If Beer Ran the Economy

Ryan James Girdusky

6/8/2011 12:01:00 AM - Ryan James Girdusky

The New York Timesreported on May 31, 2011 that housing prices had hit their new all time low; similarly consumer confidence has hit a six month low according to Bloomberg, and unemployment remains high .  Americans have become disenchanted with the economic stagnation; headlines reading “a new low”, has been applied to the economy more than to Congressman Anthony Weiner.  Americans looking for relief and a way back to prosperity have looked to the stimulus package, omnibus, the Federal Reserve, Republicans, Democrats and a soiree of people and schemes to save our sinking economic ship.  After all of these solutions have failed, there is only one place Americans can safely turn in order to seek salvation from our economic woes: beer. 

The beer industry has had as many ups and downs as the American economy during the last three years.  American beer of the 1970’s and 1980’s was bland, tasteless and featureless.  The world saw American beer then as offensively as they see American foreign policy today.  American beer’s return to greatness in regards to taste, affordability and connection with localism during the early part of the 21st century is only possible within a free market.  The beer industry remains one of those last bastions of free enterprise.

From the end of the Civil War to 1910, a little more than 50 years, beer production sky rocketed to a 1600% increase.  More than 1,500 American breweries were producing close to 60 million barrels of beer a year.  The local brew soon became a pastime in taverns across the country.  The railroad systems allowed for easy transportation of beer and brand names soon emerged, the likes of Pabst and Anheuser-Busch were being enjoyed in brothels, taverns, ball games, and family gatherings from New York to San Francisco.

Needless to say, not every American loved the taste of beer, Prohibition was the law of the land from 1920 to 1933.  It ended just in time for a depression and a World War.  Many local breweries faced bankruptcy due to government intervention in both the stock market and the beer industry.  As usual when big government intervenes, big business gets the upper hand; after prohibition large beer companies were still in existence while their smaller competition were either annihilated during prohibition or as inconsequential to the market as Poland was to stopping an advancing German invasion.  From 1940 to 1980 the top 10 largest brewing companies saw their share of the market grow from 28% to 94%.  By 1981, only 100 breweries were still operating in America.

Out of the bland taste of the canned and bottled 1980’s a renaissance of the microbreweries took place .  A counterculture was born- one that valued localism, taste and authenticity.  By 2011, there were 1,700 breweries in America, mostly small and fairly inconsequential to the major beer companies.  Yet the trend continues to grow: according to The Business Journal, craft beer grew from 4.3% of the beer market to 4.9% of the beer market from 2009 to 2010, even though overall beer sales decreased by 1% during the same time period.  While 4.9% doesn’t seem big, it represents $7.6 billion and 100,000 jobs. 

This may seem like a history lesson, but the rebirth of microbreweries created thousands of jobs and billions of dollars in revenue because they were allowed to compete in the free market.  Beer's path to better quality and job creation is the same path the US needs to take to get out of this recession. What is different from the beer industry than most others is that big beer never successfully lobbied congress to regulate the industry to such an extent that the small beer companies would all but cease to exist.

Big corporations have used the government to distort the market allowing their companies to get larger percentages of any industry while weeding out the minor companies.  It is almost impossible for small businesses to compete in most fields; big agriculture, big tobacco, big pharmaceuticals, big financial, and others have worked together with big government to over regulate the little guy out of business.

 It may sound conspiratorial but a perfect example comes from the tobacco industry.  Philip Morris is by far America’s most famous and largest cigarette company.  Sales of their cigarettes accounted for 50.4% of all cigarette sales in America.  Under the Family Smoking bill, the FDA could require cigarette makers to measure the amount of ingredients in the smoke.  According to Altria’s 2007 annual report, Philip Morris supported these regulations.  Philip Morris, previous to bill’s passing, already conducted most of these tests and could afford slight alterations to them.  Start-ups in the cigarette industry would be bankrupted by these regulations.  Also according to the Family Smoke bill, advertising would be limited for cigarettes.  For a company like Philip Morris, which already has the biggest cigarette brand in America, they don’t have to win over the American smoker- the American smoker has known them for generations.  A small business can never win over a base without the ability to advertise.

This is just one example in one industry, an industry that does not make nearly as much money or political consequences as food, energy, healthcare and real-estate.  Regulations like the ones on cigarettes can seem minuscule but are extremely destructive to small business and the overall economy.

The death of the middle class can be attributed to the inflation of the money supply, over regulation of industry (like the ones detailed above) and free trade agreements that ship jobs overseas.  There is part of the reason that unemployment is higher than Charlie Sheen.  Big government and big business collude to weed out everyone but themselves; and while more regulations will come forward to “protect the public”, “protect the children” or “get revenge on the corporations” they will do anything but.  Washington has been helping corporations rig the game for years.  As George Carlin use to say, “it’s a big club and you ain’t in it.”  The only way to get America back to work is to start deregulating industries so new businesses can start up and existing small businesses can expand.  Closer regulations should be put on the government and government made monopolies, not on the market.

So before the regulations wreck another industry, drink a beer from a microbrewery.  Celebrate the free market, localism, the middle class, entrepreneurship and everything that made America great, while it’s still allowed to exist.