Alcohol pricing can curb drinking

  • Article by: THE ECONOMIST
  • Updated: December 23, 2013 - 7:06 PM

Consumption is stable, but risky drinking is on the rise. Policymakers want higher prices — causing a headache for the alcohol industry.


Bottles were lined up a San Francisco liquor store. Worldwide, those who do drink are often drinking dangerously. PETER DaSILVA New York Times

By day tourists flock to the Plaza de España in central Madrid to snap photos beside the sculpture of Miguel de Cervantes, author of “Don Quixote.”

By night a newer facet of Spanish culture is on display: loitering groups of young people downing plastic bottles of whiskey and vodka mixed with Fanta Lemon carbonated juice. The ground is littered with empties. Nearby, three young men help a friend who’s vomit­ing on the pavement.

Such carousing was once rare in Spain. A Mediterranean drinking ­culture prevailed in which alcohol was taken only with food. That is changing. In Spain and many other rich countries, alcohol intake is becoming a bigger problem — for some groups.

Overall, global consumption of alcohol has been stable since 1990, according to the World Health Organization. Around half of the planet’s population is teetotal. But those who drink alcohol are doing so more hazardously. Policymakers are looking for ways to address this. A new and much-watched experiment in Scotland, for example, involves setting a minimum price for each unit of alcohol.

Individual consumption peaked in Spain in 1975, but young people are increasingly indulging in the ­botellón, (literally “big bottle”): Drinking outdoors to get drunk. In France, another country with traditionally moderate drinking patterns, a similar trend is emerging. In the past three years hospital admissions from alcohol abuse have risen 30 percent there, to 400,000 a year. Binge drinking is so common that in July it gained an official name, “beuverie express.” Across much of the rich world, many people (not just the young) are drinking greater quantities in a single session.

Responsible drinkers pose little risk to others. But the growth in hazardous drinking habits has far-­reaching implications. Deaths from the overuse of alcohol rose from 750,000 in 1990 to 2.5 million in 2011, nearly 4 percent of all fatalities worldwide. Alcohol causes long-term ill-health, but even a single binge can end in hospital: In Britain, for example, such admissions ­doubled in 2003-10.

It is not only drunks who suffer from their excess. Booze contributes to a third of all deaths on Europe’s roads each year and stokes abuse and violence. It features in almost all public-order offenses in Ireland; Up to 80 percent of Australian police work is alcohol- and drug-related; across the European Union, it is linked to 65 percent of domestic violence and 40 percent of murders. When lower economic output and higher social costs are taken into account, alcohol costs Europe and America hundreds of billions a year, up to 1.5 percent of GDP by some estimates.

The alcohol industry has introduced some modest schemes to encourage responsible drinking. Governments have stepped up education campaigns; most restrict the sale of alcohol in some regard, by licensing premises, setting opening and closing hours and banning purchases by children. But all that is largely outweighed by another factor: Health campaigners say that in many countries booze is simply too cheap.

Alcohol as a loss-leader

Increasingly alcohol is drunk at home, rather than in bars or restaurants, and is often purchased at deeply discounted prices. In Britain and Ireland, supermarkets frequently sell drinks at or below cost, to lure in customers: Cheap strong cider means a Scotsman can reach his recommended weekly drinking limit of 21 units (210 mililiters, or 7.1 ounces) of pure alcohol for just $7.50. An Irishwoman can buy her 14 units for $8.70. The trend is spreading. Wal-Mart, an American chain, recently started selling beer almost at cost.

The cheaper the liquor, the more people drink. That is not just barroom wisdom. A 2009 paper in Addiction, a public health journal, reviewed 112 studies of changes in alcohol taxes and found an unambiguous link. This suggested that a 10 percent price rise in prices would cut consumption by around 5 percent.

Two groups are particularly price-sensitive. Heavy drinkers tend to trade down and seek out cheaper booze to maintain their intake. They drink at home and are likely to die early of alcohol-related illness. A second category is young and underage merrymakers who often have low or minimal income. They cannot afford to drink as much when prices rise.

Most government initiatives on prices have been tentative. In 1998 Germany introduced a so-called “apple-juice law.” In places where booze is consumed, at least one alcohol-free beverage must cost less than the cheapest alcoholic one. This does not deal with home consumption, though, which accounts for most hazardous drinking. In 2014 Britain will introduce a ban on selling alcohol at below cost, but this will affect less than 1 percent of all booze on sale, according to the Sheffield Alcohol Research Group, a British academic consortium. Alcohol taxes in some European countries have been rising for a decade, but wine and cider are both taxed by volume, not just strength. That means a sweet wine with 10 percent alcohol bears the same tax as a riesling with 6 percent.

More convincing are the efforts of several Canadian provinces, which have a floor price for a unit of each type of alcohol: the stronger a drink, the more it costs. When this policy was introduced in British Columbia in 2002, with an average 10 percent price increase, an immediate, substantial and significant reduction in wholly alcohol-attributable deaths followed, says Tim Stockwell of the province’s University of Victoria. The longer-term effect is striking too. Over the 2002-09 period, figures show a 32 percent drop in such deaths. In Saskatchewan a similar price rise in 2010 was associated with an 8.4 percent drop in drinking.

Copyright 2013 The Economist Newspaper Limited, London. All Rights Reserved. Reprinted with permission.

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