I really like the chart of cigar consumption versus major events in American history that The Economist posted this week. I find these cause-effect charts to be a tad dubious when it comes to explaining economic trends, but it is neat to see how certain spikes correspond to certain political and economic factors. It got me to thinking about other luxury goods and what they might indicate about national and global prosperity. Cigars are obviously wildly effected by our trade embargo with Cuba and a general trend away from stogies, so I hunted around for something a little more global in scale and a little less subject to fashionable whims. Voila: scotch whiskey.
First, I went to the Scotch Whiskey Association, which is naturally based in the United Kingdom. I was disappointed at first that they didn’t publish any granular historical data, so there was no hope of duplicating the cigar chart with a similar look at American consumption patterns. There was, however, one nice table going back to 1949 of total exports in liters. This means we’re ignoring scotch consumption in the UK — what a pity — and it doesn’t say anything directly about America, as the USA is only the second-biggest export market for scotch, traditionally. (France is number one, and Canada definitely holds its own.) Here, for what it’s worth, is the amount of scotch shipped annually since 1949. The numbers on the y-axis are expressed in units of 100,000 liters, an odd scale that I will explain in a moment.
Because we’re talking about global exports, I don’t feel comfortable dropping key moments in U.S. history on there (or UK history, for that matter) as explanations for the bumps and ridges. Suffice to say, the world got a lot more scotch in the ’60s, then leveled out in its appetite until recently. However, I wanted to see if this pattern matched global prosperity. Lacking any other idea for a measurement, I figured I’d just match it up against the Dow Jones Industrial Average. To smooth out the jagged bits, I just took the closing price on the first trading day of December for each year. The reason I chose to divide scotch liters by 100,000 was so the amounts would fall in approximately the same range as the DJIA. And here’s how they match.
They really, really match … until 1965, when they just don’t. I was going to put in all sorts of stuff about the silliness of matching a hard quantity of something that has natural limitations on how much can be made versus a hypothetical measure of wealth — and really, from a mathematical standpoint, this exercise is pretty silly — but then I had a flash. When we’re measuring exports of scotch, we’re measuring based on the year they ship. But that’s not when decisions are made about how much scotch to distill. Scotch is aged for more than a decade, sometimes two. To really see how the economy dictates the amount of scotch in the world (not that it does), we should match up the Dow with the year the scotch was barrelled, not shipped. Because this whole idea is already intellectually sloppy enough, I decided it wouldn’t hurt to round things back by an average aging time of 15 years (it should probably be 12, but whatever) and run the numbers again.
Holy moly, that’s eerie. So will we see a spike over the next 15 years to match the incredible run of the Dow? Is scotch like starlight, a delayed signal of what has already occurred? Does any of this mean anything? Probably not, but if you happen to read this and buy stock in a publicly traded scotch distributor and make a fortune over the next 15 years … please kick something back to me.
Leave a Reply