The Online Library of Liberty

A project of Liberty Fund, Inc.

• Preface
• Translator's Note
• Where and Why Public Ownership Has Failed
• Book I: Public and Private Trading Operations
• Chapter I: Two Precepts
• Chapter II: The Three Mainsprings of Human Action
• Chapter III: Determining Motives of Private As Against Public Enterprises
• Chapter IV: Government and Municipal Trading Operations
• Book II: Financial Results of Government and Municipal Ownership
• Chapter I: Bookkeeping In State and Municipal Trading Enterprises
• Chapter II: The Belgian State Railroads
• Chapter III: Prussian Railroads
• Chapter IV: State Railways of Austria and Hungary
• Chapter V: Italian Railways
• Chapter VII: Railways of New Zealand
• Chapter VIII: Government Railroads In France
• Chapter IX: Public Vs. Private Operation
• Chapter X: The Holy Cities of Municipal Operation
• Chapter XI: Operation of Gas and Electricity In the United Kingdom
• Chapter XII: Tramways In Great Britain
• Chapter XIII: Housing of the Working Classes and Public Ownership In Great Britain
• Chapter XIV: Housing of the Working Classes On the Continent
• Chapter XV: Government Control of Food Supplies
• Chapter XVI: Victims of Government Ownership
• Chapter XVII: Charges, Debts and Credit
• Chapter XVIII: Fictitious Profits
• Chapter XIX: Fiscal Monopolies
• Chapter XX: The Alcohol Monopoly In Switzerland and Russia
• Chapter XXI: Financial Disorder
• Chapter XXII: The Purchase Price
• Chapter XXIII: Delusions of Profit and the Life Insurance Monopoly In Italy
• Chapter XXIV: The Fiscal Mines of the Saar District
• Chapter XXV: Public Versus Private Enterprise
• Book III: Administrative Results
• Chapter I: Administrative Results
• Chapter II: The Safety of Travelers Upon State and Private Railway Lines
• Chapter III: Disorders, Delays and Errors
• Chapter IV: Official Conservatism
• Chapter V: Labor
• Chapter VI: The Consumer
• Chapter VII: Programs of Organization and Regulation
• Book IV: Political and Social Consequences of Public Operation
• Chapter I: Socialist Programs and the Facts
• Chapter II: Bluff
• Chapter III: Results of Experience
• Chapter IV: The State a Dishonest Man
• Chapter V: Corruption
• Chapter VI: Nationalization of Public Utilities and the Foundation of Great Fortunes
• Chapter VII: Disintegrating Character of Public Operation
• Appendix %u201ca%u201d: Alcoholism In Russia
• Appendix %u201cb%u201d: the Financial Year In Australia
• Appendix %u201cc%u201d: the Shortcomings of the Telephone In England

CHAPTER XX

THE ALCOHOL MONOPOLY IN SWITZERLAND AND RUSSIA

• 1. Monopolistic Fictions of Emile Alglave.—Monopoly Rejected in Germany.—No Monopoly in Austria.—An Experiment in Italy.
• 2. In Switzerland, the Object of the Monopoly the Abolition of Ohmgeld Duties.—Neither the Distillation of Wines nor Stone and Kernel Fruits Affected by the Monopoly.—Ten per Cent. of the Receipts to Combat Alcoholism.—A Surprise Vote.—Numa Droz.—The Electoral Premium on Potatoes.—Restrictions on Sale in Switzerland.—Fiscal Deception.
• 3. Russia.—Moujik Forbidden to Drink on Premises.—Characteristics of the Liquor Traffic.—Increase of Public Drunkenness.—Declaration of a Moral Purpose.—Fiscal Success.

1. About thirty years ago Émile Alglave was anxious to establish a monopoly on alcohol in France.

Basing his appeal on authority he said, with magnificent assurance, that France would be the last country in Europe to adopt such a monopoly, and he reproached her with a lack of progressive spirit. He cited the example of Germany, where, as a matter of fact, a monopolistic project was submitted to the Reichstag on February 22, 1886. But despite the intervention of Bismarck, who pointed out the financial necessities of the empire and the need for reforming municipal taxation, the bill was rejected on the 27th of March, following, by a vote of 181 to 3.

