How Government Policies Help Fuel the Illicit Alcohol Trade


The CEO of Anheuser-Busch InBev, Carlos Brito, took to the pages of the Wall Street Journal to highlight the problems with the illicit alcohol trade around the globe. Brito points out that it's often government policies that help fuel the illicit booze market:

"According to the World Health Organization, about a quarter of all alcoholic-beverage consumption globally is unrecorded. Unrecorded alcohol is a wide category that comprises everything from the beer brewed by aficionados at home to illegal and sometimes destructive bootlegging practices.

Recent studies by Euromonitor International demonstrate that in many countries, particularly emerging markets, the percentage of unrecorded alcohol can sometimes be more than half of the total alcohol market. What’s more, often it is dominated by organizations that control large counterfeiting and contraband operations. In those countries, the illicit alcohol market creates serious safety risks for consumers, erodes the rule of law, denies the government much needed fiscal income and makes growth for legal businesses much harder.

What is the root cause of this illicit market? Poor enforcement is an obvious contributing factor, and indeed improved enforcement is critical. But we would argue that the main drivers, while often well-intentioned, are badly designed public policies that seek to reduce harmful drinking.

To be clear, we are active supporters of policies that reduce harmful drinking. However, as Euromonitor and recent research from the Organization for Economic Cooperation and Development demonstrate, when taxes increase to the point that prices exceed consumers’ purchasing power, then illicit beverages become cheaper alternatives, illegal production blossoms, dangerous products enter the market and fiscal income dwindles..."

Read the whole thing here.

R Street's Kevin Kosar addressed this very issue--including the role of high booze taxes--at length in his recent book Moonshine: A Global History.