Private clubs, middle ground?

The Prohibition is known as the noble experiment ... that failed! The lesson learned from the experiment that legislating morality and person conduct is difficult. Not only is it difficult, it has proved to be counterproductive, since drinking increased during the 1920s, with an estimately 100,000 speakeasies in New York alone. While the Prohibition was repealed, states are empowered to make their own legislature when it comes to how it regulates alcohol. The focus of this blog is on how Arkansas has exercised this right.

Arkansas operates on a “local option” system, under which each county or city may determine whether alcoholic beverages may be sold in that area.  The 1969 law allows a private club to exist in a dry county as a nonprofit corporation with certain purposes “other than the consumption of alcoholic beverages.” Then in 2003, the law was amended to add three more purposes for private clubs — community hospitality, professional association and entertainment. The map below represents the unofficial "wet-dry" status of the counties in Arkansas.

"In a wet county, the retail sale and manufacture of alcoholic beverages in legal. In dry counties, only a private club permit may be issued." It is interesting to note that "most of the wet counties have dry areas within their borders such as townships or cities." Every year these areas can put local option on the elections through petition during November General Elections

The issue gets complicated due to the private club permit provision within the regulation. For example, Cleburne County is “dry;” that is, alcoholic beverages may not be sold to the general public. Even so, alcoholic beverages may be legally dispensed through non-profit private clubs, provided certain criteria are met by those establishments.  This bothers people and organizations, such as The Dry Counties Coalition, who believe if the county has voted to be “dry,” it should actually be dry. In order to accomplish this, Arkansas General Assembly would need to actually change the law.  

The bizarre practice of "voting dry, but drinking wet" is a consistent theme with American's relationship with liquor. On the one hand, our nation sees it as a sin, an immorality that is not good for individuals and society. However, people want to drink and so they do. Further, because of this desire, alcohol regulations can have economic effects on an entire town. In fact, Arkansas Legislature highlighted this conflict in their alcoholic beverage control law which states that "such activities will be strictly regulated, but then acknowledges the importance of tourism and conventions to the state; the competition among states for them; and proclaims that visitors to the state must be provided “accommodations, services and facilities” to allow Arkansas to be competitive with other states."

An example of the detrimental economic effects of being dry is the history of Monmouth, Oregon, which was the last dry town on the West Coast. OBP's historical piece is an insightful reflection on the turmoil regarding this issue. Ultimately, the economic impact on the town was just something that cannot be ignored. In fact, it even lost its supermarket due to population loss. It seems holding onto the dream of a dry county makes no sense if you don't have any people left.

Wine Not Help Small Business?

When it rains it pours. It seems that legislatures like to get on a bandwagon and roll with it. OpenMarket.org, a blog of the Competitive Enterprise Institute, featured a lengthy list of proposed alcohol laws in their Alcohol Regulation Roundup.  Many of them focus on beer and breweries, but quite a few affect the wine industry. For example, the recently filed Arizona referendum hoping to raise taxes on all alcoholic beverages. Part of the referendum calls for an increase in wine taxes by 20 cents per bottle (making wine taxed at $1.04 a gallow!).  However, the money is said to support alcoholism-related social programs. In New York, lawmakers are pushing to legalize wine in grocery stores. The economy stimulating goal is clearly repented in the title of the legislature, the "Wine Industry and Liquor Store Revitalization Act."

One might think wine and immediately think deep pockets and rich snooty people make and drinking the delicious elixir. But notions like these make it easy to forget that there are many small wine makers, who are more economically vulnerable and were hit heaviest by the Great Recession. Enter Alabama House bill sponsored by Representative Becky Nordgren, R-Gadsden.  The Alabama House’s Economic Development and Tourism committee bill hopes to even the playing field to allow small farm wineries to be competitive. 

The bill has stalled since its first reading early last month, but Nordgren stresses the powerful effect this bill could have. Currently in Alabama, wine manufactures can only sell on their premises, and this bill would allow farm wineries to sell to wholesalers or distributors.  America's alcohol operates under a  three-tier distribution system. The distribution system emerged after the prohibition, with the historic rationale to assure that alcohol taxes are duly paid and collected by the government. Further, it is believed by some that the system "serves the interests of everyone in the value chain: consumers, states and their revenue collectors, local communities, brewers, wholesalers and retailers. Consumer choice would suffer if retailers were owned or controlled by a supplier or distributor, as they would feature only the brands offered by these suppliers and exclude others."

