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Why are the most ardent defenders of a free market so dead-set against DTC?

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Republicans and Democrats alike take campaign contributions from liquor wholesalers, as you can see from this data compiled by The Center for Responsive Politics, but perhaps the poster child for alcohol distribution companies is the Republican Senator from Texas, John Cornyn, who heads CRP’s list.

Our system of wholesalers and distributors is, of course, an anachronistic relic of the Repeal of Prohibition. As Tom Wark cogently pointed out last week in his blog, the original reasons for creating this “third leg” between producers and buyers might have seemed logical in the 1930s, but today, the system has become a “self-serving…monopoly” that “provide[s] the means for wholesaler coercion of producers and retailers.” The effect of this, as we all know, is that smaller wineries too often find themselves shut out of distribution channels, forcing them to try to sell their products directly to stores, restaurants and individuals. DTC is in fact the Holy Grail for wineries for the simple fact that the three-tiered system so ignobly makes fair distribution impossible. Wineries, especially small family ones, find themselves thwarted at every turn by a wholesaler industry that desperately wants to keep its monopoly intact.

Now, Cornyn is the senior senator from a state, Texas, which is one of a handful of American States, all of them in the so-called Bible Belt, that still has “dry” counties—those in which the sale of alcoholic beverages is illegal. This is a dreary leftover of the “temperance” movement in America, a religious-based crusade that began quite early in our country’s history, picked up steam throughout the nineteenth century, and finally resulted in the calamity of Prohibition, which, for fourteen years (1920-1033) made the sale and distribution of alcoholic beverages, including wine, illegal, except in the rarest of circumstances.

What people should understand about Cornyn, who also is against almost any form of gun control including background checks, is that politicians like him are the reason why liquor wholesalers continue to hold so much power over what the American people can and cannot drink. When Tom Wark says today’s lawmakers tend to support this wholesaler manipulation and control of the alcohol beverage marketplace,” he must have had John Cornyn in mind.

Politicians often claim that their votes can’t be bought even if somebody contributes a lot of money to their campaigns. (I know, I know, Hillary says the same thing about her Wall Street donations.) But an analysis of where Cornyn gets his money shows an outsized presence of liquor distributors, almost all of them based in Texas. When Dallas-based Andrews Distributing, one of Texas’s biggest beer wholesalers, contributed to Cornyn, what did they get for it? How about Texas City-based Del Papa Distributing, or Corpus Christi-based L&f Distributing, or Amarillo-based Budweiser Distributing? The list goes on and on.

Why would any reasonable person be against direct sales from small family wineries to whomever wants to buy their wines (as long as they’re of legal drinking age)? Tom Wark points out the many reasons why the three-tiered system is antiquated. But it’s more than that: it’s also anti-democratic (with a small “d”) and thus anti-American. It’s ironic that people who argue with such passionate conviction about the virtues of a free market should side with one of the nation’s most monopolistic trusts, the liquor wholesalers. “Let the free market work,” Cornyn endlessly yammers—and yet, when it comes to putting his money (or rather, the distributors’ money) where his mouth is, Cornyn is conspicuously silent, a lacuna that helps to crush the very free market he praises.

The ironies pile up. A fund-raising company called the Aristeia Group held a “wine tasting reception” for Cornyn that asked for a minimum contribution of $1,000 for PACs and $250 for individuals. What is Aristeia Group? Well, in a single year, 2014, they gave more than $281,000 to “Texans for Senator John Cornyn,” but they also gave large amounts of money to the Rand Paul Victory Committee and the Alamo PAC, whose Federal Election Commission statement lists only a single individual “Leadership PAC Sponsor,” John Cornyn. And where does Alamo PAC get all this money to donate to its favorite politician? From the interests and lobbyists who attend the many BBQs, breakfasts and “dove hunts” they sponsor, every one of which lists as its sole beneficiary “John Cornyn.” Your cost of admission: at least $1,000 per event. A sweetheart deal, and we can only guess at the things Cornyn is forced to do for his benefactors.

Well, the tight little circle of PACs, campaign contributions and lobbying isn’t limited to any one political party, like I said, but a peek behind the murky scenes into the Cornyn-Aristeia-Alamo PAC-beer distributors cabal should be enough to make even die-hard free marketeers bewail the extent to which the true “free market” has been demolished, in the alcohol distribution industry and no doubt in others. Returning to a truly free market of wine distribution should be a non-partisan no-brainer, but for some reason, we’re not seeing it, and I wonder if we ever will, as long as some of these politicians are drinking off the teat of distributors.


How nature and fashion influence alcohol levels and the three-tiered system

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In 1999 the futurist Stewart Brand, whose Whole Earth Catalog galavanized a generation of environmentalists and alternative lifestylists, published “The Clock of the Long Now,” in which he introduced the notion of “pace” into the analysis of history.

