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Why alcohol bans don't work

The idea of prohibition is a classic example of tail-chasing and won't solve the problem; increasing taxes might

Saahil Parekh 

Saahil Parekh

The new government in Bihar has called for a ban on alcohol, which from the 1st of April, 2016, will first prohibit sale of country-liquor, and in the next phase, extend it to Indian made foreign liquor (IMFL). To re-employ the people running liquor stores into the new, dry economy, the government has sanctioned a feasibility study to check if the thekas can be converted to milk booths. Recollect the scene from Anthony Burgess’ A Clockwork Orange, where the sinister-eyed protagonist, Alex, holds a glass of milk and says, “The Korova milkbar sold milk-plus (laced with drugs)… which is what we were drinking. This would sharpen you up and make you ready for a bit of the old ultra-violence.” As it might turn out, this quote could very well be from an Anurag Kashyap movie with a modern take on the book, set in a Bihar with alcohol ban.

The state of Gujarat has had prohibition since its formation in 1960, and the failure of the state in curbing alcohol consumption despite the prohibition is perhaps its worst kept secret. The network of bootleggers ensure timely delivery of booze, just like pizza. Liquor flows in from the neighbouring states, and brings with it corruption money that fills the black coffers of the road transport, excise, police and other government officials. Between 1999 and 2009, approximately 80,000 prohibition cases were registered of which only 9% were convicted. Moreover, estimates suggest that Gujarat loses INR 10,000 crores annually in enforcement and loss of tax due to the prohibition.

When bans are put in place, the scarcity of the banned commodity doesn’t curb demand, which is then satiated by a boom in the dirty business of contraband and bootlegging. The government officials bear implicit partnership with the bootleggers simply because they have the incentive to do so. A good job of enforcing prohibition will earn them their month’s salary, a pittance compared to what they stand to make by letting booze flow. The intention of the law, which is to curb consumption of the commodity, gets flipped on its head and leads to a thriving black-market.

The notorious Italian Mafia of Chicago and New York gained much of its prominence during the prohibition era of 1920s in the United States, and became rich through a well-organized network of bootleggers satisfying the high demand for alcohol. Even in our own Bombay, the prohibition in the 60s didn’t really curb the consumption. Locally brewed cheap liquor, colloquially known as hooch or moonshine, was served in the living rooms of houses which became infamous as aunties’ bars. In both cases, the booming contraband business inevitably led to a thriving black-market of other, more nefarious, substances as well.

The idea of prohibition is a classic example of tail-chasing. It is a short-sighted idea which can only get rid of the symptoms, facilitate ‘out of sight, out of mind’, but can never truly manage to cure the disease. And what is the disease anyway? Linking domestic abuse with increased alcohol consumption is perhaps like being overconfident and assuming the problem is incredulously simple. Domestic abuse by men who squander their limited incomes on alcohol and then come home to beat their wives, or engage in other crimes, and its connection with alcohol consumption needs more research. The National Family Health Survey (NFHS) conducted across the country in 2005-06 reported that 51% of the men in Bihar thought they are justified in beating their wives. You will be surprised to know the response from Gujarat, where alcohol is banned: at 74%, it far surpasses Bihar and is one of the highest in the country.

Apart from being unsuccessful in curbing domestic violence, a prohibition will rid the state of annual tax revenues of roughly INR 4000 crores. Surely the money will flow, but into the hands of corrupt officials and bootleggers, just as the alcohol will flow into the state from West Bengal, Uttar Pradesh, Jharkhand, and perhaps even Nepal. Bihar already has a thriving illegal arms manufacturing cottage industry which flourishes under the patronage of various political parties; who’s to say the moonshine manufacturers will not be favoured in a similar manner? Prohibition risks to bring the double whammy of the loss of tax revenues and the need for increased spending on enforcement.

As a concluding idea, this article suggests to simply increase the taxes on the sale of alcohol. A prohibitive tax rate will drastically reduce consumption, as well as bring revenue for the government. This revenue can then be utilized to not only improve enforcement and curb illegal brewing of hooch, but also to undertake reformative action by opening alcohol and other substance de-addiction centres, sensitising the community about the pernicious effects of domestic violence and improving overall education levels of adults.

Laws work best when they are reformative, not retributive. The mind-set of the people cannot be changed overnight, and less so through inefficacious policy levers that infringe on individual freedom. That will just make it costlier for people to make mistakes and learn about their preferences through trial and error. On the other hand, higher taxes on alcohol might give Bihar a chance to bring reforms to its society which are both progressive and prescient.


Saahil Parekh is an economist writing about the changing face of India’s economy on his blog, Arthashastra, a part of Business Standard’s platform Punditry. He works in areas of sustainability and climate change at The Energy & Resources Institute in New Delhi. The ideas expressed in this article are his own.

