What CAMRA tells us about markets

Last week was the fortieth birthday of the Campaign for Real Ale (CAMRA). Described by a government minister as the most successful consumer group in Europe, it revolutionised (or perhaps counter-revolutionised) the beer market in the UK. Contrary to popular myth, CAMRA was not founded by four old gits in a pub. It was founded by four relatively young gits, lads in their early twenties, out on a pub crawl in Chester. Fed up with being served pints that were at best bland and at worst puke-inducing, they decided to start a campaign to get proper traditionally brewed beer back into the country’s pubs. What started off as pub-talk evolved, within a few years, into a very effective organisation.

But, according to the classical economic theory that is still fetishised in some parts of the blogosphere, an organisation like CAMRA should be unnecessary. Markets react to supply and demand. If there is enough demand for traditional beer, so the story goes, new firms will enter the market to satisfy that demand. However, when you look at what firms actually do, rather than what the theory says they do, the reality of markets is different. In many sectors, firms adopt industry standards which enable them to promote their collective interests at the expense of customers.

Such standards are not just a feature of oligopolies. Take private gyms for example. Most of them have high joining fees. They would rather collude with each other to lock customers in than compete with each other to win them over. Or consider the UK broadband market. With dozens of suppliers it should be a fine example of perfect competition, yet most providers have abysmal levels of service, eye wateringly frustrating support processes and massively expensive help-lines. Despite the large number of players in the market, it took regulation to get any improvement to the way customers were treated.

And so it was with Britain’s brewing industry in the 1960s. The major breweries developed pasteurised and carbonated keg beers to replace their traditionally brewed products. The reason for this was simple; they were much more profitable. Traditional beer goes off quickly and it takes time to learn how to look after it and serve it properly. Keg beer, by contrast, has a shelf-life of months rather than weeks and it doesn’t require much skill to keep. The only problem with it is the taste – which ranges from insipid to horrible. It is, in short, a hugely inferior product.

But if all the breweries switched over to keg and promoted it with massive marketing campaigns, they could perhaps persuade people to drink it. At the same time, if they withdrew their traditional products and starved them of publicity, they could claim that there was no demand for them and quietly kill them off.

During the sixties and early seventies, things pretty much went to plan for the big brewers. I’m too young to remember the darkest days of the kegocracy but I’m told that it was bad. There were whole areas where it was impossible to get a pint of traditional beer. Sure, if you didn’t like the beer you could walk down the road to another brewer’s pub but it would simply be a different brand of nasty keg beer. The brewers had colluded to kill off real ale in many parts of the country. It was only when those four lads decided they’d had enough that things began to change.

And boy, did they change! By the time I started drinking in the 1980s, the tide was already beginning to turn. CAMRA’s campaigns had raised awareness of real ale; it was a form of counter-propaganda to the brewers’ marketing campaigns. People were banding together around the country and kicking up a fuss. Like salmon returning to once-polluted rivers, traditional beer began to appear again in areas where it had not been seen for years.

In 1979 there were only four pubs left in Britain that brewed their own beer. Now there are hundreds. Sales of real ale are rising and the twentysomethings, once thought to be a lost cause, are discovering the delights of proper beer too.   

Would any of this have happened without CAMRA? If consumers had relied on classical market forces they would have ended up drinking crap beer or sitting at home not drinking at all. In the early 1970s, there was no sign of the ‘new entrants to the market’ that are supposed to ride to the consumers’ rescue. If they had turned up at all, they would have been a long time coming. Fortunately, four young men in Chester decided they couldn’t wait for the invisible hand of the market.

Markets are not free. They never have been and they never will be. The powerful will manipulate markets for their own ends. Sometimes, the only way to get what you want is to manipulate them back.

Happy 40th Birthday CAMRA. Let’s raise a glass to the four lads who decided to fight back. The ‘invisible hand of the market’ might deliver the goods eventually but pissed-off and passionate people tend to get things done a lot more quickly.

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13 Responses to What CAMRA tells us about markets

  1. Pingback: What CAMRA tells us about markets - Rick - Member Blogs - HR Blogs - HR Space from Personnel Today and Xpert HR

  2. Pingback: The stupid, it hurts!

  3. thomas jones says:

    Good grief, what do you think the ‘invisible hand’ actually is? It isn’t actually a hand that you cannot see, it’s a figure of speech for the actions of market participants. Such as, for example, CAMRA.

  4. Steve says:

    fcft: “Sometimes, the only way to get what you want is to manipulate them back.”

    Er, it’s called “demand”. The clue’s in the word. And CAMRA is proof that markets respond to demand.

    What you’re really saying is that large suppliers can misjudge demand, or be unable to meet it – and consumers must express their preferences to restore the supply. This is business-as-usual, not “manipulation”.

  5. Rick says:

    Steve – I think the large suppliers were doing more than merely misjudging demand in this case. They were trying to squeeze certain products out of the market because they were not as profitable. It is, all too often, business as usual.

    On your other point, yes, it is demand. I’m not saying there is no such thing as market forces or supply and demand, just that it doesn’t always work in the way free market theory would have us believe.

