Governments’ alcohol subsidies are harmful to public health

Each January, millions of people around the world make resolutions to cut back on the amount of alcohol they drink; many participate in the popular “dry January” pledge to give up alcohol altogether for a month. Given the high societal cost of harmful alcohol use, and the pandemic-driven increase in the use of alcohol, it’s a trend that should be encouraged.

Changing personal drinking habits isn’t easy. The addictive nature of alcohol aside, pervasive marketing of alcoholic products, their availability, and social pressures to drink all contribute to alcohol consumption. Governments also contribute to it by supporting the industry with billions of dollars of alcohol subsidies to bring their products to consumers.

We use the economist’s term “perverse” to describe these incentives because they go against the interest of the public.

A new report from Vital Strategies, the global public health organization we work for, exposes how the alcohol industry, like the tobacco and fossil fuel industries, benefits from billions of dollars it gets in financial incentives and alcohol subsidies from governments and development agencies to increase its reach and profits. These incentives, which are used to produce, market, and sell alcohol, contribute to a growing health burden: Excessive consumption of alcohol is among the world’s leading causes of death and disability, contributing each year to more than 3 million deaths and other social ills.

As detailed in the new report, the health costs of excessive alcohol consumption are staggering. It is a leading risk factor for noncommunicable diseases, including cancer, cardiovascular disease, and liver disease. It’s also the leading global risk factor for death and disability for people ages 15 to 49. And it contributes to lost productivity, road injuries, and deaths, as well as to homicides, suicides, and domestic abuse.

It is short-sighted, if not foolhardy, for governments to give alcohol subsidies to an industry with a total market value of more than $1.5 trillion in 2019. Yet the industry continues to benefit from significant government-sponsored tax breaks, marketing deductions, and other practices that promote alcohol use. Research shows that marketing deductions alone increase heavy drinking and encourage children as young as 10 to start drinking alcohol.

The Vital Strategies review showed that between 1995 and 2020, governments and development agencies with headquarters in high-income countries often gave incentives to companies producing and selling alcohol in low- and middle-income countries, which tend to have the highest attributable deaths due to alcohol and less-stringent alcohol regulations. Here are a few examples:

• Over the past three decades, the European Bank for Reconstruction and Development has invested more than $422 million in breweries in Central and Eastern Europe, a region with some of the highest rates of harmful drinking and high levels of disease attributable to alcohol.
• The United Kingdom has actively promoted the global expansion of U.K.-based alcohol companies around the world, including in Cameroon and Sudan, via about $1.25 million in development assistance, and in India by securing reductions in price controls or tariffs.
• In Uganda, SABMiller leveraged a production subsidy of a local variety of sorghum to encourage local farmers to grow and harvest it for beer production. This subsidy led to increased production and sales of a new low-cost beer, created 100 factory jobs, and was hailed for advancing economic development. Yet the incentive also promoted the growth and sale of beer in a country where alcohol use is the leading risk factor for premature death.

These incentives create a triple burden for countries across the world: lost revenue, increased alcohol consumption, and overwhelmed public health systems. If we want to build a healthier world, these enticements need to stop.

First, governments should use finances and fiscal policies to strengthen health systems rather than subsidize alcohol companies, and reallocate the savings or new revenue from taxes to enhance health budgets.

Second, incentives that can be harmful to health should be carefully phased out, as has been done with tobacco and, to a lesser extent, fossil fuels.

Third, governments and the development community must be more transparent and intentional about collecting and reporting data on the economic incentives, like alcohol subsidies, they offer to industries. Countries should consider whether incentives are health positive or health negative.

While the imperative of companies, including the alcohol industry, will always be to increase their markets and profits, governments need to be ever watchful and responsive to the evolving ways in which their societies suffer from unhealthy products. Consider, for instance, how the coronavirus pandemic has been used for commercial gain. Brazil brewer Karsten, for example, created an ad that urges consumers to follow three steps to survive the pandemic: “Isolate, use sanitizer, and drink beer for fun.”

As we start a new year, government and development leaders globally should make their own resolution and stick to it: Commit to protecting the health and welfare of people, and ensure that their actions — even those cast as development aid — do good, not harm.

Nandita Murukutla is vice president for global policy and research at Vital Strategies, where Rebecca Perl is vice president for partnerships and initiatives.