I think I mentioned several times on this blog that fake alcohol kills 42,000 people in Russia. Recent economic measures of the Russian government, intended to reduce that number…are actually going to increase it! The reason? Good intentions, bad implementation.
Imported alcohol has disappeared from stores and restaurants over the past several weeks. Why? Because the law mandates that there should be new excise stamps on bottles being sold, developed partly to ensure that counterfeit goods (and stamps) don’t make their way into the market. There is one key problem – while old stamps can’t be used, the new ones have not been printed up. This means, alcohol can’t be legally sold. There are several consequences – one is increased prices (Econ 101 – reduced supply, higher price)
Any shortage sends prices up,” Drobiz said. “So, of course, the prices of alcoholic beverages will be raised, although probably by no more than 20%.” According to Alexander Barkhatov, the chief communications officer for Russian supermarket network Perekryostok, “The situation with imported alcoholic beverages is normalizing and departments selling wines and spirits won’t come back to life until fall.” He said liquor importers were likely to raise their prices by an average 10%.
Another one is lost government revenue. It is estimated that one of the supermarket chains in Moscow is going to pay $5 million less in taxes. What about other stores in Moscow? What about the whole country? The amount can be staggering. More thoughts on this here (in Russian).
The most important consequence of all is a lot worse that millions lost in revenue and higher prices. As imported alcohol disappears from stores and restaurants, guess what happens to sales of counterfeit stuff in the black market? You are right – it goes up! And this means that the initiative, the original intention of which was to reduce the amount of counterfeit alcohol on the market, is leading to the opposite — more fake alcohol and more deaths. Disheartening indeed.
Published Date: July 07, 2006