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THE SEARCH BAR

How beer kick-started economic recovery during The Great Depression

| 49 minutes | Media Contact: University Communications

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Summary

National Beer Day isn’t just a made-up holiday by the beer industry. There’s real, historical significance with the legalization of beer having economic ripple effects across the country during The Great Depression.

Summary 

In this episode of The Search Bar, host Adam Sparkes welcomes Jason Taylor back to the show how beer helped save a struggling U.S. economy during The Great Depression, and how New Beer’s Eve and National Beer Day came to be.

Chapters 

Transcript

Introduction

Adam: National Beer Day isn’t a made-up holiday backed by “Big Beer.” It has major historical significance that stems from the signature of a US president. Welcome to The Search Bar. I'm your host, Adam Sparkes, and on today's episode, Jason Taylor, professor of Economics as Central Michigan University, joins us to discuss how beer helps save a struggling US economy. Welcome back. Thanks for coming back in to talk about beer instead of inflation.

 Jason: This will be a little more fun, I think.

What got an economics professor so interested in researching the legalization of beer?

Adam: I guess that should be the first question is kind of what got you to beer as an economic study?

Jason: Yeah. Well, I'm an economic historian. I know I was talking about inflation last time, but most of my research goes back to the Great Depression era, and I was studying-The Depression was, if you think of it as a long down slide. It was a big down slide from ‘29 to ‘33, and then the economy slowly started to recover, but even that wasn't consistent. There was actually a really sharp recovery that happens in the spring of ‘33, and then it kind of gets derailed and there's some ups and downs. I was looking at that sharp recovery in early ‘33 and what were the causes of it? There hasn't really been a lot done on that. There's been some, but as I was studying that, I had discovered in a New York Times article, the quote saying, well, “beer has loosened the purse strings and the public feels better.” And I was puzzled by that because I didn't understand what they meant. Prohibition was still going on. Prohibition started in 1920 and it was going on until December of 1933, and I had no idea that in fact, beer had been legalized at the end of prohibition and very, very few people know this. And this then opened up a whole line of research thinking about the economic impact of beer legalization before the end of prohibition. I wrote, I don't know, five or six different articles on different aspects of that. What was the economic impact of beer legalization? How quickly did breweries reenter after they were decimated, the industry had been decimated? How did breweries finance their return? So I'd written all these papers and kind of piecemeal on these, and these are scholarly papers, and I thought it'd be nice to write this as a more of a general audience book, which is what I ended up doing was taking my five years of research and background and knowledge that I had gained and trying to put it into not an academic tome, but a fun, interesting book that will appeal to people that love history, people that love beer, and people who just want to learn something new.

What made the "roaring 20's roar"?

Adam: Prohibition, it's largely that-It's weird in my brain, I always think of it as 1920 to 1930. I know it was ‘33, but it is that roaring twenties decade. What makes the American economy go at that time?

Jason: Well, there's technological advances, there's automobiles. The stock market is booming. It's really a time of major productivity increases and technological advances that are driving a lot of the roaring twenties in the United States and other parts of the world were still reeling from World War I and not doing as well as we were. Our land was unscathed. Whereas Europe had been devastated from World War I that also had a role in helping our economy, relative to theirs. But it had nothing to do with the bootlegging or alcohol. That was all just going on at the side of things.

Adam: And I'm just trying to get a little bit of a picture of it there. So who's making the money off of alcohol then? During prohibition?

Jason: It's not the government. So, prior to prohibition, one third of all government federal revenues came from alcohol taxes. One third. The only reason we could have prohibition was because we, in 1913, passed the income tax amendment. Once they had the income tax amendment in place, they could replace the revenues from alcohol. And that actually opened the door for the Temperance Movement to say, okay, we don't need the liquor taxes anymore. We can tax income now, had it not been for the income tax prohibition probably could never have occurred. So yeah, who was benefiting from the liquor? It was bootleggers. And that was one of the arguments they were making about why we should get rid of prohibition was you've got this underground economy of people that are making money when the government could be taxing and regulating this. And again, the alcohol that was being consumed was dangerous, very high proof made in unsanitary conditions. And so the argument was, this is insanity, but again, it never got off the ground. The Temperance Movement was very politically connected, and they would punish anybody, any politicians that got in their way. What changed in 1929 was of course the Great Depression. And when The Depression hits in ‘29, ‘30, ‘31, there's this push to say we should legalize beer not as a civil liberties, but as an economic. Beer was a top 10 industry in manufacturing industry before prohibition. It was responsible for tens of thousands of jobs, perhaps hundreds of thousands of jobs if you think about all the things that are connected to beer. So the call then became strong. “We want beer, we want beer.” President Hoover would go places and people would chant, “we want beer, we want beer.” And Hoover was not willing to listen to that. He wanted to keep prohibition in place. The Democratic Party, then President Roosevelt, candidate Roosevelt in 1932 pushed for saying, “Hey, here we are in the Great Depression and unemployment 25%, we need to do something.” One thing we could do very quickly, getting rid of prohibition would again take three quarters of states to ratify a new amendment, two thirds of Congress to pass that. That's going to take a long time if it's ever going to happen at all, but we could quickly. And so this was in the Democratic Party platform in 1932 with a simple majority in the House and Senate, and a signature by the President, modify the definition of intoxicating liquors to allow light beer. Now they didn't say 3.2 at that time, but he campaigned on this idea of allowing low alcohol, beer, non-intoxicating beer.

