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Toronto - Ontario - Canada
Selling the LCBO
12/01/2004

The Windsor Star today had an editorial suggesting that one way for Dalton McGuinty to try to eliminate the deficit would be to sell the LCBO. Unfortunately, the editorial is full of contradictions.

On one hand, they raise the promise of a lot of fast money by selling an asset. On the other hand, they call for greater choice, more stores, and less bureaucracy through privatization and competition.

But, if the LCBO is not going to be a monopoly, why would anyone buy it? If Ontarians were going to be able to buy booze at the grocery store in the future, the value of the LCBO would be reduced significantly. In fact, it would mainly be just a collection of buildings.

The province has a choice: It can sell the LCBO as a guaranteed monopoly, and cash-in the asset. Or, it can introduce competition, thereby vapourizing much of the LCBO's value.

Now, if it were to follow the first option -- selling the LCBO as a guaranteed monopoly -- it is doing little more than turning an annual cash flow into a one-time windfall. This doesn't sound wise to me. Besides, the windfall probably wouldn't be big enough -- if I were considering a purchase of the LCBO, I'd always be afraid of the possible of future competition, and therefore discount what I was willing to pay.

There is a reason that the Harris-Eves Tories didn't sell off the LCBO, despite their privatization jones: it didn't make sense.

Now, reading the Windsor Star editorial, it really seems that they are driven more by ideology than by fiscal sense. They seem angered by the thought that the government would be involved in running stores. (Actually, knowing the typical Windsor Star editorial, they usually seem angered by the thought that government exists at all.) They also claim that if it weren't for Queen's Park involvement, Ontarians would have more choice in beverage alcohol.

Well, I can see the point in questioning why the government is involved in stores -- although I wonder if Ontarians don't continue to want liquour controlled -- but I don't buy the choice argument. Maybe, with competition, there would be more choice in terms of location, but I would be very surprised if there was more choice on the shelf, which is where it counts.

On Jason Nolan's blog, a post refers to a link-rotted Globe and Mail article, and reads: "The LCBO is the largest retailer of alcohol in the world and uses its purchasing power to ensure low wholesale prices for its products and widespread availability of specialty brands, said a government official who has examined the possibility of selling the board." That sounds right to me.

Anyway, selling the LCBO isn't the simple win that some people might think it to be.


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