John McCain and his beer problem
(image borrowed from The Sunday Morning Hangover)
John McCain has a serious beer problem. Or at least he would have a problem if more people were paying attention to it. You see, John McCain, the man that’s claimed to hate pork barrel spending, is connected to a family beer empire that’s benefited from some major government subsidies.
Radley Balko shares some history in an excellent article for Reason magazine:
When McCain married his second wife Cindy Lou Hensley in 1980, he became one half of a very wealthy household. By some estimates, Cindy McCain’s stake in her family’s Hensley & Co. beer distributorship puts her net worth around $100 million. The Hensley company gave McCain an executive position shortly after he married the heiress, helped catapult him into public office, has thrown heaps of money at his campaigns over the years, and in addition to providing him with a charmed life, has played a significant role in putting him an election away from the White House.
Over the course of his career, media outlets covering McCain have delved pretty extensively into the history of Cindy McCain’s father and his company, as well as the ethical issues McCain will have to face if he’s elected and his wife still serves as the company’s president (McCain generally recuses himself from federal legislation pertaining to alcohol regulation—he won’t have that option as president). But thus far, there’s been little examination of the beer wholesaling industry as a whole. To be blunt, the entire industry is a farce. It’s an artificial, anachronistic, government-created entity that’s anti-competitive and full of lobbyists and special interests. It raises the cost of each bottle of beer you drink, though “Joe Six Pack,” as McCain’s running mate might put it, receives no value for the added cost.
Alcohol wholesalers (in this context, wholesalers and distributors essentially have the same meaning) thrive thanks to what’s known as the "three-tier system" of alcohol distribution, a series of laws that date back to just after the end of prohibition in 1933. The 21st Amendment gives states the power to regulate the sale of alcohol within their borders. Some states decided to assume control of all alcohol sales (they’re known today as control states). Most of those that didn’t adopted laws mandating a state-based middleman between alcohol producers (brewers, distillers, wineries) and retailers (restaurants, grocery stores, liquor stores). There are some exceptions, but generally in three-tier states no one is allowed to buy directly from a producer. Everything must go through a distributor. And while it’s possible to envision a role for a beer or wine distributor in a freer market for alcohol, it’s clear that the industry wouldn’t be nearly as lucrative or prominent as it is today were it not for these protectionist laws.
The article has more specifics about the McCain family business:
Hensley is the fourth largest beer distributor in the country, one of the largest privately-held companies in Arizona, and holds a 60 percent market share in the parts of Arizona it serves. It also distributes Anheuser-Busch products exclusively. Beer-producing giant Busch began an incentive campaign in the late 1990s aimed at getting distributors to drop the products produced by its competitors. In those parts of the country where a given distributor has a huge, government-abetted market share, such arrangements put the squeeze on the variety of options available to consumers (Anheuser-Bush’s national market share rose five percent during the campaign, to 50 percent nationally).
Go read the whole article. It’s a keeper.