He tweets as @saahilparekh and can be reached at saahil.parekh@gmail.com

First Published: Tue, December 29 2015. 11:10 IST

Why alcohol bans don't work

The idea of prohibition is a classic example of tail-chasing and won't solve the problem; increasing taxes might

The idea of prohibition is a classic example of tail-chasing and won't solve the problem; increasing taxes might

The new government in Bihar has called for a ban on alcohol, which from the 1st of April, 2016, will first prohibit sale of country-liquor, and in the next phase, extend it to Indian made foreign liquor (IMFL). To re-employ the people running liquor stores into the new, dry economy, the government has sanctioned a feasibility study to check if the thekas can be converted to milk booths. Recollect the scene from Anthony Burgess’ A Clockwork Orange, where the sinister-eyed protagonist, Alex, holds a glass of milk and says, “The Korova milkbar sold milk-plus (laced with drugs)… which is what we were drinking. This would sharpen you up and make you ready for a bit of the old ultra-violence.” As it might turn out, this quote could very well be from an Anurag Kashyap movie with a modern take on the book, set in a Bihar with alcohol ban.

The state of Gujarat has had prohibition since its formation in 1960, and the failure of the state in curbing alcohol consumption despite the prohibition is perhaps its worst kept secret. The network of bootleggers ensure timely delivery of booze, just like pizza. Liquor flows in from the neighbouring states, and brings with it corruption money that fills the black coffers of the road transport, excise, police and other government officials. Between 1999 and 2009, approximately 80,000 prohibition cases were registered of which only 9% were convicted. Moreover, estimates suggest that Gujarat loses INR 10,000 crores annually in enforcement and loss of tax due to the prohibition.

When bans are put in place, the scarcity of the banned commodity doesn’t curb demand, which is then satiated by a boom in the dirty business of contraband and bootlegging. The government officials bear implicit partnership with the bootleggers simply because they have the incentive to do so. A good job of enforcing prohibition will earn them their month’s salary, a pittance compared to what they stand to make by letting booze flow. The intention of the law, which is to curb consumption of the commodity, gets flipped on its head and leads to a thriving black-market.

The notorious Italian Mafia of Chicago and New York gained much of its prominence during the prohibition era of 1920s in the United States, and became rich through a well-organized network of bootleggers satisfying the high demand for alcohol. Even in our own Bombay, the prohibition in the 60s didn’t really curb the consumption. Locally brewed cheap liquor, colloquially known as hooch or moonshine, was served in the living rooms of houses which became infamous as aunties’ bars. In both cases, the booming contraband business inevitably led to a thriving black-market of other, more nefarious, substances as well.

The idea of prohibition is a classic example of tail-chasing. It is a short-sighted idea which can only get rid of the symptoms, facilitate ‘out of sight, out of mind’, but can never truly manage to cure the disease. And what is the disease anyway? Linking domestic abuse with increased alcohol consumption is perhaps like being overconfident and assuming the problem is incredulously simple. Domestic abuse by men who squander their limited incomes on alcohol and then come home to beat their wives, or engage in other crimes, and its connection with alcohol consumption needs more research. The National Family Health Survey (NFHS) conducted across the country in 2005-06 reported that 51% of the men in Bihar thought they are justified in beating their wives. You will be surprised to know the response from Gujarat, where alcohol is banned: at 74%, it far surpasses Bihar and is one of the highest in the country.

Apart from being unsuccessful in curbing domestic violence, a prohibition will rid the state of annual tax revenues of roughly INR 4000 crores. Surely the money will flow, but into the hands of corrupt officials and bootleggers, just as the alcohol will flow into the state from West Bengal, Uttar Pradesh, Jharkhand, and perhaps even Nepal. Bihar already has a thriving illegal arms manufacturing cottage industry which flourishes under the patronage of various political parties; who’s to say the moonshine manufacturers will not be favoured in a similar manner? Prohibition risks to bring the double whammy of the loss of tax revenues and the need for increased spending on enforcement.

As a concluding idea, this article suggests to simply increase the taxes on the sale of alcohol. A prohibitive tax rate will drastically reduce consumption, as well as bring revenue for the government. This revenue can then be utilized to not only improve enforcement and curb illegal brewing of hooch, but also to undertake reformative action by opening alcohol and other substance de-addiction centres, sensitising the community about the pernicious effects of domestic violence and improving overall education levels of adults.

Laws work best when they are reformative, not retributive. The mind-set of the people cannot be changed overnight, and less so through inefficacious policy levers that infringe on individual freedom. That will just make it costlier for people to make mistakes and learn about their preferences through trial and error. On the other hand, higher taxes on alcohol might give Bihar a chance to bring reforms to its society which are both progressive and prescient.


Saahil Parekh is an economist writing about the changing face of India’s economy on his blog, Arthashastra, a part of Business Standard’s platform Punditry. He works in areas of sustainability and climate change at The Energy & Resources Institute in New Delhi. The ideas expressed in this article are his own.