Adam: It's a campaign promise.

Jason: Campaign promise, yes.

Adam: Thirties man.

Jason: And the election of ‘32 was a landslide election. Of course, no surprise, the Republicans were in power, President Hoover during the collapse of the economy. So it's a landslide for the Democratic party, and it's also then becomes a landslide for legal beer. In fact, the headlines on November 9th, 1932, the day after the election said, yeah, “Roosevelt carries almost every state, but they also said right below that move for beer starts” beer. So it was pretty-

Adam: People were ready.

Jason: In some cities like Buffalo it was actually, the banner headline was basically “beer coming by the way, Roosevelt won.”

Why was 3.2% beer chosen as the first step toward repealing Prohibition?

Adam: Alright. Buffalo, New York. So that's the catalyst for this kind of like, and I didn't know about this until I knew we were going to talk about it. So, this is that catalyst for that kind of little early pre-lifting of prohibition or at least a rewriting of what is going to be enforced under prohibition. So how did they get to this 3.2%? How do we get there?

Jason: It's relatively arbitrary. So, when Congress had been pushing for these, well, when people in Congress had been pushing for these modifications in the twenties, they often threw out numbers like 2.75% here or 3% or 3.05%. It was pretty arbitrary. Why did they go with the three two in March of 1933? I don't have an answer. I think that one thing I’ll say is that the beer that was being produced before Prohibition wasn't too different than 3.2% alcohol by weight. Keep in mind, three two, alcohol by weight is 4% by volume, which is about what a Bud Light is or something like that, today. It's not that weak of a beer and it's certainly not non intoxicating. Whenever I say non intoxicating, I always put the quotes around it, but I think that it was a landslide election and there was really no discussion between the November election and March-back then the president didn't take office until March 4th. That was-after Roosevelt, we actually amended another constitutional amendment to start on January 20th as we do now. So there's a long delay between when Roosevelt wins the election and when Roosevelt takes office and there's really nothing going on in terms of beer stuff because the other Congress that was dominated by the Dries is still in. Roosevelt takes office on March 4th, and then nine days later out of the blue, he issues a statement to Congress. “I want you to immediately modify the Volstead Act to allow non intoxicating beer.” He doesn't say what percent. Congress says, oh, where did that come from? They get together that day, that evening they worked through the night to write a bill and I don't know how, but the bill said 3.2 alcohol by weight. So that's the best answer I can give you that there's no magic number there.

Adam: Yeah, someone's brother was a brewer or something in there probably, right? It was the beer lobby.

Jason: During World War I, they allowed 2.75% alcohol by weight, and I think a lot of the brewers had said, well, it's just really hard to make a beer that tastes good at 2.75%. You could even just get it a little bit higher to 3.05% or 3.2% I think that that would be more palatable, and they won the day, basically. Another thing that I had looked at, by the way in my prior research was the political economy of all this, the voting patterns of the beer bill as they called it, and who voted in favor and the whole congressional hearings. And again, no magic to a 3.2% except for that. I think that they felt like they want to landslide election, and they were going to say, let's go all in. Let's not 2.75%. No, let's go 3.2%.

How was the legalization of 3.2% beer rolled out?

Adam: Get it done. So what does the rollout look like then? So April 7, right,

Jason: Right.

Adam: So April 7, it becomes legal. How quick is beer on the streets, in the US?

Jason: The beer bill was passed on March 22nd, and it said there'd be a 15-day waiting period, which set April 7 as the day that 3.2% alcohol, beer would become legal. Now, many breweries had anticipated this. As I mentioned, it was part of the Democratic Party platform. So the breweries that were making dealcoholized beer. Many of them made beer and did not dealcoholize it. It was perfectly legal as long as your intention was to dealcoholize it before you sold it, but they anticipated that legal beer was coming, and so they started making,

Adam: Oh, they're ramping up.

