The federal ban on the sale of alcohol and its relegalization just 12 years later was probably the biggest policy ever imposed on the United States and then rapidly reversed. Economic historian Jason Taylor recently marked the 90th anniversary of relegalization with an op-ed in The Wall Street Journal. He joins the Overton Window podcast to discuss the lessons for social change today.
Prohibition was the culmination of a Temperance movement that was at least as old as the nation itself. “Back in the early 1800s, the Temperance movement was not focused on state or national law,” Taylor says. “It was focused on getting individual people to sign temperance pledges to not drink alcohol.”
Having gotten 12% of the population to join Temperance organizations, the movement’s leaders decided to get into the lawmaking business. They began with local efforts to ban alcohol in the 1830s. Then state-level prohibitions in the 1850s and 1860s. “Those efforts were statutory, not constitutional, and they were often repealed,” Taylor says.
They moved to state constitutional efforts in the 1880s but were unsuccessful and turned back to local efforts.
“But then World War I, that was the turning point that changed the Overton Window,” Taylor says. Making alcohol was an unpopular thing to do when there were troops to be fed. Most states had outlawed booze by the war’s end.
The adoption of the Sixteenth Amendment in 1913 also made it more politically acceptable to ban alcohol. “Prior to Prohibition, tax revenues from alcohol were a big part of state and federal tax government revenues,” Taylor says, “One thing that made Prohibition feasible was the income tax. Without having another source of revenue, you couldn’t have Prohibition.”
Leaders of the Temperance movement thought it was a good time to launch a constitutional amendment to ban the sale of “intoxicating liquor” and had it ratified in 1919.
The constitutional amendment required Congress to decide what “intoxicating liquor” meant, and it chose any product that contained more than 0.5% alcohol, which outlawed distilled spirits as well as beer and wine.
“I think a lot of people were surprised by that,” Taylor says. The Temperance movement argued against hard liquor and won popular support for banning distilled spirits. But the movement largely avoided targeting beer and wine.
“If they had defined intoxicating liquor as anything more than 12%, which would have allowed for beer and wine, maybe Prohibition would have been more durable,” Taylor says.
It wasn’t Congress’s only mistake. Politicians also likely thought outlawing alcohol would get more people to stop drinking for good.
“What economists have done is look at crime statistics, mortality statistics, health statistics like cases of cirrhosis of the liver, and have estimated that alcohol drinking probably went down to 30% of its original level very quickly,” Taylor says, “But then it rose to about 50% to 70% of its previous level by the mid-1920s. By the late ‘20s — early ‘30s, it’s probably about 70% of where it was.”
So Prohibition had an effect, but only 30% of what its supporters wanted. Bootlegging was rampant.
Prohibition also had the unintended consequence of encouraging the more hated liquor at the expense of beer and wine, Taylor says. Bootleggers get paid by how much alcohol they deliver, so making alcohol illegal encouraged the more concentrated distilled spirits.
The Great Depression made it politically feasible to make alcohol legal once again. Allowing its production and sales would put more people back to work, and taxing the newly legalized product would help the federal government’s finances.
Congress could end prohibition without a new constitutional amendment. “It was quite easy to legalize beer. All they had to do was amend the legal definition of ‘intoxicating’ to allow for more than a half percent,” Taylor says.
The Democratic Party put loosening Prohibition in its party platform in 1932. Democrats won a supermajority in the House of Representatives, majorities in the Senate, and the first of Franklin Delano Roosevelt’s four presidential elections. Taylor notes that in newspaper headlines the day after the election, landslide Democratic wins were no more newsworthy than the question of whether beer would be legalized.
“The banner headline on many newspapers were about Democrats winning the election, but just as big if not bigger was something like, ‘Happy Days are Beer Again,’” Taylor says.
Sure enough, lawmakers passed a law to redefine intoxicating liquors at levels above 3.2% alcohol. This didn’t legalize beer in every state, and 30 states had prohibitions on alcohol regardless of federal law. But a number of states changed their law to allow for beer sales after the federal law was approved. “By the end of the year, there were 43 states in which 3.2% beer was legal,” Taylor says.
Repeal fulfilled its promise of encouraging growth.
“We estimate that it created about 100,000 jobs between April 1933 and July 1933, about five or six percent of the total job growth during that time,” Taylor says.
The economic effects were also seen before repeal took effect. “They were starting to ramp up production, hiring new workers, buying new trucks, ordering more barley, and putting in orders for glass bottles and steel kegs,” Taylor says. In other words, the newly legalized beer producers were racing to get to the market once it was clear that they’d be allowed to sell their product again.
“After four years of falling, there’s no magic to cause the economy to rise. Why does it start to rise in March and April of 1933? I think beer legalization was a big part of that,” Taylor says.
This success wouldn’t last, though. Other New Deal policies like the National Industrial Recovery Act negated the progress made from ending Prohibition. “The economy goes into a four-month downturn from August to December 1933 that is sharper than the Great Recession downturn in 2007 to 2009,” Taylor says, “Had they just left it alone we might not be calling it the Great Depression today.”
Franklin Delano Roosevelt took credit for the growth after relegalization and missed the blowback from the failures of the rest of his policies during the Great Depression. “He got a lot of goodwill for the four months of recovery,” Taylor says.
The Temperance movement took a gradualist approach to its efforts. “A proponent of municipal prohibition could become an advocate of county prohibition, then an advocate of statewide prohibition, and finally an advocate of national constitutional prohibition,” Taylor quotes from an Anti-Saloon League spokesman. But the movement overreached. And the factors that turned people toward Prohibition turned against it during the Great Depression.
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