The great distillers supported the project because the government promised to buy their alcohol at 40 marks, or 10 marks more than it was worth at the time—a proceeding which would have involved an outright gift to them of 35,000,000 marks. But, although these particular manufacturers might contemplate with satisfaction the immediate profit, the question naturally arose as to what would happen if, later, under various kinds of pressure, the government, instead of having at its head a man like Bismarck, himself a prominent distiller, should have statesmen anxious not to arouse any suspicion of favoring these special interests, and who, moreover, might be in need of revenues to balance the budget. It was the general opinion that such a monopoly would increase the power of the government, and convert the retailers into electoral agents. The questions of rectification and exportation were also debated. Since that hour the question of an alcohol monopoly has been dead so far as the Reichstag is concerned.

Before the alcohol monopoly investigating committee of the French government, in 1887, M. Alglave expressly declared that Austria had adopted the policy of monopolizing alcohol. He even gave circumstantial details, such as that the price of a single glass was fixed at o franc 04; that the commission allowed the tavern keeper was 10 per cent., etc. He further declared that in Austria the measure was not a fiscal one, since the budget had a surplus of from 7 to 8 per cent., but purely hygienic. As a matter of fact the sole support for these statements existed in the fertile imagination of M. Alglave himself. There is no alcohol monopoly in Austria.

Finally M. Alglave attempted to invoke the example of Italy. In 1894, or seven years later than the sitting of the committee above referred to, the Italian government had considered the question, but any really serious discussion of the proposition was defeated by the outcry which arose.

Consequently M. Alglave's argument from example proved to be worth no more than all the others.

Belgium reformed its legislation regarding alcohol in 1896, but the monopoly proposed by the Socialist group was rejected without debate. The Belgian government increased the duties upon alcohol and prohibited the sale of absinthe, but the question of monopoly has played no other rôle.

2. Alcohol monopoly is actually found in only two countries, viz., Switzerland and Russia. Louis Marin, who, in 1902, as deputy from Var, took up the project of M. Alglave and presented it to the Chamber of Deputies, said: “You all know that the monopoly of alcohol in Switzerland and Russia is managed according to the ideas of M. Alglave.” I did not know it. But, if either conforms to the ideas of M. Alglave, they at least differ from each other.

The establishment of the Swiss monopoly had for its principal object the abolition of the ohmgeld duties. These were inter-cantonal entrance duties, a species of internal revenue tax at different rates, upon wine, cider, beer and alcohol. Established in 16 cantons out of 22 they had proved a serious hindrance to freedom of trade and commerce in the Swiss Confederation. The constitution of 1848 had prohibited any further increase of them, and, in the negotiations over the commercial treaty with France in 1864, they had given rise to grave difficulties. The Federal constitution of 1874 had ordered their abolition after January 1, 1890.

Article 31 of the constitution guarantees “liberty of industry and commerce throughout the length and breadth of the Confederation.” Article 32 enumerates exceptions to the above in the case of “salt, gunpowder, entrance duties on wines and other beverages”; while the amendment of 1885 adds to this list “the manufacture and sale of distilled beverages.” Article 32 and following gives to the Confederation “the right of establishing, by legislative act, regulations governing the manufacture and sale of distilled beverages”; which declaration, however, is seriously affected by a qualifying clause, the text of which I reproduce:

“The distillation of wine, of stone and kernel fruits and their waste, the roots of the gentian, juniper berries, and other similar materials, is excepted from Federal regulations governing manufacture and taxation.”

This clause was a triumph for the individual distillers of every description—makers of kirsch, bitters, gin and distillers of wine. The restrictions apply only to alcohol derived from amylaceous sources. The second paragraph of the above-mentioned article 32 adds that “trade in non-distilled alcoholic beverages shall not be subjected to any special tax by the cantons.” The third paragraph of the article declares that “the net income of the Confederation resulting from native distillation and the corresponding increase of entrance duties upon foreign distilled beverages shall be divided among the cantons in proportion to their population as established by the most recent Federal census.”

