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November 14, 2003

Alcohol(ism) in Norden

On this blog, it is sometimes mentioned that libertarianism needs a proper social-cultural context, a loose liquor law regimine that might be mildly problematic in European nations is disastrous for Native Americans. Below is an article from The Economist that highlights the problems that the Nordic countries have had in maintaining their high taxation rates on alcohol, aimed at temperance, in the face of E.U. amalgamation. A few years ago The New York Times had an article which recounted the difference between a Finnish town and a Russian town in terms of vital statistics, but, the key was that 50 years ago the Finnish town had similar problems as across the border. The difference was partially due to a drop in alcoholism brought about by cultural changes and economic opportunity.

This is a cautionary note, because Europeans tend to have higher tolerances for alcohol than people in most of the world....

Viking binge
From The Economist print edition

How Europe's single market makes boozing cheaper

THE alcohol stores in Helsingor struggle to close on time, as Swedes cram in to grab a few more bottles before heading back across the Oresund strait that divides these Nordic neighbours. Trade in the stores has doubled since Denmark cut taxes on spirits by 45% at the start of October. Its action is inexorably chipping away at the entire Nordic region's restrictive alcohol regime.

The Danish government, itself trying to discourage people from heading across the border to Germany to buy cheap booze, felt it had no choice. Even after the tax cut, the incentives for drinkers to go abroad are powerful. A bottle of Bells Extra Special Scotch, priced at NKr270 ($38) in Norway, can be had for NKr225 in Sweden, NKr117 in Denmark and just NKr90 in Germany.

Sweden is deeply worried. In the 19th century, a lethal cocktail mixing the misery caused by industrialisation with cheap spirits helped to set off endemic alcohol abuse. Total prohibition was only narrowly defeated in a referendum in 1922. Alcohol was rationed until 1955. Strong beer, wine and spirits remain heavily taxed, and retail sales are still conducted through a limited number of state monopoly stores. Similar systems exist in Finland and Norway. Temperance movements have a strong political foothold in all three Scandinavian countries.

Since their entry into the European Union in 1995, Sweden and Finland have struggled to protect their alcohol regimes, as import restrictions have been gradually lifted under single-market rules. In Sweden consumption has risen to levels not seen since 1875. Hakan Leifman, a researcher at Stockholm University, says Swedes over 15 now consume around ten litres of pure alcohol a year, still well below the 14-15 litres per year in Ireland, but closing in on the EU average of 12. Other measures aimed at limiting sales have also fallen foul of EU rules. Earlier this year Sweden's ban on the advertising of strong beer, wine and spirits was overruled.

So far there is little evidence of a more “sophisticated” European attitude to alcohol: “binge drinking” remains the Scandinavian way. Public-health organisations are alarmed, predicting a rise in alcohol-related violence, drink-driving and chronic alcohol-related diseases.

But with Swedes in the south of the country bringing in booze from Denmark, and a virtual scrapping of controls on such imports coming in January, Bosse Ringholm, the (teetotal) finance minister, faces a dilemma. Even Sweden's state alcohol stores are campaigning for a tax cut. If Mr Ringholm does not oblige, he will lose revenues and foster an environment for illegal reselling. But if he does, cheaper alcohol will be available throughout the country. The Finnish prime minister, Matti Vanhanen, is duly proposing steep tax cuts in January, in an effort to stem imports.

Similar arguments are being heard even in non-EU Norway. The country has maintained its import control of one litre of spirits per person. But since it has scrapped most of its border checks, Norway has now become a nation of petty smugglers. Few expect the prime minister, Kjell Magne Bondevik, a teetotal Lutheran priest, to jump at the idea of a tax cut. Some have suggested that the answer is to reimpose border controls. But if the Swedes do cut prices it will be hard for Norway to stand against the tide. One way or another, cheaper alcohol is coming.

Posted by razib at 11:33 AM