David Blair, a recent candidate for Montgomery County executive, is co-founder of the Council for Advocacy and Policy Solutions and chairman of Accountable Health Solutions.
Montgomery County is one of the few local jurisdictions in the country that has a wholesale monopoly on liquor sales. That system has been widely condemned, resulting in numerous complaints about service, more than one system collapse in the critical week between Christmas and New Year’s, massive consumer flight and a string of D.C. liquor stores camped out at our county’s border. The monopoly stunts the county’s restaurant industry, with one owner blaming the monopoly’s “bloated and antiquated bureaucracy ” for his decision to close. The monopoly has even been a nest of outright crime over the years. So what should we do about it?
One elected official is suggesting a new government monopoly for marijuana.
Montgomery County Executive Marc Elrich (D) recently suggested that the state should legalize marijuana and establish a state monopoly for distribution and retail sales. He said, “They should not just legalize it. They should let Maryland farmers grow, and the state should process and sell. And take every dime of revenue. . . . What’s the justification for giving [the profits] to a bunch of private guys who are rich, so they will get richer, and then you’ll be sitting there with crumbs in your hand, when you could have all of it?”
Let’s set aside the fact that, according to the Census Bureau’s 2012 Survey of Business Owners and Self-Employed Persons , 70 percent of retail trade firms in Maryland had less than $100,000 in sales in 2012. (These folks are not rich.) Let’s also set aside the fact noted by Maryland Del. Kathleen Dumais (D-Montgomery) that selling marijuana is a federal crime and is therefore a problematic activity for state employees. Instead, let’s follow the county executive’s logic. Why stop at marijuana? Why not have the state establish a monopoly on coffee?
According to the Census Bureau’s foreign trade program, the United States imported $4.7 billion of green coffee beans in 2018. (Aside from production in Hawaii, the United States imports virtually all the coffee beans it consumes.) Maryland accounts for roughly 1.8 percent of the nation’s population, so if we consume coffee at the national average, that means $85 million of those coffee beans are headed here. Suppose the state monopolizes distribution and charges a 100 percent markup (a low markup, according to the Specialty Coffee Association). Subtract operational costs, and it’s easy to see the state making tens of millions of dollars annually from a wholesale coffee monopoly.
But why stop there? The Census Bureau’s 2012 Economic Census estimated that there were 883 snack and nonalcoholic beverage shops in Maryland grossing $639 million in sales that year . Montgomery County’s liquor dispensaries have a retail monopoly on spirits, so why shouldn’t the state have a retail monopoly on coffee shops? Again, it’s easy to see tens of millions of dollars in more revenue for the state.
So why not just have the state monopolize the sales of everything? We know the costs of that. First, entrepreneurs get frozen out. All the quirks you like about your local coffee shop (and all the other stores you frequent) will be subsumed under a monolithic government leviathan. Second, the economic opportunities used by entrepreneurs to improve their families’ lives are lost. The county executive calls them “private guys who are rich,” but most don’t start out that way and many don’t wind up that way. These are the folks who create jobs and build our communities. And, finally, consumers lose with monopolies, no matter their industry. Lack of competition pushes up prices and limits selection. That’s why it has been federal law since 1890 to break up monopolies when they appear. Why, then, should our state establish a new monopoly, whether it controls marijuana or anything else?
Instead, monopolists should look right here at Montgomery County to see what happens when a monopoly loses power. In 2014, the entrepreneurs who would go on to found Denizens Brewing Company in Silver Spring pushed to exempt craft brewers from the county’s wholesale liquor monopoly. Denizens co-owner Julie Verratti said, “There’s no freaking way in hell I would ever trust my product to the department of liquor control.” So, to facilitate Denizens opening, the state exempted craft breweries from having to go through the liquor monopoly. But it didn’t stop there: The monopoly exemption spurred an explosion of craft breweries in Montgomery County. Employees get new jobs, owners get to build their businesses, the county gets property and income tax revenue, and consumers get new products. Everybody wins.
That is exactly the kind of scenario projected by the state’s Bureau of Revenue Estimates in 2015, which found that getting rid of Montgomery County’s liquor monopoly entirely would generate $194 million in new economic activity, 1,364 new jobs and $23 million more in state and local tax revenue.
So spurring competition, not constructing new monopolies, is the true way to build an economy and create revenue for government. Those who disagree can go down to the government coffee shop for a java fix. But given the much-maligned service record of Montgomery County’s monopoly, good luck getting your double vanilla Frappuccino. It’ll be instant coffee for you!