The article concludes with the following direction:

“The cantons are expected to employ at least 10 per cent. of the receipts in combating both the causes and the effects of alcoholism.” Very little attention has ever been paid to this wholesome bit of advice.

It is to be easily gathered that the object of the amendment of October 25, 1885, was to assure free circulation of beverages throughout the Confederation by suppressing cantonal entrance duties. It is a law of liberty.

On the other hand, the mere granting to the Confederation of “the right to establish, by legislative act, regulations governing the manufacture and sale of distilled beverages,” certainly does not imply monopoly. Numa Droz, then minister of agriculture, was opposed to monopoly, but favored the suppression of the ohmgeld duties. If the amendments to the Federal constitution, submitted to referendum October 25, 1885, did not absolutely forbid the monopoly of alcohol they were certainly not intended to pave the way for it. On the contrary, they provided for a system of excise duties by which the suppression of the ohmgeld duties would be more effectually accomplished than by a monopoly.

“In the course of the discussion in the chamber I do not believe that the word monopoly was pronounced a single time,” said Numa Droz in speaking of the surprise produced when the Department of the Interior presented to the Federal council three bills, two of which proposed a monopoly. Upon his recommendation, and by a vote of 4 against 3, the Federal council adopted the first bill presented, which provided for excise duties. The committee of the National Council, however, espoused the bill creating a monopoly. The majority of the Council thereupon capitulated, on condition that the Confederation would not itself distill alcohol, and the law was actually passed December 23, 1886, and approved May 15, 1887, by a referendum vote of 267,000 votes against 138,500.

As the Swiss were the first nation to put into practice free institutions they have shown themselves extremely distrustful of this measure. In fact they have been so anxious to limit their losses that they have decreed that three-fourths of the alcohol controlled by the monopoly shall be put on the foreign market, and only one-fourth sold at home. Nor shall this latter amount exceed 20,000 hectoliters or 25,700 hundred-weight a year.1

It was expected that the monopoly would yield a net profit of 8,840,000 francs, which sum was to be so divided among the cantons that each should receive an amount proportioned to the quantity of alcohol distilled within its borders.

The following table gives the result for the first five years:

Since 1896 the net profit has been distributed among all the cantons in proportion to their population. The following figures represent the amounts distributed from 1906 to 1910:

Thus we see that the monopoly has never reached the figure anticipated. During the last five years it has been 30 per cent. less than what was expected twenty-five years earlier.

As far as Switzerland is concerned this is not a disaster. But if the experiment were to be attempted in France, and its provisions based upon the dreams of Émile Alglave, who prophesied 1,500,000,000 francs revenue from it, or even upon those of M. Guillemet, who prophesied 700,000,000 or 800,000,000 francs, a certain deficit of hundreds of millions must inevitably have been the result.

In France M. Alglave has frequently declared that the Swiss monopoly was established first and foremost for hygienic reasons, and not for fiscal gain. That this is a complete error I have just shown, since the Swiss monopoly was established for the purpose of suppressing the ohmgeld duties.

It is true that at first, under the pressure of hygienists, the administration furnished absolutely pure alcohol. The Swiss, however, accustomed to drinking schnapps, which provokes a strong irritation of the throat, demanded that the alcohol provided by the monopoly should give them the same sensation. The department was forced to add an impure grade to the rectified alcohol in order to give the taste of fusel, without which the monopoly must have gone completely bankrupt.

To-day the Swiss are content with such rectification as the industry which sells the alcohol sees fit to make.

3. According to Peter the Great, “Russia's one joy is to drink.” However, the people consume little enough of the more common forms of alcohol; 2,000,000 to 4,000,000 hectoliters (53,000,000 to 106,000,000 gallons) of wine, 4,000,000 hectoliters of beer, for a population of more than 130,000,000, or about three liters (3 quarts) per capita. When the Russian wishes to indulge in his “one joy” he drinks brandy.