However, Nordgren says the current structure systematically disadvantages small business. While small farm wineries can currently sell bottles of wine on their premises, they struggle distributing their product because they don't produce large enough quantities to entice distributors. She thinks that if you allow farm wineries to self-distribute, you will give them the leg up needed to grow to a size that would distributors would be willing to work with.

But are Alabama small wineries really in an economic position that ensure this legislation will serve its purpose? While I am doubtful, Nordgren and supporters are not. A similar experiment in North Carolina was met with great success. The state had 19 wineries before the bill, and in the five year period after the bill was passed the number reached a whopping 99. These wineries equated to jobs and taxes for the state, and a 2011 study by Frank, Rimmerman & Co. of St. Helena, California estimated

 "the total economic impact of the wine industry was $1.28 billion. During the five-year period, the number of jobs in the North Carolina wine industry increased from 5,727 to 7,575 and wages paid increased from $158 million to $237 million. Production increased from 470,000 cases to 529,000 cases, and the number of wineries grew from 55 to 89. Wine-related tourism produced $122 million in 2005 and increased to $156 million in 2009. In the final year of the survey, the North Carolina wine industry paid $65 million in federal taxes and $51 million in state taxes.

John Copety, Wills Creek Vineyard owner, believes that the Alabama would have the same effect on its' state wine industry as its equivalent did in North Carolina. He confidently proclaimed that not only are "people ... going to buy wine,” and “[he'd] prefer them to buy wine from Alabama and not California.” As a Californian, I may not want this for selfish reasons, but I can't argue with a state trying to revitalize their economy.

Immigration: Effect of Whine on Wine

Debate over the current state of American immigration remains a hot topic in the political arena. It is no secret that farmers often rely on immigrant labor. Therefore, it is no wonder that farmers support immigration reform. All across the nation, farmers are suffering because of the insistence of some that undocumented workers be driven out. In a recent Legal Ruralism post, I noted how all across the country, farmers face farm labor shortage concerns from a wide range of agriculture, from dairy to berries. California wine is no exception.

In California, farmers are worried about their grape harvests (and subsequent raisin production). Individuals, such as Roy Beck (the executive director of Numbers USA, a nonprofit that supports lower immigration levels) suggest that farmers resort to mechanization of harvesting. Some vineyards have headed this suggestion and replaced grape harvesting jobs with machines. No only have some vineyards implemented mechanical harvesting, some find this method superior to handpicking for a variety of reasons (most notably its cost effectiveness). But for others, mechanical picking does not adhere to the spirit of wine making while others possess vineyards not suitable for machine work (as the machines could cause damage to the vines and soil).

Proper agriculture labor involved with wine growing is both physically difficult and requires a level of skill and sophistication. It took several strikes by the United Farm Workers union for grape growers labor conditions to improve beyond the horrific depiction in Steinbeck's "The Grapes of Wrath." This should have made the cost of grapes increase, but instead they stayed the same. America likes things cheap, and we constantly undervalue the effect proper compensation of lower tier employees has on the end cost of a product. Wineries in Napa and Sonoma have the capacity to pay their employees a fairer price as their grapes yield a higher value. In turn, these wineries possess a lower reliance on undocumented labor.

Some fear that undocumented workers take American jobs. When it comes to agriculture, this argument simply does not hold up. The Gray Report blog astutely points out, "[i]f we didn't need them, we wouldn't hire them, and they wouldn't come." Wine Geeks fears about what would happen if the labor force vanished. They logically predict that,

Prices will skyrocket. Production will drop. Small mom and pop wineries, the kind that we winegeeks love to praise, will be forced out of business because they cannot get enough people to harvest the grapes and they can’t compete with the gigantic companies who harvest by machine. This is but one aspect of our society that has become increasingly dependent upon the work of those who are foreign to our soil.

It is clear that immigration reform is needed in order to accommodate both the quantity of workers wanting to work in the United States and the amount of work that needs to be done. Personally, I believe this country craves more creative policy suggestions. For example, The Gray Report suggests issuing visas for guest workers, which would permit multiple entries and be renewable. After consistent presence and lack of criminal activity, they would be able to obtain a higher level of green card. These kind of solutions help fulfull the immigration enforcement primary policy objective, while providing labor for the work that needs to be done.

Despite the policy shift, there also needs to be a cultural shift. There is no way for wine to remain as cheap as it currently is without relying on machine harvesting or underpaying the workers who pick the wine. As a country we simply need to come to terms with this understanding and move on. I suggest doing so over a glass of nice California wine with some close friends.