  6. Pingback: The Campaign for Real Ale: Capitalist or Not? « Left Outside

  7. Luis Enrique says:

    But, according to the classical economic theory that is still fetishised in some parts of the blogosphere, an organisation like CAMRA should be unnecessary.

    oh give me a break. if you are talking about ‘textbook’ models of perfect markets, everybody knows they are highly simplified parables used to communicate a general idea, not simulacrums of reality. Everybody, that is, apart from all those people who appear to believe that being a classical economist involves thinking that model exactly captures reality. “Classical economic theory” has long incorporated things like collusion, and ‘missing’ goods. Would you like some references?

    Markets are not free. They never have been and they never will be. The powerful will manipulate markets for their own ends. Sometimes, the only way to get what you want is to manipulate them back.

    what are you on about? the phrase “free market” usually has something to do with free from government intervention – in a market free from government intervention one might expect to see monopolies and collusive oligopolies, where the “powerful” manipulate things for their own ends, that is, if you’ve kept up with “classical economic theory” over about the last 200 years. But your phrasing suggests that “free markets” supposedly entails the absence of that.

  8. Rick says:

    Luis – please do send the reference (seriously) – but ‘everybody’ doesn’t know that these are parables. Some people treat them as iron laws. I know because I’ve gotten into arguments with them on various blogs.

    Does ‘free’ really only mean free from government intervention? Surely massive corporate power can be just as restrictive. And collusion and combination are all part of free markets, why do so many free-market ideologues get so hot under the collar about trade unions?

    • James Harlow says:

      “Free” typical means “undistorted”, either by the state or by large actors (buyers/sellers) attempting to make the market inelastic. You’re absolutely right that markets will never be free (because people aren’t perfect economic actors)–most free market proponents hold that the duty of the state is to reduce distortion (by, e.g., anti-trust laws).

      Unlike you, I think CAMRA demonstrate the invisible hand of the market (and thus work well as an argument for free markets)–in a command economy, you’ll find the same effect, but without the ability to set up a rival brewery (imagine a “guild of brewers” who dictate what gets made, and you pretty much have the opposite of a free market).

      Free markets fail to be free all the time. But the solution is not less freedom. It’s more.

  9. Luis Enrique says:

    Rick,

    I suppose the meaning of the phrase “free markets” is in the eye of the beholder, but what I think you’re talking about – market power – is something that can occur within a “free market”, market power is not something whose presence means markets are “not free” .

    I honestly don’t know how people can regard simple models with a handful of equations as anything other than parables. My first ever economics lecture was about the differences between models and reality, I don’t know who your blog debate opponents have been – there’s a difference between arguing that free markets are generally a good idea in practice, and trying to claim that they are always the best of all possible worlds.

    As for references, well as others have said collusion was emphasized by Adam Smith and every undergraduate microeconomics text book has a section on oligopoly, anti-trust regulation etc. Usually collusion is analyzed purely in terms of pricing – your example here involves collusion over the variety of good produced. This isn’t my area, but a quick google of “collusion varieties marketed” locates a reference in the Handbook of Industrial Organization referring to collusion over the “costs, qualities and varieties of products marketed”.

    something that also isn’t my areas of expertize: I think a lot of the theoretical results concerning ‘free markets’ involve the assumption of ‘complete markets’ which might be relevant to the idea of firms deliberately not producing certain goods:
    http://en.wikipedia.org/wiki/Incomplete_markets

  10. Luis Enrique says:

    (actually, having read it, that stuff about incomplete markets isn’t really relevant – it’s not really about physical goods)

  11. Luis Enrique says:

    Rick,

    actually, I think I have provided you with very poor references. The Handbook of Industrial Organization is grad level maths-heavy economics. Really, if you’re after evidence that mainstream economics does (and always has) think about collusion, oligopoly, any undergrad text book (search for Microeconomics in Amazon / Google books) should do you, although they tend to only look at very simple examples, because in general there’s so many complicated possibilities for collusion, formal treatment gets very difficult very quickly. You have to stray deep into the realms of Game Theory. I think the topic generally comes under the heading of “Industrial Organization” and a bit of googling of those words will throw up text books and university course syllabuses.

  12. For both beer and broadband, I suspect the problem is not just nasty oligopolists, it is about consumers reacting to not quite bad enough products. The question in the heyday of keg beer was not whether people preferred real ale, it was how many pubs selling keg beer they were willing to walk past to get to one selling real ale. Similarly, the question about broadband is how bad the service has to get before people look for less obvious providers. There are good broadband providers, but most people don’t care quite enough to go looking for them. You could say that the market as a whole has reacted perfectly from the providers’ point of view: the service is not quite bad enough to make people walk away from it.

    Of course, from consumers’ perspective, that is in part a collective action problem – only if enough of us walk past the keg pubs will there be a real ale pub to find at all, which is why CAMRA had an important role to play. It’s interesting to speculate what an equivalent demand aggregation service for broadband or gyms might look like.

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