An alcohol monopoly is not a novelty to him. It is an institution which dates from 1598. It has passed through various fortunes. Abolished in 1883, it was reestablished January 1, 1895, in the four provinces of Perm, Orenburg, Samara and Oufa, having a joint population of 10,000,000 inhabitants. This population is consuming 200,000 hectoliters (5,300,000 gallons) of alcohol, or two liters (2 quarts) per capita, less than half the consumption in France.

In Russia the people live under a paternal régime. The emperor is the “little father” of his subjects. He must provide for their welfare; he must watch over them and protect them from evil. The Russian peasant, the moujik, has one great fault. Ill nourished, he loves to drink; and, when he enters a tavern, he demands vodka. This is alcohol brought to 40 degrees by an addition of water. When he has no more money with which to buy, he sells his cart, his cattle, his furniture. He even sells his clothes, so that in winter he would be in danger of dying of cold in the streets if the police did not look after him.

The emperor of Russia says: “I do not object to my subjects drinking alcohol. If they did not drink it irreparable injury would ensue to the finances of my empire. Only I forbid the moujik to drink it in a tavern.” Consequently the peasant is sold a little phial of 6, 12 or 60 centiliters, the cost of which is rigidly proportioned to the contents of the phial. There is no object, therefore, in buying large quantities at one time.

Such is the basis upon which the monopoly of alcohol in Russia is established. What have been the practical results? The alcohol shops are kept by officials who receive fixed salaries of 70, 80 and 100 francs, with a maximum of 150 francs per month. They have no interest whatever in developing trade. It is a very honorable position, about one-thirtieth of these agents being members of the nobility.

These alcohol shops have certain peculiar characteristics. They have neither corkscrew, glass, nor chair. The phial that they sell is sealed with a vignette, and it is absolutely prohibited to uncork it upon the premises. The customer enters, pays, and takes the phial away with him. The shop is in no sense a public house.

The moujik, once in possession of his bottle, goes out of the shop. Arriving in the street he finds a street vendor, who possesses what he has been unable to find in the shop, namely, a corkscrew and a glass. The vendor offers him the use of these, with a crust of bread and a piece of herring. While he uncorks the magic bottle the moujik eats the crust of bread and the bit of herring.

But as the poor fellow is afraid of being disturbed by the police, if he remains too long in the street, he gulps down the brandy and returns to get another bottle. The final result is this: Instead of drinking the liquor under shelter, and more or less slowly, in a public house, in front of a good stove, as was formerly the custom, the Russian peasant drinks in all haste, in the open air, in the street.

I have taken this information from official reports addressed to the emperor by temperance committees, which, strangely enough, are frequently headed by the collectors of indirect taxes (Directeurs des Contributions Indirectes) themselves.

All these reports declare that the present system has provoked an increase in public drunkenness. In one city (Ztatooust) alone, from the 1st of January to the 16th of August, 1895, there were 265 cases of public drunkenness, compared with 155 during the preceding period—an increase of 58 per cent. Moreover, whereas the monopoly is directing its efforts toward the suppression of drinking upon the premises, all these temperance committees are united in the desire to reestablish the former state of affairs under better conditions. For this reason the attempt has been made to open to drinkers so-called traktirs, establishments where cakes may be eaten while drinking warm beverages, but from which alcohol is proscribed. Alcohol is also excluded from breweries, therefore the moujik brings his phial with him and pours the contents into the beer. The efforts of the temperance committees have also been directed toward bettering this condition of affairs.

Serge de Witte once declared that the monopoly of alcohol in Russia had a moral, not a fiscal, aim. Today the moral excuse has been abandoned and the fiscal one openly proclaimed. The receipts from the monopoly play too important a role to be tampered with.

As I have already stated, from the fiscal point of view, the monopoly has been a success. In the preliminary budget for 1912–1913 it is estimated at 763,925,000 roubles ($393,421,000), in a total budget of 2,900,000,000 roubles ($1,493,500,000). It represents more than 26 per cent. of the total revenue. In Russia there are not as many alcoholic drinks as in France. The vodka of the monopoly may satisfy the moujik, but it would certainly never satisfy the majority of Frenchmen.1

[1]See Numa Droz, Études Économiques.

[1]See Appendix “A.”