He tweets as @saahilparekh and can be reached at saahil.parekh@gmail.com

image
Business Standard
177 22

Why alcohol bans don't work

The idea of prohibition is a classic example of tail-chasing and won't solve the problem; increasing taxes might

The new government in Bihar has called for a ban on alcohol, which from the 1st of April, 2016, will first prohibit sale of country-liquor, and in the next phase, extend it to Indian made foreign liquor (IMFL). To re-employ the people running liquor stores into the new, dry economy, the government has sanctioned a feasibility study to check if the thekas can be converted to milk booths. Recollect the scene from Anthony Burgess’ A Clockwork Orange, where the sinister-eyed protagonist, Alex, holds a glass of milk and says, “The Korova milkbar sold milk-plus (laced with drugs)… which is what we were drinking. This would sharpen you up and make you ready for a bit of the old ultra-violence.” As it might turn out, this quote could very well be from an Anurag Kashyap movie with a modern take on the book, set in a Bihar with alcohol ban.

The state of Gujarat has had prohibition since its formation in 1960, and the failure of the state in curbing alcohol consumption despite the prohibition is perhaps its worst kept secret. The network of bootleggers ensure timely delivery of booze, just like pizza. Liquor flows in from the neighbouring states, and brings with it corruption money that fills the black coffers of the road transport, excise, police and other government officials. Between 1999 and 2009, approximately 80,000 prohibition cases were registered of which only 9% were convicted. Moreover, estimates suggest that Gujarat loses INR 10,000 crores annually in enforcement and loss of tax due to the prohibition.

When bans are put in place, the scarcity of the banned commodity doesn’t curb demand, which is then satiated by a boom in the dirty business of contraband and bootlegging. The government officials bear implicit partnership with the bootleggers simply because they have the incentive to do so. A good job of enforcing prohibition will earn them their month’s salary, a pittance compared to what they stand to make by letting booze flow. The intention of the law, which is to curb consumption of the commodity, gets flipped on its head and leads to a thriving black-market.

The notorious Italian Mafia of Chicago and New York gained much of its prominence during the prohibition era of 1920s in the United States, and became rich through a well-organized network of bootleggers satisfying the high demand for alcohol. Even in our own Bombay, the prohibition in the 60s didn’t really curb the consumption. Locally brewed cheap liquor, colloquially known as hooch or moonshine, was served in the living rooms of houses which became infamous as aunties’ bars. In both cases, the booming contraband business inevitably led to a thriving black-market of other, more nefarious, substances as well.

The idea of prohibition is a classic example of tail-chasing. It is a short-sighted idea which can only get rid of the symptoms, facilitate ‘out of sight, out of mind’, but can never truly manage to cure the disease. And what is the disease anyway? Linking domestic abuse with increased alcohol consumption is perhaps like being overconfident and assuming the problem is incredulously simple. Domestic abuse by men who squander their limited incomes on alcohol and then come home to beat their wives, or engage in other crimes, and its connection with alcohol consumption needs more research. The National Family Health Survey (NFHS) conducted across the country in 2005-06 reported that 51% of the men in Bihar thought they are justified in beating their wives. You will be surprised to know the response from Gujarat, where alcohol is banned: at 74%, it far surpasses Bihar and is one of the highest in the country.

Apart from being unsuccessful in curbing domestic violence, a prohibition will rid the state of annual tax revenues of roughly INR 4000 crores. Surely the money will flow, but into the hands of corrupt officials and bootleggers, just as the alcohol will flow into the state from West Bengal, Uttar Pradesh, Jharkhand, and perhaps even Nepal. Bihar already has a thriving illegal arms manufacturing cottage industry which flourishes under the patronage of various political parties; who’s to say the moonshine manufacturers will not be favoured in a similar manner? Prohibition risks to bring the double whammy of the loss of tax revenues and the need for increased spending on enforcement.

As a concluding idea, this article suggests to simply increase the taxes on the sale of alcohol. A prohibitive tax rate will drastically reduce consumption, as well as bring revenue for the government. This revenue can then be utilized to not only improve enforcement and curb illegal brewing of hooch, but also to undertake reformative action by opening alcohol and other substance de-addiction centres, sensitising the community about the pernicious effects of domestic violence and improving overall education levels of adults.

Laws work best when they are reformative, not retributive. The mind-set of the people cannot be changed overnight, and less so through inefficacious policy levers that infringe on individual freedom. That will just make it costlier for people to make mistakes and learn about their preferences through trial and error. On the other hand, higher taxes on alcohol might give Bihar a chance to bring reforms to its society which are both progressive and prescient.


Saahil Parekh is an economist writing about the changing face of India’s economy on his blog, Arthashastra, a part of Business Standard’s platform Punditry. He works in areas of sustainability and climate change at The Energy & Resources Institute in New Delhi. The ideas expressed in this article are his own.

He tweets as @saahilparekh and can be reached at saahil.parekh@gmail.com

image
Business Standard
177 22