Free Markets

If You Think Capitalism Is Dying Because Two Companies 'Control 90 Percent of the Beer Americans Drink,' Go Home, You're Drunk

Obituaries for the benefits of free markets are as numerous as they are wrongheaded.


You can't swing a dead grumpy cat these days without hitting headlines declaring the imminent death of capitalism, the failure of capitalism, and the rebirth of socialism.

Number of people who are Poor, Vulnerable, Middle Class, and Rich Worldwide
Source: Brookings Institution, Projections by World Data Lab

But before we bury capitalism, it's worth pointing out that rumors of its demise are greatly exaggerated. For instance, it was only last fall that a "global tipping point" was reached, meaning that "half the world is now middle class or wealthier," according to researchers at the Brookings Institution. How did that happen? By bringing increasing levels of market forces to bear around the planet, especially in the developing world. China is nobody's idea of a pure capitalist economy but it has clearly moved in that general direction over the past several decades. As U2's Bono, who has spent a great deal of time and energy trying to help the developing world, will tell you, "commerce, entrepreneurial capitalism takes more people out of poverty than aid—of course, we know that." (To be sure, the legendary frontman is no anarcho-capitalist, telling a crowd at Davos this year that while "capitalism has taken more people out of poverty than any other 'ism'… it is a wild beast that, if not tamed, can chew up a lot of people along the way.")

In Europe and North America, concerns about the death of capitalism stem mostly Um. Isn't this good news?from flat or slow economic growth for basically all of the 21st century. That the rest of the world is catching up to us probably doesn't make anyone feel better, either. But even in the United States, apparent reductions in the middle class are explained in part by households bumping up into higher income categories. And it turns out that when economists control for household size and use an accurate measure of inflation, "the story of stagnating wages was mostly wrong." Indeed, as Michael R. Strain, writes, "median household income grew by 43% between 1990 and 2015 (the last year for which data is available). Households in the bottom 20% saw their incomes increase by 62%." It's also true that contrary to the conventional wisdom, "the rich" did not capture all the new wealth created over the past several decades. As Russ Roberts has shown, when you track actual individuals across time, "the richest people in 1980 actually ended up poorer, on average, in 2014. Like the top 20%, the top 1% in 1980 were also poorer on average 34 years later in 2014."

So maybe capitalism is still delivering the goods by and large. And by goods, I mean general, broad-based increases in living standards (yes, even for Millennials and Gen Z).

Except for beer, right? Jonathan Tepper, author of The Myth of Capitalism, argues that the essence of capitalism is competition, which is flatter than Beto O'Rourke's new haircut. Writing at Bloomberg, Tepper avers:

Competition is the essence of capitalism, yet it is dying.

Rising market power by dominant firms has created less competition, lower investment in the real economy, lower productivity, less economic dynamism with fewer startups, higher prices for dominant firms, lower wages and more wealth inequality….

In industry after industry, [Americans] can only purchase from local monopolies or oligopolies that can tacitly collude. The U.S. now has many industries with only three or four competitors controlling entire markets. Since the early 1980s, market concentration has increased severely.

Among the evidence he marshals is the fact that "two corporations control 90 percent of the beer Americans drink." Tepper's numbers seem a bit high. According to the latest edition of Beer Marketer's Insights, a trade publication, Anheuser-Busch Inbev controls 41 percent of the market, MillerCoors owns another 24 percent, and "since 2017, more than 9 percent of the market volume has shifted from large brewers and importers to smaller brewers and importers."

But let's grant Tepper his large point: Two mega-players dominate the market for beer. How has that been working out for beer drinkers? Pretty damn well, actually. Go back to, say, 1990, when the microbrewery revolution was barely a thing and I started graduate school at SUNY-Buffalo. My friends and I would drive across the Peace Bridge to Canada specifically to drink Molson and Labatt's because it was so much better than American beer. Such a thought is inconceivable now given the proliferation of choices available to today's beer drinkers. Some of that choice comes from Anheuser-Busch, MillerCoors, and other big brewers, and much of it comes from small, scrappy startups.

