Bob CollinsMarketplace’s David Brancaccio raises a fascinating question today: If a municipality starts a business that could compete with private business — say, a municipal liquor store like the one in more than 200 Minnesota communities — is it socialism?
Brancaccio reports on a town in Kentucky that was frustrated by high gasoline prices charged by retailers in Somerset, Ky. So the town started its own gas station to try to force prices down to the ones encountered by drivers in other towns in the area.
I looked around for some precedents and they are interesting. Some cities have long had municipal public utilities. The power company in San Francisco is owned by the city and county, for instance. In North Dakota, there has been a state-owned bank that for 95 years has been serving as a kind of mini-Federal Reserve for the region to target cheaper loans to projects deemed in the public interest, like nurturing local entrepreneurs.
There are precedents in the retail sector as well. The town of Kotzebue, Alaska, owns its own liquor store. In Minnesota, 207 municipalities own their own booze emporiums.
More typically, however, the response to high prices or other perceived market failures has not been ownership of the retail outlet by a municipality. Instead, the solution is more often local citizens banding together. Heating fuel co-ops are common, in which locals pool resources to get a better price on oil by buying in bulk. In Powell, Wyoming, there is even a department store called Powell Mercantile owned by a group of 500 local shareholders. The store is popular enough to have become a tourist destination.
“Every holiday, every weekend, I’ve seen gasoline jump here 30, 40, 50 cents on the gallon just overnight, for no reason, and our neighboring towns — until the last two or three weeks — you could drive anywhere in a 50-mile radius and buy gas cheaper than you could in Somerset,” said John Minton, a Somerset councilman since 1994.
