In 1986, The Economist first published its Big Mac Index as a way to “make exchange rate-theory a bit more digestible.” The theory behind the Big Mac Index is that the same good should be priced similarly in all countries. Any differences in prices suggest, in a rather savory way, that one country’s currency is undervalued or overvalued against another’s. Other products have sometimes been substituted for the Big Mac. In 2004, The Economist used a Tall Latte Index, with a cup of Starbucks Coffee being the good in question.
Could beer be used as such an index product? Well, not to tell the same story about exchange rates. Whereas a cup of Starbucks coffee or a Big Mac is, technically, the same across all borders but produced locally using local suppliers whenever possible, there is no single beer brand that is produced locally throughout the world and, if there were, it is doubtful this world brew would be the preferred choice amongst every country’s consumers.
All the same, comparing the price of beer across a number of countries can be a very illuminating exercise for a different reason: to help us understand the factors of why, for a stackful of countries, a beer is so bloody expensive?
For the purposes of this exercise, we will use the price of a half liter (≈ an Imperial pint) of mainstream draught lager, as lager is the most commonly available and widely consumed beer type worldwide. If a country produces no beer of its own and imports or smuggles in its supply, then the price of a half liter of the most widely consumed beer will be used instead. Since the purpose of this exercise is to show relative discrepancies, we will use an index to distinguish prices, arbitrarily setting the value of 100 to the price of a half liter of draught lager in the USA (= USD 3.62). This allows you to see in an instant that a country with a price level of 150 is 50% more expensive than the benchmark without the need to do any mathematical calculations yourself. The prices here were determined by averaging together figures from several crowdsourcing web sites.
The country with the most expensive beer prices is Qatar, with a price level of 283. The obvious culprit to blame for the sky high pricing is religion. Behind Saudi Arabia, Qatar is considered the most conservative society in the Gulf Cooperation Council and adheres to a strict interpretation of Islam. This hardly explains the full story because Saudi Arabia, the stricter of the two nations as far as Islam is concerned, has a beer price level of only 34. There is a more thorough explanation. First, Qatar is a rich country. A very rich country. It contains the world’s third largest natural gas reserves and oil reserves and currently enjoys the world’s highest GNP per capita at around US$146,000 (adjusted for purchasing power), more than 2.5 times that of the USA’s. Rich countries can get away charging higher prices.
Couple that with the second reason, which is that over 80% of the residents in Qatar are expatriates. To cater to these foreign residents, the Qatari government permits them to drink – either at luxury hotel bars where a beer can cost $13/each or from the specially licensed alcohol store called the Qatar Distribution Company. The latter option is only available to permanent residents. To get a liquor license card, one must produce a residence permit and a written letter from his employer stating his income and pay a $300 deposit.
Qatar’s scheme works out ingeniously for the Qatari government. They can impose prohibitive alcohol taxes without alienating a minority citizenry who can’t legally buy it while getting the foreign majority residents to fill up the government coffers. Another rich country, the United Arab Emirates (price level: 238), practices a similar scheme, where, again, over 80% of the residents are expats. Oman, too (price level: 180), though they have ‘just’ 53% of their population comprised of expats.
Contrary to popular opinion, the Islamic influence on beer prices, if you exclude high income countries with huge foreign resident populations, isn’t widely seen. Only Iran (201) and tiny Djibouti (190) charge exorbitant rates for beer and other alcohol. The joke is that Jewish Israel is pricier (209) than all but two of the Islamic countries. A beer in the Islamic Republic of Pakistan will cost about a third of what it will in Israel. Jordan and Yemen are pricier than Pakistan but still less than three-quarters of the price of a beer in Israel. The Israeli government’s recent alcohol tax reforms have turned Tel Aviv into the world’s fourth costliest city for a beer, according to the International Beer Price Index.
The Islamic Middle East really isn’t the beer ripoff everyone thinks it is. You can head to Scandinavia for that. High taxes on alcohol are a price the Scandinavians are willing to live with to fund their generous welfare states. Norway (269) leads the way, but is followed closely by Greenland (247 – considered part of Denmark officially), Sweden (192), Denmark (181), and Iceland (179). For the sale of alcohol, Scandinavians don’t operate all that differently from the Qataris. In Norway, you can only buy your alcohol from government owned stores called Vinmonopolet; in Sweden, the Systembolaget; in Finland, at Alko; in Iceland, at Vínbúð. Only Denmark remains the exception. Alcohol can be purchased there from any grocery or kiosk.
Countries with high standards of living, as measured in terms of not just incomes, but inexpensive or free tertiary education, healthcare, adequate holidays, etc, seem to be able to slide in higher excise taxes on liquor over countries which do not. It is a watered down version of the Scandinavian welfare state principle that if you want all these perks, you have to be willing to allow the government to tax you on something to pay for them. Switzerland (180), France (174), and Australia (152) fall into this category.
There is an old idiomatic proverb which says that you can’t have your cake and eat it, too. In some countries, it appears that you can’t have your beer and drink it, too.