Jason: They're ramping up starting especially in November, December, and they're stockpiling beer that they're telling the government, officially, this is legal. We're going to dealcoholize before we sell it, which is all fine. So that's how there was beer available because that's a natural question. If beer is illegal and then suddenly it's legal, how could it be that there was a lot of beer? Well, because there were 133 breweries that were licensed to sell beer on April 7th, 133. Again, there were 1400 breweries in, before prohibition, so we're talking a much smaller amount, but they tended to be the large breweries, Anheuser-Busch, Pabst, and Strauss and those kind of breweries. And so they were stockpiling beer for a while. So there was enough beer, there were some shortages, but there was by and large enough beer on April 7th to go around.

Was it a big party when beer was legalized?

Adam: What did that look like? Was it a massive party? Were there people in the streets? Was it New Year's Eve or something? A little less?

Jason: I think you're way understating it. No, it is been called The Greatest Beer Day in History, new Year's Eve. That's nothing. This is like Mardi Gras, New Year's Eve, 4th of July rolled into one and then multiplied by 10. So around the nation's breweries that were still operating again, there's 133 of them, there were gatherings. Anheuser-Busch, 30,000 people, many breweries around the country had 20-30,000 people gathering around them. Smaller breweries. Okay. 2000 people in smaller cities. And so the interesting thing was the beer was not allowed to leave the brewery until 12:01 the night, April 7th. So when the calendar turns from April 6th, midnight, 12:01, that's when the, it's not that now suddenly the bars are allowed to start serving beer. That's when the beer leaves the breweries to go to the bars. So people are at the breweries, and then the breweries whistles go off. People shoot guns in the air, people throwing their hats in the air, dancing, whipping, and then the trucks start to come out. And of course, people are all over the place. So the police escorts have to clear the crowd to get these beer trucks to be able to go through the streets. And then 10, 15, 20 minutes later, they start delivering the beer to the hotels and restaurants and bars that are now in place. People of course, have gathered there. They've been there for hours waiting. So first, there's the party at the breweries, and then everybody's screaming as the trucks leave. And then there's the party that goes on at the bars and the restaurants and hotels, and people are, most of these places hired bands to play. So they're playing How Dry I Am , and they're playing Sweet Adeline. They're playing all these kind of typical drinking songs. As they're counting down, especially, they're playing the kind of more sad stuff. And then when the beer arrives, their happy days are here again and songs like that, and everybody's just smiling and raising a glass to the goodness of life, something that they hadn't been doing for the previous four years of the Great Depression.

Adam: So for these folks, it's kind of interesting too. It sounds like it becomes a symbol for the hope of this new era, right? There's a new presidency.

Jason: It's a new deal.

Adam: Yeah, it is. So it's sort of the beginning of the New Deal then, right?

Jason: Yeah. This is one of the earliest New Deal policies. Roosevelt takes office and nine days later, one of his first New Deal policies is to call for legal beer. He does several other things, of course, in that time as well. But this is one of the early New Deal policies, and people are, they actually called it Roosevelt Beer, the 3.2% beer. So, they're raising a glass of Roosevelt beer to the New Deal, basically, and the newfound freedom that they have.

Was the roll-out nationwide? Up to each state?

Adam: No wonder people wanted to give the guy three terms. So it doesn't roll out everywhere on April 7th. So in Michigan, for example, it takes a few more weeks for the state of Michigan to kind of allow this to happen. How does that look around the country?