But the point is that the number of firms in an industry doesn't dictate the amount of choice that consumers have. Check out the illustration to the side here from a tweet by The New York Times' David Leonhardt. It shows increased concentration in various sectors. But has there been a concomitant reduction in either consumer choice or quality of service? Think of mattresses, one of the products listed. Has it ever been easier or more cost-effective to shop for a mattress, including ones based on whole new technologies? Tepper opens his Bloomberg piece by recounting the 2017 beating that Dr. David Dao took on a United Airlines flight. He implies that airlines can treat their customers anyway they want because "the American skies have gone from an open market with many competing airlines to a cozy oligopoly with four major airlines." Yet that incident was shocking precisely because it was so rare; drawing any implications from it is ridiculous. Over the past decade, the on-time performance of airlines has effectively stayed the same, which suggests that airlines are still competing for customers. So has the safety record for domestic carriers. Airlines have gotten better at maximizing the number of passengers per flight, which might make flying less comfortable, but they've also passed on savings to customers. "The average airfare has been lower because airlines have been putting their capacity to better use," note researchers at the St. Louis Federal Reserve Bank. Monopolists tend not to be so generous.

None of this is to say the status quo is perfect or that it shouldn't be challenged. In many parts of the economy, corporations works in cahoots with the government to rig markets (lord knows this is happening big time in the tech and social media sectors as we speak). Donald Trump's trade war with China points to more problems. We always need more creative destruction than we're getting at any point in time. But to focus on the number of firms in a sector rather than what is being offered to consumers is to make a very basic analytical error and one that opens up space not for the best elements of laissez-faire but the worst forms of a strangulated future.

Enjoy a chill, classic Reason video from 2009. It's called "Beer: An American Revolution—How Microbreweries Promote Choice."

NEXT: U.S. Will Lift Steel, Aluminum Tariffs on Imports from Canada, Mexico

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  1. Those people really are fucking idiots and ingrates. Nothing but bitch and complain. Go to socialist Venezuela where you have no beer and no good

    1. Butt Venezuela isn't doing it RIGHT!!! Us here in the USA, under Bernie Sanders and His Fried Socialist Chickens-in-every-pot, for-every-pothead, WEEE could do it RIGHT!!! Ass a patriotic American, can't you see that we are SPECIAL??!

      (I know that I am special!!!! SEE my specialness?!?!)

      1. And as AOC pointed out, we can print money!

        1. She is just chomping at the bit to get at those printing presses.

    2. At least the left is honest about its hate of capitalism. The right cloaks its hate of free markets with all kinds of binkies named "domestic job protection," "national security," and "cultural preservation," whatever even the fuck that is.

      1. You left out "protection of intellectual property".

        1. Well hey, man, what good is power and money if you can't use it to put up as many barriers to entry to your 'market' of choice?

  2. Great article, Nick.

  3. Pepsi and Coca Cola produce near all of the soft drinks as well.

    A lot of the reason has to do with distribution I believe. Since beer is widely distributed it takes an enormous logistical chain to keep those shelves magically stocked with your favorite beverage.

    1. I think it's more just changing times. Craft beer is popular, and so craft beer in the on the rise. Even that chart from the beer makers one shows a major drop in the classic players and a rise of the "other" category.

      Soda apparently has less push for diversity there. Maybe there will be someday, but craft soda is less of a big deal then it was before.

      1. There is a market for craft soda.
        I buy them at the local supermarket.
        Anyone here know about Ale-8-1?
        I can get that sometimes here.

        From my days wandering about in Kentucky. Pronounced aiellee.

        Zombie brain juice when I can get it. That one sells out fast. Made by Avery’s from CT.

        1. Ale 8 One! The beverage to reward yourself at Miguel's after a day getting spit off of your project at the Lode.

          At least that is where I learned about it. I'm sure those closer to Winchester don't think much of it, but in my circle we call it "The taste of the red."

          1. We did a lot of camping, hiking and backpacking in that area then. Near Winchester in the Red River Gorge.

            When you got back to the car there was an outpost country store with a snake pit you could visit for a few bucks.

            Dry county but there was cold ale eight. Nothing better on a hot day.

        2. Here in south eastern Wisconsin, there is a local micro brewery (not attached to a bar/restaurant) that in addition to beer, makes it's own premium root beer.

          1. I also live in Wisconsin (North East) and have lived in Northern, Central, Southeast Wisconsin. I grew up in the late 60's and early 70's when you couldn't get many beers. Then regional beers were allowed. While the big brewers have taken over the major brands, you can find great beers in many more varieties than ever at local microbreweries anywhere. Choice is greater, and even the big labels are starting to make more varieties and better beers to compete, while still keeping their cheaper crappy beers for those that prefer price over quality.

