How government greed, not individual rights, ended America's ban on alcohol.

Don Boudreaux | July 31, 2007

The standard, schoolbook history of alcohol prohibition in the United States goes like this:

Americans in 1920 embarked on a noble experiment to force everyone to give up drinking. Alas, despite its nobility, this experiment was too naive to work. It soon became clear that people weren't giving up drinking. Worse, it also became clear that Prohibition fueled mobsters who grew rich supplying illegal booze. So, recognizing the futility of Prohibition, Americans repealed it in 1934.

This popular belief is completely mistaken. Here's what really happened:

National alcohol prohibition did begin on Jan. 16, 1920, following ratification of the 18th Amendment and enactment of the Volstead Act.

Speakeasies and gangster violence did become familiar during the 1920s.

And Americans did indeed keep drinking.

But contrary to popular belief, the 1920s witnessed virtually no sympathy for ending Prohibition. Neither citizens nor politicians concluded from the obvious failure of Prohibition that it should end. Read More

As historian Norman Clark reports:

"Before 1930 few people called for outright repeal of the (18th) Amendment. No amendment had ever been repealed, and it was clear that few Americans were moved to political action yet by the partial successes or failures of the Eighteenth. ... The repeal movement, which since the early 1920s had been a sullen and hopeless expression of minority discontent, astounded even its most dedicated supporters when it suddenly gained political momentum."

What happened in 1930 that suddenly gave the repeal movement political muscle? The answer is the Great Depression and the ravages that it inflicted on federal income-tax revenues.

Prior to the creation in 1913 of the national income tax, about a third of Uncle Sam's annual revenue came from liquor taxes. (The bulk of Uncle Sam's revenues came from customs duties.) Not so after 1913. Especially after the income tax surprised politicians during World War I with its incredible ability to rake in tax revenue, the importance of liquor taxation fell precipitously.