Jason: That's right. The thing about law in the United States is, of course we have multiple layers. So just because something is legal, when something's illegal at the federal level, it's illegal everywhere. But if something becomes legal at the federal level, then it goes to the States, and if it's illegal at the state level, then it might go to the localities. In most states had their own prohibitions in place. They put their prohibitions in place before the federal prohibition, or even during the federal prohibition, they put in their own prohibitions to co-enforce prohibition. So when the federal law gets passed, legalizing 3.2% beer, that doesn't mean that it's going to be legal everywhere. In fact, only a couple of states would've automatically become legal. Most states had to very quickly pass their own beer bills. So on April 7th, only 20 states out of the 48, only 20 had legal 3.2% beer. The other states remained under prohibition by state law. And then slowly a week here, two weeks there, a month here, over the course of the next few months, state after state legalizes 3.2% beer. And so we have these New Beers Eves, as they were called, the New Beers Eve parties that I described a minute ago. New Beer's Eve happened in April 7th in 20 states. It happened in other states at different times. But the interesting thing is every single one of these parties is just as wild as what happened on April 7th in the states that had legal beer. So like in Michigan. So the story with Michigan basically is that our Congress didn't get things together quite as quickly as other places, but passed the beer bill on April 27th, and that didn't legalize beer though right away, the Governor Comstock said, “well, I need to put into place a liquor commission and a regulation and a way to tax beer.” That was a big part. It was taxing beer. I need to put this in place, and as soon as I'm satisfied that that's in place, that's when we'll be allowed. Then to get, you had to get stamps for tax purposes when you could sell beer. And he said that this would probably happen on May 10th. So the American Legion in Detroit got the first permit for the state of Michigan to hold a major party at the Detroit Convention Hall on May 10th. And it turned out though that the governor wasn't quite ready on May 10th to say, not everything's quite in place. We're going to shoot for May 11th. Well, the American legions already rented out this, so they asked the governor, “Hey, we got this whole party plan, victory Day celebration, victory over The Depression, victory over prohibition.” And so the governor relents and says he'll give a 24 hour preview only to the American Legion in Detroit on May 10th, so May 10th at the American Legion, 30,000 people turnout. Joseph Strauss pours the very first glass, it's all Strauss beer that was at the event. He pours the honorary first glass of beer on May 10th, and 30,000 people come in, it starts at 6:00 PM it goes till 2:00 AM, wild party, great time. Beer was 10 cents, 10 cents a glass, and all proceeds went to charity because it was the American Legion, the rest of the state. It's 6:00 PM May 11th the next day. So everywhere else except for the Detroit Convention Hall. So if you want to think about National Beer Day is April 7th. We celebrate National Beer Day April 7th in honor of the events of April 7th, but that only happened in 20 states. So what I would push for is that, go ahead and celebrate April 7th, Michigan, but May 11th,

Adam: That's yours

Jason: Is also yours, now if you're in Detroit and you're in the Detroit, maybe you do May 10th, but I think May 11th is the day that we should be celebrating in Michigan. So have a great time on April 7th as you celebrate National Beer Day. But on May 11th, you can celebrate Michigan Beer Day and Michigan Beer Day, for example, in Lansing, I think there were 15 places that advertised in the Lansing State Journal “tonight, 6:00 PM come on out, New Beer's Eve,” and again, wild parties going on all throughout the state on May 11th.

What were the taxes like on beer sales?

Adam: I'm curious a little bit too about the economics of this. Well, one thing I thought was interesting is looking at some of the reference materials that Aaron sent to both of us, and there's the state of Michigan has some of these vintage ads that were in papers. This is on the Liquor Commission's website talking about, I think it was the 75th year of the Liquor Commission, and one of them was a 40 cent meal you could get that included a real beer. And I thought that was incredible. It was basically advertising a sandwich and a beer for 40 cents. And it got me to thinking, what does a beer tax look like in 1933? How much money are we talking? What's the percentage? And how does that compare to now?

Jason: The tax that the federal government set was pretty steep. It ended up being about 1 cent per serving a beer. That doesn't sound like much to us today.

Adam: Yeah, but 40 cents-

Jason: But when you consider that beer typically cost 5 cents or 10 cents in cheaper cities, it was typically like in the South, it was usually 5 cents. In bigger cities like Chicago, it was sometimes 5, but it was often 10. I mean, it was usually 5 or 10 cents a glass, and of that, if it was 5 cents, 20% of that is going to federal tax, states also impose taxes. So if the state-and sometimes even the localities-impose taxes. So a lot of this money that the breweries were making on even a 10 cent beer was going directly to the taxes at that time.

Adam: I was curious, what's the difference between how alcohol, tobacco, and now cannabis gets taxed? Those are the three big things, but I have no idea. I've never thought about it once buying a beer, how much of this is tax? Think about it with gas every now and then.

Jason: Right? And of course that varies by state to state, and I think so too for liquor taxes and things, but I don't how much, I don't think it's quite as much variety as it is the gas tax.

Adam: Yeah. Mean there's a ton of different, I mean, the way we're handling stuff state to state, Michigan, like you were mentioning, I think was pretty dry before prohibition. They were ahead of it. And then even now, there's dry counties down south. There's plenty of states where they're not getting that revenue at all. I think Tennessee, Kentucky still have quite a bit, I'm not familiar with anywhere else,

Jason: But at that time, there were a lot of dry counties. So even if a state had approved 3.2% beer, like in Texas it was a local option state, there were lots of local option states. Ohio was a local option state. Michigan was a local option state. So, there would be about half of the counties allowed 3.2% beer, and the other half was still all prohibition. And it tended to be the urban counties allowed beer and the rural counties are the one. And that's still the case today where when you do have counties, they tend to be rural. Is that just

Adam: Is that just social differences or is there economics behind that at all?

Jason: I think it's more social differences as opposed to economics.

