Alcohol Monopoly

ALCOHOL MONOPOLY

Ever since the last quarter of the fifteenth century, Moscovite princes have exercised control over the production and sale of vodka. In 1553 Ivan IV (the Terrible) rewarded some of his administrative elite (oprichnina ) for loyal service with the concession of owning kabaks or taverns. Even so, these tavern owners had to pay a fee for such concessions. Under Boris Godunov (1598–1605), the state exerted greater control over vodka, a monopoly that was codified in the 1649 Ulozhenie (code of laws).

Disputes over the succession to the throne at the end of the seventeenth century loosened state control over vodka, but Peter I (the Great, r. 1682–1725) reasserted strict control over the state monopoly. Catherine II (the Great, r. 1762–1796) allowed the gentry to sell vodka to the state. Since the state did not have sufficient administrators to collect revenue from sales, merchants were allowed to purchase concessions that entitled them to a monopoly of vodka sales in a given area for a specified period of time. For this concession, merchants paid the state a fixed amount that was based on their anticipated sales. These tax-farmers (otkupshchiki ) assured the state of steady revenue. The percentage of total revenue derived from vodka sales increased from 11 percent in 1724 to 30 per cent in 1795. Between 1798 and 1825, Tsars Paul I and Alexander I attempted to restore a state monopoly, but gentry and merchants, who profited from the tax-farming system, resisted their attempts.

Under the tax-farming system, prices for vodka could be set high and the quality of the product was sometimes questionable. Complaining of adulteration and price gouging, some people in the late 1850s boycotted buying vodka and sacked distilleries. As part of the great reforms that accompanied the emancipation of the serfs, the tax-farming system was abolished in 1863, to be replaced by an excise system. By the late 1890s, it was estimated that about one-third of the excise taxes never reached the state treasury due to fraud.

Alexander III called for the establishment of a state vodka monopoly (vinnaia monopoliia ) in order to curb drunkenness. In 1893 his minister of finances, Sergei Witte, presented to the State Council a proposal for the establishment of the state vodka monopoly. He argued that if the state became the sole purchaser and seller of all spirits produced for the internal market, it could regulate the quality of vodka, as well as limit sales so that people would learn to drink in a regular but moderate fashion. Witte insisted that the monopoly was an attempt to reform the drinking habits of people and not to increase revenue. The result, however, was that the sale of vodka became the single greatest source of state revenue and also one of the largest industries in Russia. By 1902, when the state monopoly had taken hold, the state garnered 341 million rubles; by 1911, the sum reached 594 million.

By 1914, vodka revenue comprised one-third of the state's income.

Established in 1894, the monopoly took effect in the eastern provinces of Orenburg, Perm, Samara, and Ufa in 1896. By July 1896, it was introduced in the southwest, to the provinces of Bessarabia, Volynia, Podolia, Kherson, Kiev, Chernigov, Poltava, Tavrida, and Ekaterinoslav. Seven provinces in Belarus and Lithuania had the monopoly by 1897, followed by ten provinces in the Kingdom of Poland and in St. Petersburg, spreading to cover all of European Russia and western Siberia by 1902 and a large part of eastern Siberia by 1904. The goal was to close down the taverns and restrict the sale of alcoholic beverages to state liquor stores. Restaurants would be allowed to serve alcoholic beverages, but state employees in government shops would handle most of the trade. The introduction of the monopoly caused a great deal of financial loss for tavern owners, many of whom were Jews. Because the state vodka was inexpensive and of uniformly pure quality, sales soared. Bootleggers, often women, bought vodka from state stores and resold it when the stores were closed.

In 1895 the state created a temperance society, the Guardianship of Public Sobriety (Popechitel'stvo o narodnoi trezvosti), in part to demonstrate its interest in encouraging moderation in the consumption of alcohol. Composed primarily of government officials, with dignitaries as honorary members, the Guardianship received a small percentage of the vodka revenues from the state; these funds were intended for use in promoting moderation in drink. Most of the limited sums were used to produce entertainments, thus founding popular theater in Russia. Only a small amount was used for clinics to treat alcoholics. Private temperance societies harshly criticized the Guardianship for promoting moderation rather than strict abstinence, accusing it of hypocrisy and futility.

With the mobilization of troops in August 1914, Nicholas II declared a prohibition on the consumption of vodka for the duration of the war. At first alcoholism was reduced, but peasants soon began to produce moonshine (samogon ) on a massive scale. This moonshine, together with the lethal use of alcoholic substitutes, took its toll. The use of scarce grain for profitable moonshine also exacerbated food shortages in the cities. In St. Petersburg, food riots contributed to the abdication of Nicholas in February 1917.

The new Bolshevik regime was a strict adherent to prohibition until 1924, when prohibition was relaxed. A full state monopoly of vodka was reinstated in August 1925, largely for fiscal reasons. While Stalin officially discouraged drunkenness, in 1930 he gave orders to maximize vodka production in the middle of his First Five-Year Plan for rapid industrialization.

The Soviet state maintained a monopoly on vodka. As soon as Mikhail Gorbachev became general secretary of the Communist Party in 1985, he began a major drive to eliminate alcoholism, primarily by limiting the hours and venues for the sale of vodka. This aggressive campaign contributed to Gorbachev's unpopularity. After he launched his anti-alcohol drive, the Soviet government annually lost between 8 and 11 billion rubles (equivalent to 13 to 17 billion U.S. dollars, at the 1990 exchange rate) in liquor tax revenue. After Gorbachev's fall and the dissolution of the Soviet Union, the state vodka monopoly was abolished in May 1992.

Boris Yeltsin attempted to reinstate the monopoly in June 1993, but by that time floods of cheap vodka had been imported and many domestic factories had gone out of business. Although President Vladimir Putin issued an order in February 1996 acknowledging that Yeltsin's attempt to reestablish the vodka monopoly in 1993 had failed, he has also tried to control and expand domestic production and sales of vodka. The tax code of January 1, 1999 imposed only a 5 percent excise tax on vodka in order to stimulate domestic consumption. By buying large numbers of shares in vodka distilleries, controlling their management, and attacking criminal elements in the business, Putin has attempted to reestablish state control over vodka.

See also: alcoholism; taxes; vodka; witte, sergei yulievich

bibliography

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Herlihy, Patricia. (2002). The Alcoholic Empire: Vodka and Politics in Late Imperial Russia. New York: Oxford University Press.

LeDonne, John. (1976). "Indirect Taxes in Catherine's Russia II. The Liquor Monopoly." Jahrbücher für Geschichte Osteuropas 24(2): 175–207.

Pechenuk, Volodimir. (1980). "Temperance and Revenue Raising: The Goals of the Russian State Liquor Monopoly, 1894–1914." New England Slavonic Journal 1: 35–48..

Sherwell, Arthur. (1915). The Russian Vodka Monopoly. London:

White, Stephen. (1996). Russia Goes Dry: Alcohol, State, and Society. New York: Cambridge University Press.

Patricia Herlihy