The Economics of Beer and Brewing in Gin-Craze London

I’m trying to get a handle on London Brewing during the 1700s (especially during the Gin Craze), as part of the research for the novel I’m writing set at that time. What’s interesting is how English brewing transitioned from being primarily a small-scale industry, to being a large-scale industrial business with international reach, during this precise time.

I found an interesting bit of information about the transition which is worth talking about:

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(from The Economics of Beer by Johan F.N. Swinnen)

From 1748 to 1830, the transition is massive: brewing went from almost 60% smaller business, to 15% smaller business, even though the scale of production (and, presumably, demand on the market–local and international) increased by more than 50% during that time.

Swinnen spends some ink discussing the government’s incentive to protect the largest brewing companies–because the British tax on beer was considerable, and excise could be most easily collected from bigger companies… which led to government support for monopolistic corporate brewing. He discusses the role of technical innovation, particularly in the development of a mass-producible porter. He discusses legislative stagnation–indeed, how hard it was to repeal the Corn Laws that led to the Gin Craze–and about how the temperance movement and free traders ended up being allies for a time (because the laws that impeded the import of foreign wines and jacked up the price of commercial beers were thought to drive the poorer classes to harder alcohols, like gin). He even talks about a kind of sociocultural perfect storm that allowed the commercialization of beer:

The combination of increasing urbanization, the central importance of London, and the successful adoption of porter as a basis for large-scale wholesale production contributed to a situation that moved large numbers of people away from home-brewing towards just consuming market products.

But his sociocultural perfect storm is missing a few elements… 

1. The South Sea Bubble. In 1711, a company was created called the South Sea Company, which basically existed to consolidate national debt, though it also had an official monopoly on British trade with South America. (Trade with South America was geopolitically very unlikely: South America was controlled by Spain, and England was at war with Spain.) By 1720, when the stock peaked, it seemed like half of London–including many of the developing middle class, and even many poor folk–had invested their life savings into the scheme, since, after all, South America was covered in gold, right? El Dorado and all that? What could possibly go wrong? Apparently, everything: the stock crashed soon after it peaked, and left a royal mess behind:

A considerable number of persons were ruined by the share collapse, and the national economy greatly reduced as a result. The founders of the scheme engaged in insider trading, using their advance knowledge of when national debt was to be consolidated to make large profits from purchasing debt in advance. Huge bribes were given to politicians to support the Acts of Parliament necessary for the scheme. Company money was used to deal in its own shares, and selected individuals purchasing shares were given loans backed by those same shares to spend on purchasing more shares. The expectation of vast wealth from trade with South America was used to encourage the public to purchase shares, despite the limited likelihood this would ever happen. The only significant trade that did take place was in slaves, but the company failed to manage this profitably.

A parliamentary enquiry was held after the crash to discover its causes. A number of politicians were disgraced and persons found to have profited unlawfully from the company had assets confiscated proportionately to their gains (most had already been rich men and remained comfortably rich). The company was restructured and continued to operate for more than a century after the Bubble. The headquarters were in Threadneedle Street at the centre of the financial district in London, in which street today can be found the Bank of England. At the time of these events this also was a private company dealing in national debt, and the crash of its rival consolidated its position as banker to the British government.

I have absolutely no data on how much of brewing was small and independent in London in 1711, or 1720, but it seems pretty likely to me that many smaller beer producers would have ended up financially ruined–that is, out of business–when South Sea crashed. I’d wager that this was when the trend of brewery consolidation and a shrinking small-brewer population probably started, that we see continuing on through that chart above. I’d guess, in fact, that the collapse of the South Sea Bubble probably had the effect of nuking a lot of small brewers from orbit, giving those who would become the biggest brewers an easier foothold in their climb to the top.

2. The Gin Craze: In London, the consumption of beer among the poor declined as soon as stronger alternatives became available. Gin was the drink of the masses, the opiate (ie. painkiller) of the then-industrializing people, and again, it seems likely that this would most profoundly hurt the small brewer more than the large one, given how vulnerable a smaller brewer would be to any sudden decline in sales.

Gin Lane

And the declines and increases would sometimes have been sudden. Laws governing gin’s production changed from time to time, provoking riots and protests. But anytime the laws loosened, one would expect a certain number of people hurrying to get their gin on… and leaving the small brewers in the lurch. Even in the later 1700s, after the passing of the so-called “Gin Craze,” demand was prone to changing in a volatile way from year to year.

Which leads to the question of how much of the beer in London was being produced for domestic consumption, versus export. By the late 1800s, there’s IPA being sent to India, and Russian Imperial Stout being sent to Russia. These foreign market demands would have made up a certain portion of the production, but they were new: as they grew, domestic consumption of local beer–the kinds of beer that small brewers produced–would necessarily have had to decline. With export, stable and consistent product is necessary, and one also needs more resources to deal effectively with problems of distribution. All of this essentially endangered the small brewer, while making things easier for the big brewing companies to maintain their dominance.

Interesting stuff, especially since my characters are running around in the early stages of all that: my story takes place in the late 1730s, just before this increasing consolidation and steamrolling of the small brewer becomes truly evident. There were already big brewing houses, but the little ones still were dominant.. and yet, the future could, just maybe, be glimpsed from that moment, especially by someone bright enough, if he or she were given a hint or two.

And now, I need to find some source of information for what happened with beer within the Habsburg Empire at the same time period… Hm.

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