Adam: Just more conservative areas, they're just less likely to want the, yeah, I mean, I guess that makes sense. If you go to Dale Hollow, Tennessee, you can't buy a beer for 30 miles.

Jason: And in lot of rural areas, there's also probably a lot of, we'll call home brewing, we'll say, or whatever word you want to use for-

Adam: Bespoke drinks.

Jason: Yeah, that's more likely probably to have happened. It happened in urban areas too, but a lot of people were making their own moonshine or their own wine or whatever it might be at the time.

Was there a growth in breweries and jobs after beer was legalized?

Adam: So you mentioned too that it was the larger breweries that they were there, they were ready for in April, Strauss, which was massive. I mean, still pretty big, but it was massive at the time. Although they may be owned by Anheuser-Busch or something at this point, but Anheuser-Busch, was there a rapid growth in smaller breweries after this? Did it continue to expand or did, was it just those big players?

Jason: Oh, no, it was definitely a lot of smaller breweries, and there were 1400 breweries before prohibition. There were about 140 of them that survived prohibition. A lot of them came back. The interesting thing is within about a year of the April 7th, there were not 133, but closer to 633, about 500 breweries entered over the next year. And this entry was not all at once. It was kind of staggered, but it would take a brewery if you wanted to say, I want to get in on this, right? You got legal beer and there's a big demand and there's a relatively short supply, so they would want to try to get in as quickly as they could, but it's going to take time. The breweries had to, first of all, whitewash all their, A lot of the breweries had mushroom beds in them. I guess mushroom beds grow very, very nicely-because these breweries, tend to not have a lot of windows and things like that. They were pretty closed up, so you had to clean it all up. You had to then buy new equipment. You had to buy new vats. It took usually at least three or four months to get a brewery from being a Ram Shack-deserted Ram Shackle as it was for 10 years or more, to being able to start producing beer at least two or three or four months. And in many cases, it was more like six or seven months. In other cases, it took a year or two. But these breweries started to come online slowly. And it wasn't all big breweries. It was definitely small breweries. Breweries where you'd have an entrepreneur who would say, this facility has been sitting vacant now for 13 years. They used to make beer here. Why don't we bring it back? So they would buy it for a relatively low cost, and they would put thousands of dollars into refurbishing it, and then they would start, they'd get their license and start brewing beer. This happened all over the country in the states that allowed beer, which was by the end of 1933, 43 of the 48 states were allowing 3.2% beer. There were only a few holdouts.

Adam: So, it's really cooking at that point.

Jason: Yeah.

Did the economics of it play out the way the government had hoped?

Adam: And I imagine the downstream economics of that are probably really positive. So this thing, I guess the question is, did it work as they intended?

Jason: Right? And now you're getting at really the heart of my book, The Brew Deal, How Beer Helped Battle The Great Depression. I'm an economist, right? So what I'm really interested in is the question that you just asked. They brought back beer with the intention of trying to help battle The Great Depression. Did it work? The answer is yes, that-as all these breweries were having to invest in new equipment, buying new trucks, hiring new workers, the breweries, they had to invest about 6 billion dollars, in today's dollars if you account for inflation, but 6 billion in less than a year of an infusion of spending by breweries to try to ramp up. They were hiring-directly breweries hired about 30,000 workers. But then you have to think about all the indirect things where you have a ramping up of demand for new trucks, for new barrels and vats and brewing equipment, bottling equipment. You have companies like that make glass bottles, have factories that are sitting idle, and then suddenly they start running these factories on double shifts. So we have all this new employment that's created for beer, so there's a huge recovery. This is what got me into the whole thing at the beginning, was to think about what was the cause of this recovery. The spring of 1933, when beer becomes legal in April, April, May, June and July of 1933, manufacturing production rises 78%, 78% in four months. Durable goods. Durable goods are things that last three years or longer, such as brewing equipment, automobiles, jumped 200% in a four-month period.

Adam: Gotta deliver that beer.

