27 October 2012

Consolidation of the Spirits Industry

The Whiskey Rebellion by William Hodgeland, 2006, Excerpts

Hamilton’s inspiration was the British Empire, where distilling and government had a long history together. From as early as the seventeenth century, large distillers had actually favored whiskey excises – had even contributed expertise to helping the government write excise laws. In 1785, an act of Parliament gave a tax rebate to big distillers, and later acts went all the way, placing an outright ban on small stills, making it actually criminal in England to distill on anything but the largest scale. Even as the U.S. Congress was passing its whiskey tax in 1791, Parliament was banning stills of less than five-hundred-gallon capacity.

The goal was industry consolidation. Hamilton had learned from the English that commercial agriculture and large industry, when publicly chartered, given tax breaks, and financed by large loans, might turn the United States into an industrial empire to compete with England’s. Big distilling had the potential, given American drinking habits, to be highly profitable – yet small, seasonal producers, especially in the west, competed with industrial distillers and kept revenues scattered, engines weak. Hamilton’s whiskey tax didn’t merely redistribute wealth from the many to the few and subdue rural economies; it also served as one of the heavier cogs in a machine for restructuring all of American life.

In every configuration, on every level, Hamilton had designed the law to charge small producers who could least afford it a higher tax. And the most significant effect of the higher tax was that it would, as Hamilton said, have to be passed on to consumers. Small producers would have to raise prices. Big producers could lower prices, sharply underselling the small distillers, taking over their customers, ultimately driving the small producers out of business. Closing down local whiskey economies, the whiskey tax pushed self-employed farmers and artisans into the factories of their creditors.

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