Alcohol lobbyist fighting GM

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Alcohol lobbyist fighting GM

• BY JEFFREY McCRACKEN
• FREE PRESS BUSINESS WRITER
• February 24, 2005

http//www.freep.com/money/autonews/gmadd24e_20050
224.htm
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Combating Drunken Driving

• General Motors Corp., which is a lightning rod
  for criticism on everything from air pollution to
  auto quality, has now become a target for, of all
  things, one of its charitable efforts -- its
  financial and political push to combat drunken
  driving.
• A national campaign -- called MADDatGM -- has
  been launched with the backing of 17,000 bars,
  taverns and liquor stores to attack the automaker
  and Mothers Against Drunk Driving, mostly for
  their efforts to lower legal blood-alcohol
  levels. The effort has so far been a low-key one,
  but GM officials say the Washington-based trade
  group behind it is threatening that its members
  will quit buying GM vehicles for corporate fleet
  use -- which could cost the automaker millions of
  dollars.

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Prohibition?

• The campaign, which already has a Web site and
  says it will distribute posters and coasters at
  various stores and bars, argues that MADD is no
  longer just trying to halt drunken driving, but
  has become a prohibitionist group that wants to
  criminalize all drinking.
• The campaign argues that GM, with its
  long-running support of MADD, supports
  prohibition and that tavern or liquor-store
  owners should think twice about buying GM cars or
  trucks.

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Response

• MADD denies that it's trying to halt social
  drinking, saying its mission is focused on three
  things preventing drunken driving, helping
  victims of drunken driving and halting under-age
  drinking. MADD notes that the MADDatGM push is
  from businesses that make money off alcohol sales
  and are angry MADD successfully lobbied for
  tougher national blood-alcohol levels for drunken
  driving.
• GM is one of MADD's top corporate sponsors,
  donating over 3 million the last five years and
  placing executives on MADD boards. GM spokesman
  Alan Adler says the automaker supports MADD
  because "our focus is on drunk driving and the
  17,000 people killed each year by drunk driving
  on the highways."

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The Economics Market Failure
Price
D
S

• Look at demand and supply of liquor.
• You get market price and market quantity.
• You can treat the alcohol level restrictions as a
  tax, BUT

D
P0
DW
Quantity
Q0
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The Economics Market Failure
Price
S
D
S

• Dont liquor sales have an external cost?
• What is it? Traffic fatalities and damage.
• This is a cost that is not priced!
• As a result, market equilibrium at P0 Q0 gives us
  too much drinking and too much driving.
• We want to be at Q1, where the properly accounted
  supply and demand are equal.

D
P0
DW
Quantity
Q0
Q1