Jason: The stock market, the Dow Jones Industrial average is up 78% in four months. The economy has this amazing turnaround. We had 14 and a half million people unemployed in March. They were only about 10 million. When I say only, that's still a lot, but about four and a half million people were taken off of the unemployment rules. About a third of the unemployment problem was solved in four months, and beer was not the only reason. I never would contend that. There were other factors, but it was not about, it was not about New deal spending. It was not about the money supply increasing that didn't happen. The New Deal agencies also, those things happen much later. What economists have said is it was an expectations driven recovery. That's what the preexisting literature said. Roosevelt comes in and he infuses a lot of optimism. He helps reform the banking system. People are more confident in the banking system. He has these fireside chats. Nobody ever brought up beer as a potential contributor to this optimism induced recovery. The New Beers Eve celebrations were like an economic baptism washing away the stains of The Depression on people. If you just see the way people were smiling, and these are in the newspapers, these pictures of people hoisting, hoisting beer stuff, and then the headlines of newspapers say things like “Beer Boom Brings Prosperity,” “Beers’ Gurgle Creates New Jobs,” headlines all over the country are talking about the impact of beer, creating employment and creating prosperity. These are words that hadn't been seen in four years in the nation's headlines, and here they are prosperity, boom jobs, and that has its own indirect psychological impact on the economy. Economists have long acknowledged that a big-one of the best stimulus policies is optimism. If people feel good about the economy, they're going to go out. They're going to spend more, firms, if they feel good about the economy, are going to expand and hire more workers. And so there's this great letter that somebody in New York City had written back home to Georgia now, Georgia was still dry. And he said in this letter that the turnaround since the legal, this is about a week after April 7th. The turnaround we're seeing is just, it's phenomenal. Businesses booming everywhere. Everybody is optimistic and happy that beer's return has brought a prosperity that we have not seen in four years. It's brought a new hope, and this just resonates with me that beer brought hope to people. Even if you didn't drink beer, you saw these headlines, you saw these pictures, you saw these parties, these celebrations that were happening. And this has a major impact, I believe, on the economy. So I think it had a major role in the economic turnaround, not just directly in terms of employment from beer, but indirectly in terms of the psychological boost that it brought to the nation's spirits. If you don't mind my pun.

Why haven't we really heard about this yet?

 Adam: What makes me curious is like, why am I just hearing about this now? It seems really interesting, right? It seems pretty feel good, in terms of my lay person's understandings of recovery after the Great Depression. What do you think leaves us out of the history books? This is just Beer's not great for middle school economics class or what?

Jason: It's a great question, and I'm as shocked as you are. There's been so much written about prohibition. There's been so much written about the Great Depression

Adam: Yeah, movies, shows and everything, right?

Jason: Any book I looked at books about prohibition, they tend to devote two paragraphs. To the, oh, by the way, they legalized beer nine months earlier than the end of prohibition, and two paragraphs in many of the books about prohibition. That's it. And no economists has ever, the economists have written all about the Great Depression, every aspect of the New Deal and the Great Depression, nothing on beer legalization. And I'm happy because it opened up a great avenue for really fun, for me, really fun research to do. Again, my research that I had done before this book was more academic and scholarly and crunching data and so on. But this book is meant to be something that is not heavy or academic.

Adam: It’s like the beer party.

Jason: Yeah, it is something that anybody can read and enjoy because it is so interesting. I think that we legalized non intoxicating beer prior to the end of prohibition for economic purposes. And it appears to have worked dramatically.

What are your favorite stories from the first New Beer's Eve?

Adam: Yeah, it worked quite well. In researching the book, when you're kind of getting, like you said, a little bit out of that academic phase, and you're getting into the history and the people of it, are there some anecdotes you can share? Is there anything fun? What made you smile along the way as you're kind of going through this.

Jason: There’s too many.

Adam: Give me one. Give me a good one. Give me a favorite.

Jason: Too many to count. Oh, the whole book was fun to write, and a lot of the anecdotes that I came up with were things that were in newspaper articles that were written, all this stuff on the New Beer's Eve. So one of the chapters is called New Beer's Eve, that just documents that night of April 7th, and then the first two thirds of the chapter, and then the last part of the chapter talks about the new beer Eves that happened in all the other states. And I just really enjoyed writing about, especially those other states was kind of interesting. So like Texas, for example, one kind of neat story is that there was a reporter in Waco on April 7th. Now Texas is still dry. The only way that you could enjoy April 7th in Texas was on the radio. Radio stations were playing that night, national radio station. There was no television. They were giving play-by-plays of what was going on at the Anheuser-Busch Brewery, the Pabst Brewery. So the announcer's like, oh, they're rolling the barrels in now. Can you hear that Barrels? And you’d hear them. And they're loading them onto the trucks. And then they were doing the play-by-play. And okay, midnight comes 10, 9, 8. And so this reporter in Waco, Texas is writing about how he's turning the dial and everywhere he turns the dial, there's another story about beer. And then he turns the dial again. And there's some songs like Sweet Adeline or How Dry I Am going. Keeps turning the dial. Reports from Chicago, turn It again, reports from New York and he turns the dial one time and he gets down in Mexico and they're like, viva cerveza (long live beer). So then he finally gets to live it out, not virtually, but face-to-face in September 15th, that's when they legalize beer in Texas. So Texas gets beer on September 15th, and it's again, huge parties going on at midnight on the night of September 14th to September 15th. And it's all just the same. The same. And there's individual people that I talk about. People's names and their pictures. And again, the book has lots of pictures and things like that of people celebrating. It's 12:01, look at me with my stein of beer. So there's too many to really go into detail on any one. I think the whole book is just a lot of anecdotes that I think are really fun.

