Jason E. Taylor, Mackinac Center for Public Policy
A little more than ninety years ago—on April 7, 1933—beer became legal to produce, sell, and consume in the United States for the first time since the enactment of Prohibition in January 1920.
With the economy at its lowest point of the Great Depression, President Franklin D. Roosevelt pushed Congress to change the legal definition of “intoxicating” beverages to allow beer that was up to 3.2% alcohol by weight (4% by volume). Proponents claimed this would create jobs along the beer production, service, and distribution supply chain at a time when a quarter of the workforce was unemployed.
April 7 brought a carnival-like atmosphere—with more than 1.5 million barrels of beer sold—to the 20 states that had cleared the way via their own beer bills. State-level beer prohibitions subsequently fell like dominos so that by Repeal Day (December 5, 1933) beer was legal in 43 states that together had 93 percent of the nation’s population.
As predicted, relegalization brought a significant economic boost as long dormant breweries upgraded their capital, hired new workers, and purchased inputs such as barley malt, delivery trucks, glass bottles, and steel kegs.
To illustrate, the United States Brewing Company of Chicago—which was already in operation making non-alcoholic beer—quickly contracted for 250,000 additional bushels of barley malt, purchased 25 additional trucks, and hired 250 new employees. The A.O. Smith Corporation of Milwaukee converted an idle automobile frame plant into a mass production line for steel kegs and by early April the company was producing more than 4,000 per day with 450 employees working continuously across three 8-hour shifts.
Similar actions were taking place all over the nation and 300 breweries had commenced legal beer sales by June—this doubled to over 600 by year’s end. By the summer of 1933, reported brewery employment had risen by 24,000, while tens of thousands of jobs were also created in bars and bottle shops, as well as in restaurants and hotels that could now serve beer.
When one thinks of the 1930s New Deal, programs like the Agricultural Adjustment Act, the Civilian Conservation Corps, the Tennessee Valley Authority, and the Works Progress Administration come to mind. Economists conclude that the impact of the New Deal was a very mixed bag. Some programs, particularly those dealing with financial and banking reforms, were a net positive. Others promoted collusion, constrained supply, and artificially raised the price of labor slowing recovery and making things worse.
Beer legalization, however, was a clear winner. It combined with successful financial reforms to bring about a tremendous economic surge. Between April and July 1933, the United States experienced its largest—by far—four-month output jump in history. The economy had turned the corner and appeared well on its way to a full recovery, more quickly than anyone could have dreamed just months earlier. The United States Brewers Association said Americans should drink up since “in every glass there is a step forward to prosperity” and a popular contemporary song was recast as “happy days are beer again.”
One of the great tragedies of the 1930s is that the recovery of 1933 was cut short by the institution of harmful New Deal policies such as the cartel-enabling National Industrial Recovery Act. The four-month downturn (August to November 1933) that followed the NIRA’s implementation was steeper than the 18-month Great Recession of 2007-2009. The Depression was back, and while more ebbs and flows followed — again largely driven by a mix of helpful and harmful policies — the economy remained highly depressed until the nation’s entry into World War II, and arguably (if one measures prosperity by household consumption) until after the war’s conclusion.
While economists and historians are sharply divided on the costs and benefits—and legacies—of Roosevelt’s New Deal, let us set aside those differences and raise a glass to a New Deal policy we can all applaud. FDR was right in 1933 to say, “I think this would be a good time for a beer.”
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Jason Taylor is the Jerry and Felicia Campbell Professor of Economics at Central Michigan University and a member of the Board of Scholars for the Mackinac Center for Public Policy.