    2. Anybody is free to make and sell beer or cola at any time and place. But if they expect to start with 25% of the market share, they are idiots.

    3. Remember Smokey and the Bandit, back when bringing Coors east of Texas was bootlegging?

      1. Technically it would still be bootlegging, they didn’t have the proper permits from the government to move beer. Coors didn’t distribute east of the Mississippi River back then. As a kid I lived in KY and every summer we’d pile in the Rambler station wagon to go see family in OK; four kids piled up on blankets in the back. Somewhere in MO on the way back dad would stop, we’d take out all the blankets, dad would fill the back of the station wagon with two layers of Coors, we'd put the blankets back in and we continue on to KY, riding just a little higher.

  4. the American skies have gone from an open market with many competing airlines to a cozy oligopoly with four major airlines.

    A result of the USA's near-anarchic aviation market.

    1. Huh? I think you mean the USA's highly protective market that keeps out the pesky foreigners.

  5. This is, I'm pretty sure, not the worst column Nick has ever written (just think of all those "we're going to be Greece!" pieces Nick wrote in the Obama years), but it's not the best either. Cherry picking a few studies whose conclusions you agree with doesn't "prove" anything. Studies say things; they argue; they assert; they claim. They don't find; they don't show; they don't prove. I agree that capitalism is da bomb, but other than that the beer is better, there's nothing convincing here (and I knew that anyway).


    2. I think pointing out that, typically, non-capitalist's analysis of economic conditions are made up of statistics that are either wrong, misinterpreted, or both is worth writing about. That 90% of beer is controlled by 2 companies is off by 27%. That is more than significant error, and I would go so far as to call it a bald-faced lie because the real % is published in an easily available trade publication. He either falsified the number to make his claim or pulled it out of thin air.

      Speaking of thin air, the non-capitalists have been on a rampage recently about climate emergency. Anyone who relies on their analysis of statistics, scientific or otherwise, is a fool. If they are willing to lie about beer sales to make a point, how far do they go with CO2, knowing that there is $40 trillion and the willingness of people to grant the government control over nearly every aspect of business and daily life of everyone on the planet on the line?

  6. You can't swing a dead grumpy cat these days

    Really? Not even a week for mourning?

    Too soon.

    1. My dead grumpy cat is deader than YOUR dead grumpy cat!!!

      I will meet you at the "Cat's in the Kettle at the Peking Moon"...

    2. I saw a picture this week that made me sad.

      Stan Lee holding Grumpy Cat.

  7. Some perspective from St. Louis - we have experienced the consolidation of the beer market perhaps more closely than most other places.

    At first, when InBev purchased AB, it seemed like a rough deal. Consolidation meant people lost their jobs at the brewery, and a rather large inflow of money into the local economy from Budweiser was no longer coming in, at least not at anywhere near the same rate as previously.

    But in the past decade or so since the merger, we've had an absolute explosion in our local microbrew market. It turns out that a whole lot of the people who had previously worked at the big brewery were still actually very skillful in making beer. Lots of small breweries popped up, it seems like there's one in almost every neighborhood now. And lots of small shops making lots of different beer meant we actually have a lot more variety to pick from today.

    Occasionally one of our local micros get sold to the big breweries, and some people lament that, but I don't. That just means that the good local beer from down the street is more widely available than before. And the guys who sold out, well, guess what? They take their cash and they start a new microbrewery, or restaurant, or some other venture, and everyone's better off than ever.

    1. The same thing happened during prohibition. When people with marketable skills find themselves out of work, many of them go into business for themselves. Hmm, to coin a phrase, economics trumps the law.

  8. I like beer.

    Monopolies, of course, break down the entire mechanism of capitalism that makes it worth having. The interesting thing is there is problem of too much choice now rather than the old Bud vs. Miller thing we had back in my childhood.

    1. Monopolies, of course, break down the entire mechanism of capitalism that makes it worth having.

      How are you alive? You must have to wear a pair of glasses with the word 'breathe' etched on the lenses.

      There is no monopoly excepting government.

      1. Do you believe that because it is necessary in order to maintain your idiotic bullshit worldview?

        Governments exist to break up private monopolies.

        1. Yeah, good thing the government went after Microsoft and Intel. The MS guys were at my house every other week demanding I pay up or they were going to send my browser history to my boss. And one time, I woke up in the morning and found the Pentium chip severed from my motherboard and placed in my bed!

          If you think anyone can enforce a monopoly without government guns you are a century late for the People's Revolution, comrade.