Adam: The play-by-play is wild to me. I can imagine probably you're sitting home in Texas and going, I'm sure come on already, guys.

Jason: I'm sure he was a little tipsy from his home brew because it was pretty clear when he wrote this for the next morning paper that he was feeling good.

Were there major issues with people committing crimes or being drunk on that first night?

Adam: I guess I'm assuming that this went without a lot of violence or a lot of incidents or anything crazy in terms of painting the picture of a nation that kind of is dry and then kind of has alcohol kind of turned out onto the streets. Did people handle it well? Was there a lot of wild stuff?

Jason: That's a great question. And the answers, they handled it very well. But remember, they were typically drinking hard liquor in those speakeasies. So now on April 7th, they're drinking 3.2% beer. And by the way, it was 3.2% beer. They, throughout ‘33, they would test beers at random. And they found that on average, these beers were actually below 3.2%. They were probably more like 3.0% or 3.1% or even 2.9% in some cases. So this really was low alcohol beer. It wasn't like just, oh, we're going to say 3.2%, we're going to make whatever we want. But that evening, April 7th, there were numerous cities that I found that said, on a typical night, we get about 15 people in the drunk tank. Guess how many we had on April 7th? Zero? And they said that this is proof that Congress is right to declare 3.2% beer non intoxicating. There was not a single case of intoxication again. But intoxication means different things to different people. There was not a single case of somebody being arrested and put into a drunk tank for drinking 3.2% beer on April 7th. In many of these cities, this is what they reported, this is what the courts had reported. And then they would say, I guess they were right, 3.2% beer is non intoxicating.

Is 3.2% alcohol beer still around today?

Adam: Yeah, I buy it. I know a few guys who can drink 30 beers in a day and still be standing up, like Bud Lights or something. They will not be named. If you hear this, you know who you are. So as far as these non-intoxicating beers is 3.2% still with us.

Jason: Well, it's interesting that if the government's going to declare something non intoxicating, and again, it wasn't just the federal government that did that in March of ‘33. It was every state then had to also declare 3.2% beer. 43 of the 45 states, 48 states declared 3.2% beer non-toxic. Once they made this declaration, this opens the door to all kinds of roles that non intoxicating beer is going to be treated differently than intoxicating beer. When they passed this beer bill in March of ‘33, 3.2% beer declared non intoxicating was clearly meant to be a short-term solution to the problem of the 18th Amendment. To modify the Constitution will take months, years, if ever, we can get it passed. But we can just, with the snap of a finger, make declare 3.2% beer non intoxicating. Well, prohibition ends on December 5th, 1933, and you would probably assume at this point that 3.2% beer goes away. It doesn't, 3.2% beer stays the only legal beer in many states for a few years. But most states slowly start to allow liquor and other things. But 3.2% plays some roles that endure, for example, 3.2% beer in around seven states. They allowed 3.2% beer for 18 year olds, but you had to be 21 to buy anything else. So if you want anything stronger than 3.2% you need to be 21. But in places like Ohio, so maybe some Michiganders might remember up until the early eighties, you could drive down to Ohio if you were 18, and you could buy beer in Ohio. And so 3.2% beer for 18 year olds that lasted starting in the thirties all the way until the 1980s. And several states had this. Another thing was 3.2% beer in the military. Military bases had-World War I, said, no intoxicating beverage is allowed. Well, 3.2% beer is non intoxicating. So actually the first military base to allow 3.2% beer was actually in Kansas, which was a dry state altogether. But you could drink, if you were in the military, you could drink 3.2% beer in Kansas in April of ‘33, even though the rest of the state remained bone dry until 1937, when they finally allowed 3.2% beer in Kansas. In the military, they allowed nothing but 3.2% beer like through World War II, 3.2% beer played a major role in the military at military bases all the way until the mid-eighties. Another issue was Sunday sales. Many states said, you can't sell alcohol on Sundays. Blue laws. Most states did not allow alcohol sales on Sundays, and that had been true for decades before prohibition. Well, if 3.2% beer is non intoxicating, then many states allowed Sunday sales of 3.2% beer. So 3.2% beer stays a major part of the beer scene in many states for these reasons. And the other big one was many states said if you wanted to buy intoxicating liquor, you had to go to a state owned liquor store or state licensed liquor store. But 3.2% beer is non intoxicating. So they could sell that in grocery stores, gas stations, convenience stores, and this is actually still in place in one state, but as late as 2018, there were still five states that allowed 3.2% beer only in grocery stores and convenience stores. Oklahoma was a huge 3.2% beer state until 2015, 95% of the beer that was sold in the state of Oklahoma was 3.2% alcohol by weight.