Brand came up with six “layers” of human existence;

 

StewartBrand

each layer proceeds at a different pace, in a sort of celestial-mechanical model whereby Mercury rounds the Sun far faster than Neptune. Only in Brand’s model, the speeds are reversed: The outermost layer, “Fashion,” moves at the quickest pace. This is why hemlines go up and down every season on the runway, and why wine writers are able to proclaim new “styles” with each passing vintage. Fashion changes constantly; the mullet is now hopelessly out of fashion. Not that long ago, everybody wanted to look like Andre Agassi.

andre-agassi

Brand’s inmost layer, Nature, moves at the slowest pace. Evolution and geology are its most visible indices. The Sierra Nevada has taken tens of millions of years to rise; the Grand Canyon did not spring into existence overnight due to the whimsy of some flood. Not for nothing do we refer to the timespan of Nature as “glacial.” (We can have a discussion of global warming some other time!)

Glacier

Inbetween Fashion’s furious rush and Nature’s leisurely progression, from inmost to outermost, are Culture, Governance, Infrastructure and Commerce. Culture requires a long time to change; witness the world battles currently underway that have been going on since the dawn of history. Governance is almost as hard to change as Culture, but when change does occur, it can come swiftly, as with Franklin D. Roosevelt’s New Deal. Infrastructure occupies a sort of midway point between Fashion’s speed and Nature’s lethargy; as we are reminded every time a bridge collapses in America, or our cars bounce over an urban pothole, changing the Infrastructure requires human will, such as that shown by President Eisenhower, a Republican, when he promoted the Interstate Highway System.

Between Infrastructure and Fashion sits Commerce. Brand sees Commerce as occupying a vital place the scheme of things: If it derives its impulses from the outermost layer (Fashion), it risks becoming “unfettered [and] unsupported by watchful governance and culture…it easily becomes crime.” And yet, we don’t want commerce to become too regulated, lest it lose its ability to flexibly react to changing conditions.

We can apply Brand’s “pace” model to the situation we find ourselves in with regard to wine. It is, in fact, a useful tool for analyzing every issue, from the continued popularity of Cabernet Sauvignon and Chardonnay to the contemporary debate over alcohol levels. It’s apparent that the latter—alcohol content—is purely a matter of Fashion. As Brand writes, “The job of fashion…is to be froth: quick, irrelevant, engaging, self-preoccupied, and cruel. Try this! No, no, try this!” What is in today may be out tomorrow, as Heidi Klum always warns contestants on Project Runway.

By contrast humankind’s liking of wine stems more from Culture, “the work of whole peoples” as Brand describes it, and of Nature itself, “inexorable and implacable,” which somehow has programmed us (and other forms of animal life) to delight in the slight intoxication of alcohol, and in wine in particular, that most natural of alcoholic beverages.

What of the dominance of Cabernet Sauvignon and Chardonnay in America? We can see in this a balancing act between the slow-motion pace of Nature and Culture, which act to keep change from happening too quickly, and the “froth” of Fashion, which, if it dominated, would have had us by now become a nation of Fioletovy Ranny drinkers. There always will be wine critics, sommeliers and others who try to push the nation’s tastes towards the exotic and rare; also always will be pushback from people who know what they like and don’t want to change. This tension—between the more conservative elements and the more radical ones—is healthy. The system itself reinforces dialogue: “the pace layers…provide many-leveled corrective, stabilizing negative feedback [loops] throughout the system. It is precisely in the apparent contradictions of pace that civilization finds its surest health.”

We may even use Brand’s pace system to make predictions. Will the three-tiered system survive? In its favor are the slower-moving layers of Nature and Culture, both of which tend to abhor change and to support the status quo. Against the system’s continuance are Fashion and Commerce: both suggest greater flexibility, innovativeness and individual choice for the consumer.

Between Nature and Culture, on the one hand, and Fashion and Commerce, on the other, lie two key layers: Governance and Infrastructure. The former right now is largely immobile, from many points of view; the U.S. Congress is unlikely anytime soon to interfere with the three-tiered system, while the Courts likewise have not shown that they’re particularly eager to take up the issue (despite the 2005 Granholm v. Heald decision by the U.S. Supreme Court, which has resulted in hardly any change, and was in any case a 5-4 vote that could have gone either way).

That leaves Infrastructure as the sole remaining hope for upsetting if not ending the three-tiered system. A nation of consumers that has happily embraced the Internet, with its notions of untaxed online transactions, net neutrality and infinite choice, may decide on its own that it does not want its shopping decisions hampered in any way, by Governance, by Commerce or anything else. As the Infrastructure of online commerce develops in ways that are completely unpredictable, we can be sure of this: The arc bends towards freedom. That is not a good sign for a confusing, paperwork-swamped system that currently restricts what and how people can buy.


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