Executive Director Barry Lynn writes about how despite seemingly large growth in beer variety, America’s beer market is actually more concentrated than ever with two giants — Anheuser-Busch Inbev and MillerCoors — controlling some 90 percent of production.

On the surface, America’s market for beer has never looked healthier. Where fewer than a hundred companies brewed a generation ago, we can now count more than 2,000, producing a mind-boggling variety of beers. Yet just below this drinker’s paradise we find a market that has never been more concentrated. Two giants — Anheuser-Busch Inbev and MillerCoors — control some 90 percent of production.

To understand how we arrived at this seeming paradox, and what it portends for the brewer and drinker, our team at the New America Foundation took a look into the past and present structures of America’s markets for beer and alcohol. What we found surprised us. The great effervescence in America’s beer industry is largely the product of a market structure designed to ensure moral balances, one that relies on independent middlemen to limit the reach and power of the giants.

The story of this market traces back nearly a century, to 1919, when America’s citizens passed a constitutional amendment to outlaw the production and sale of alcohol. Americans soon decided, however, that the corruption and lawlessness created by the illegal trade in alcohol were worse than the mere drunkenness they had first targeted. And so in 1933 citizens repealed Prohibition.

Americans then had an opportunity to design an entirely new market system from scratch. The first task was to decide what they wanted from the market. Having concluded that “man can’t be made good by force,” citizens now aimed at a more traditionally American approach to governance — which was to seat responsibility in the community and in the individual. The new watchword was “self control.”

This line of thinking led citizens to give regulatory authority over this market to the state rather than the federal government. It then led voters in every one of America’s 48 states to divide the market into three distinct tiers of activity — brewing and distilling, wholesaling, and retailing — and to establish strict prohibitions against vertical integration. The practical goal was to ensure that no producer or seller of alcohol could become strong enough to force its products into the community or onto the individual, as had been the case before Prohibition when powerful “tied houses” were able to steamroll regulators.

Read the full article in Harvard Business Review here.