Adam: Oh, no kidding.

Jason: 95% of it, because they said that they had other beer, but you could only buy that other beer at a liquor store. And liquor stores were not allowed to carry cold beer unless it was 3.2%. And for that reason, if you wanted to go get a cold beer, it had to be 3.2%. Kansas, Oklahoma, Utah, Minnesota, and Colorado were the five states that until 2018, 3.2% beer was allowed in grocery stores and convenience stores. Those all ended except for Minnesota. Minnesota today is the last Roosevelt beer state in Minnesota. It's still the case today that if you go to a grocery store or a Target or a gas station, you can't buy anything that's intoxicating. But you can buy 3.2% beer.

Adam: That's really interesting. I know that when you're in different states, I know going in to buy beer, it's not the same, even if it's, I don’t know if it's a cultural hangover or something, but I remember being-Aaron and I actually talked about this-being in Milwaukee and the beer store is always separate from the grocery store. When you're there, you kind of go in and there's grocery store, but then the beer store is a separate checkout. You don't just kind of bring your beer in through groceries. And I wonder if those things are likely just kind of hangovers from those laws still being in place.

Jason: Every state still has different, in Utah, if you want to go to Utah, even if you're 105 years old, you have to show your ID to buy alcohol in Utah. It's just a state-and there are probably other states that are like that as well. Every state has different little nuances with their alcohol regulations,

Adam: The kind of little ins and outs of it that have hung over since-

Jason: Yeah, there you go.

Did you have any big takeaways from your research?

Adam: Since the Great Depression. Yeah. Is there a big takeaway for you that you had in this? I know it was a lot of fun to do in stuff, but in terms of like, I don't know, did it change the way you thought about maybe banned substances or syntax as an economist when you kind of went through the whole thing and realized what an impact it had when it went away and then when it came back?

Jason: Well, I think that prohibition was a terrible experiment. I think everybody agrees that prohibition was not a good thing in the end. Now, if you want to defend it, before prohibition, there were a lot of saloons. The saloons were mainly men going to them and drinking a lot, and prohibition changed things. Women went into those speakeasies as well. It made it, kind of democratized alcohol consumption. So one thing I'll say, I think that the fact that beer had a nine month monopoly in the legal market had an important impact. If prohibition had just sort of ended and it was everything. Well, people were used to drinking hard liquor at that time. And a lot of young people, people that were young before Prohibition, had never drank a beer. They had only if they drank anything at all, had they only had hard liquor. And so when we get this beer coming back in April of ‘33 and having this nine month monopoly on the legal market, people liked it. They liked beer, and it was pretty weak beer, but they liked that kind of weak beer. And I think it helped make America more of a beer country again, because we were always a beer country. And then during prohibition, we became more of a spirits country because that's what the bootleggers made. It was much more efficient to make spirits. Per ounce of alcohol. it's much more efficient to make spirits than it is to make beer, which is-

Adam: Easier to sneak it around.

Jason: Easier to sneak it around, et cetera. So having this legal headstart, I think really helped beer become king again in the United States. So there's some interesting long-term impacts of this policy on the brewing industry as well.

Adam: Yeah, it could very well be the reason that there is a microbrew on every corner in every major town, now

Jason: I mean, so the beer industry had been in a long consolidation pattern really since the 1870s. The number of breweries had just been going down, and that continued all the way until the 1970s. When we start to see the seeds of the Microbrewing movement that happened. Jimmy Carter legalizes Home brewing in 1978, and this is usually acknowledged as kind of a turning point where I think by 1978, there were only 45 independent brewing companies in the United States, again, going from 1400 before prohibition. And then we have about 700 in the 1930s. And it just keeps these, it's consolidation. Usually these breweries get subsumed. Some of them go vacant and then get torn down or whatever, but many of them are just being subsumed in a consolidation. And then we get the seeds of the Microbrewing movements starting in the eighties and nineties. And now today we have 10,000 breweries, the most we've ever had in the United States today, about 400 in Michigan alone.

Adam: And you heard it here. Thank you. FDR. Thanks Jimmy Carter, the reason you've got all the beer you've got. Thanks for coming in, Jason. It's been a lot of fun. I think we've said it all about beer.

Jason: All right. Thank you.

Adam: Look forward to doing it again. Thanks for stopping by The Search Bar. Make sure that you like and subscribe so that you never have to search for another episode.

 

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The views and opinions expressed in these episodes are strictly those of the host and guest speaker.