government intervention. Still today, it is an issue that accompanies a myriad of opinions as to what is the best means to ensure responsible alcohol beverage distribution and consumption.

To fully understand the state of alcohol in today’s society, I think it is important to look back and reflect upon its historical impact thus far.

In the late 1800s to early 1900s, saloons were overrunning American communities with nearly one saloon for every 150-200 people. To remain competitive with the saloon next door, some saloonkeepers offered gambling and prostitution for their patrons. It was this behavior that the saloons encouraged that started the prohibition movement as a means to rid their communities of these activities.

With the passage of the National Prohibition Act, called the Volstead Act, prohibition became effective January 16, 1920. In the early years of prohibition, consumption of alcohol beverages was about 30% of the pre-prohibition level. However, consumption grew in the last years of prohibition as illegal supplies of liquor increased as did the disregard for the law.

America and American policy-makers were beginning to realize the failure of prohibition. A pivotal player in the repeal of prohibition was John D. Rockefeller, II. Rockefeller had been a life-long abstainer and an early supporter of prohibition, but when he observed prohibition’s propensity to generate crime and corruption, he sought and supported the repeal. But the question became — what would replace prohibition?

Rockefeller’s support of repeal was on the condition that alternative alcohol policies would be considered by the states. To ensure the states had accurate, reliable and relevant information, he sponsored an extensive research effort on alcohol policy alternatives. This research was published in a book in 1933, the same year of the repeal of prohibition. The book, which was titled, Toward Liquor Control, was written by Raymond B. Fosdick and Albert L. Scott.

It was through this book that Rockefeller put the state monopoly system on the policy agenda of America. He introduced the alcohol monopoly system as a means to control the sale, distribution and consumption of alcohol in a responsible manner.

Monopolies were now being viewed as an alternative to total prohibition that could allow legal sales while helping to keep social problems to a minimum. Eighteen states and a few jurisdictions opted for the alcohol monopoly system model as a means to deal with alcohol as a commodity.

Since the inception of these monopoly systems or control states, their motivating factors have been to protect public health and order, ensure efficient tax collection, and eliminate unfair or illegal marketing practices. Control states have come to represent an effective means of balancing public health concerns against fiscal interests and consumer convenience. They can be a particularly effective way to maintain reasonable limits on alcohol availability and directly control the circumstances under which it is sold. Ultimately, control states are justified by what makes them unique — their ability to balance fiscal objectives against the broader public interest. They are able to address long-term public health concerns while still generating revenue and responding to consumer demand.

In the control states, less equals more. The control systems provide such a tremendous benefit and service to their residents because of their ability to balance public health issues with financial contributions to the states’ general funds, so even though there is less per capita consumption in the control states, there is more per capita revenue.

An adult in the control states consumes 1.58 gallons of spirits compared to that of an adult in the license states, who consumes 1.90 gallons. However, revenue in the control states is $20.94 per gallon of spirits compared to $10.54 in the license states (DISCUS State Data Book, 2001). This clearly shows that when the control system is in place, more revenue is generated from the sale of beverage alcohol.

Another benefit to the control state system is that it can be applied very flexibly across a wide-range of public moderation, state revenue and consumer service goals. Each control jurisdiction, then, can tailor its system to respond very directly to the policy objectives of its constituents.

These objectives have evolved over the past seven decades as public attitudes toward drinking have changed and as the demand for state revenues has increased. In response, the control state systems have transitioned from their origins as ‘dispensaries of last resort’ to their role today as efficient, consumer-oriented service agencies.

John D. Rockefeller, II, Raymond B. Fosdick and Albert L Scott all had foresight of the necessity of a continually developing control state system. They noted this very fact in Toward Liquor Control: “We need to be on our guard against any system of control that has outlived its usefulness or that no longer represents the prevalent ideas and attitudes of the community. Our legal prescriptions and formulas must be living conceptions, capable of growing as we grow. For law is itself a social phenomenon and has no meaning apart from the uses and necessities from which it springs.”

The control state system is a paradox of its time. While Americans are calling for less government involvement in our lives, it is my belief that a majority of those who live in control state systems support the system that finds the delicate balance between generating revenue and promoting public health. They support the system because it has changed with the times and with its citizens rather than becoming stagnant, outdated or antiquated.

According to a study by Greg Flanagan, Sobering Result: The Alberta Liquor Retailing Industry Ten Years After Privatization, “A major responsibility of government is to protect the interest of the general public against the abuse of alcohol and its costs imposed by a minority.” This is the foundation of the control state system and what it provides to its constituents.

The control state system is unique in that it works exactly the way the community wants it to work. It has been molded and remolded over time to fit the beliefs, values, traditions, goals and objectives of the individuals that it serves. That is why it is successful, and that is why it will continue to stand the test of time.

The National Alcohol Beverage Control Association is the national association representing those political jurisdictions that directly control the distribution and sale of beverage alcohol within their borders. Headquartered in the Washington, D.C. area, NABCA serves it members as an information clearinghouse and as liaison to federal, state, and local governments, research and advocacy groups, the alcohol beverage industry and other organizations impacting alcohol policy.

James M. Sgueo served as Systems Analyst, Director of Statistical Operations, and Deputy Director of NABCA prior to being named Executive Director in 1993 after 23 years experience with the Association. His broad knowledge of the control state systems and the


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