          Oh, and good luck convincing them you are not a kulak, because "I am not a kulak, I support the revolution" is just what a kulak would say.

        2. Governments exist to break up private monopolies.

          Private monopolies maintained by government:

          Your local power company.
          Your local water supplier.
          Your local wastewater manager.
          Soon, the Internet.

          Private monopolies formed without government intervention:

          * * *

          Yeah - I got nothing.

        3. Tony
          May.17.2019 at 6:42 pm
          "Do you believe that because it is necessary in order to maintain your idiotic bullshit worldview?"
          Lefty ignoramuses are, well, ignoramuses.

          "Governments exist to break up private monopolies."
          Sure they do. Like my dog keeps the elephants out of the house.
          Lefty ignoramuses are, well, ignoramuses.

        4. The only monopolies that have ever existed are those explicitly created by governments themselves.

          You are completely incapable of proving otherwise.

          1. The reason you can read and write is largely the doing of government. So you're right, it's hard to disprove.

            Let's do away with government and see if anyone can still spell "monopoly" as whatever private consortium of unaccountable gangsters ask you politely if they may have all your stuff.

            1. My mother taught me to read and write. She never worked for any government.

              1. My mother did the same. I was 4. I read the whole first grade reading book (in theory a years work) on the first day.

            2. Like said you are completely incapable of proving otherwise.
              As you just demonstrated.

            3. Tony
              May.18.2019 at 1:48 pm
              "The reason you can read and write is largely the doing of government."

              This shitbag probably couldn't read or write *anything* before he got some gov't toady to hold his hand in kindergarten.
              And I'm sure it was well into the 2nd grade before he could count beyond 10 without taking off his shoes and socks.

              1. He could have counted to 12 with his shoes on, but the public schools don't teach what Anglo-Saxon 5 year olds learned 1200 years ago.

        5. "Governments exist to break up private monopolies."

          No private monopoly has ever existed without the backing of government force.

      2. If there is anything resembling a monopoly in the beer industry it's AB-Inbev controlling the distribution market. They dominate taps in bars and shelf space because they force these requirements onto bars and liquor stores as a condition of distribution. I'm not saying they are a monopoly, but this type of behavior is absolutely only allowed because of the ridiculous regulations on beer distribution enforced at gunpoint by government.

        1. This is what I was looking for in the article. The three-tier system helps the duopoly control the market. AB InBev particularly began to realize it didn't need to purchase smaller competitors; it could simply add them to the distribution network.

    2. I hate too many choices.

      Just give me the one, good thing. Over and over again.

      1. It's good enough for your mom.

  9. This article is one of the reasons that people conflate the status quo with capitalism. Here you have a blatant legacy of the better part of a century of heavy central state regulation, then *you* call it capitalism and *you* say it's a free market, when it obviously is not, and because of your bias you conclude that there's nothing wrong with this picture.

    No wonder commies think Trump embodies capitalism with his walls and his tariffs. They have people like you saying that central state regulation is capitalism!

    1. EXACTLY -- "Here you have a blatant legacy of the better part of a century of heavy central state regulation, then *you* call it capitalism and *you* say it’s a free market, when it obviously is not"

      The ONLY infection producing these gigantic monopolies is socialistic laws/regulations. It's illegal for Tesla to have a repair shop? It's illegal to hire anyone without $15/hr + retirement + housing + healthcare + a new BMW and Yoga-Class? American Manufacturing must pay 90% profit tax while China Manufacturers get an export VAT exemption? WHAT FREE-MARKET are they speaking of anyways?!?!?! This kind of overly regulated and dictated market always leads to 1-final monopolized corporation called GOV.

      1. Just to add to that...... China doesn't have "slave labor" -- American's have a "spoiled labor" market that thinks mopping 200sq ft of floor HAS to pay $1000 + 50 years of retirement + a 3-bed, 3-garage $1M home + other unlimited gov handouts. No, Americans will never compete with China with the current status-quo because competing has become "illegal", "taxed" or "regulated" to death.

  10. use an accurate measure of inflation

    Ah, the PCE, substitution and hedonics. Because the ever-rejiggering of the CPI to understate inflation is not enough.

    Beef prices too high? Well the proles can just substitute Soylent Green and free-range rat meat.

    Today's Kia or Hyundai is better optioned and more reliable than a '62 Ferrari 250 GT SWB or even a 1959 Cadillac Eldorado Biarritz

    1. the proles can just substitute Soylent Green and free-range rat meat.

      I just knew that wasn't eggplant in the Impossible Burgers.

    2. Lol SIV ????

    3. "This is a rat burger? Not bad. Matter of fact this is the best burger I've had in years."

    4. Substitution is done all the time be real people in the real world as prices of various goods happen. Not accounting for this OVERstates inflation.

    5. "Beef prices too high? Well the proles can just substitute Soylent Green and free-range rat meat. I think people will try pork, chicken/turkey, and fish (all generally much less expensive than beef) long before they resort to free-range rat.

  11. ..but libertarianism is dying because of intellectual dilettantes like Nick

    1. What never lived can't die.

  12. Most Americans just want a reasonably priced, consistently mediocre lager, and Budweiser and Miller can deliver that year after year. Some want to drink water and pretend it's beer, for them there's Coors Light.

    But anyone who wants real beer with real flavor can choose from hundreds of different options. So why is capitalism bad??

  13. I would look at it a different way -- when was the last time the beer or liquor companies gunned down each others' employees in drive-by gangland shootings? That's right, it doesn't happen, because Americans wised up and ended alcohol prohibition.

    Maybe they'll wise up about drug prohibition (and not just marijuana.)

  14. You can't swing a dead grumpy cat these days ...

    Who swings a dead grumpy cat?

    1. Yes, Capitalism made America's beer industry great, and I am glad we have the freedom to do that. I remember when the government provided free beer to all public sector construction workers ... instead of bread and water or money.

      Those who like beer are free to make, sell, buy, and enjoy it, even though I personally prefer to spend my time sober and watching a bunch of hens performing with a dude who has a HUGE nose. 😉

  15. Pabst Blue Ribbon may be no more as battle brews in Milwaukee courtroom
    Another big beer change is MillerCoors not producing and distributing Pabst Brand beers when the contract is up in 2020.

    1. And a million hipster voices suddenly cried out in terror and were suddenly silenced..
      Well, we can always hope.

  16. Another point that Gillespie didnt discuss are government taxes on alcohol, ever increasing drinking ages, and distribution rules that vary from state-to-state.

  17. I too used to think that the free market would solve all problems. And, while I don't care much about former, monopolies and cooperating oligopolies are on the rise and are a huge problem.

    Try selling politically incorrect products - say, whatever the gun grabbers hate at the moment. Amazon, a near monopoly, will kick you off their platform. The big banks will deny you credit card processing facilities. Google will not list your business.

    What is the economic reason that we allow these accumulations of power? I see none, at least without utility style regulation, which itself leads to regulatory capture.

    How about the rights of the owners of those corporations - how much harm should we allow them to do to our rights, in the name of their rights?

    There is a very narrow view of anti-trust: consumer choice, and specifically, mispricing as a result. The world is a lot more complex.

    Try finding an alternative to Facebook - it does not exist, not if you are connected to a number of people and special interest groups. There's one place they congregate: Facebook.

    1. "Amazon, a near monopoly,"

      Translated from bullshit = not a monopoly. I'm not going to waste time on the rest; suffice it say it is *all* bullshit.

    2. Never been on Facebook.

      That is the alternative.

      1. Anyone else want to dive in?
        Every bit of Mesoman's post is bullshit. I called one, Echospinner did another.
        How about this laugh riot?
        "What is the economic reason that we allow these accumulations of power? I see none, at least without utility style regulation, which itself leads to regulatory capture."
        I mean, it cries out for an 8th grade kid to point out to Mesoman what a fucking ignoramus s/he is.
        Hey, Mesoman? Fuck off and die, slaver!

    3. And what kind of government can you propose that doesn't get regulatory capture?

      Fewer regulations and regulators is the only thing I can think of.

    4. Try selling politically incorrect products – say, whatever the gun grabbers hate at the moment.

      And yet millions of such products are sold every year, including online, making a healthy profit for the owners of those companies, without any help from Amazon or Google. Sounds like the free market is getting along just fine.

  18. […] in international trade have helped to lift billions out of poverty and, even more amazingly, deliver middle-class standards of living to a majority of the planet’s population. […]

  19. […] in international trade have helped to lift billions out of poverty and, even more amazingly, deliver middle-class standards of living to a majority of the planet’s population. […]

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  21. Oligopolies tend to produce near perfect competition-level prices. Only in monopolies (rare) and cases of strict collusion do we see prices drastically higher than the equilibrium.

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