Commentary

Legacy of Prohibition Lives on in Maryland

Cheers! Today is the 74th anniversary of the repeal of Prohibition. On December 5, 1933, Utah became the 36th state to ratify the 21st Amendment, thereby repealing the 18th Amendment and ending our 13 years as a dry nation.

As the only constitutional amendment ever repealed, history confirms that the 18th Amendment was an abject failure. Dubbed the “noble experiment” by its advocates, Prohibition reduced alcohol consumption only moderately, but led to a dramatic increase in crime and corruption. Organized crime flourished, and bootlegging, rum running and smuggling became commonplace — especially in Baltimore, where resistance to Prohibition was strong.

The Sage of Baltimore, H.L. Mencken, put it best when he observed: “There is not less drunkenness in the Republic, but more. There is not less crime, but more. There is not less insanity, but more. The cost of government is not smaller, but vastly greater. Respect for law has not increased, but diminished.”

These days, most folks rarely think about this failed experiment in our history. We no longer need to find a speakeasy to enjoy an alcoholic beverage. And virtually nobody distills rum in his bathtub anymore.

Yet the vestiges of Prohibition live on in our state and country, most notably in the laws that govern the sale and distribution of alcoholic beverages. In addition to repealing Prohibition, the 21st Amendment turned regulation of alcoholic beverages over to state government.

Most states, including Maryland, adopted some form of the so-called “three-tier” distribution system. Under this system, producers cannot sell their wares directly to consumers. In fact, they cannot even sell directly to grocery stores, restaurants or other retailers. Instead, they are required by state law to sell their products to wholesalers, who in turn sell to retailers, who then sell to consumers. Of course, each step in the process leads to an additional markup so in the end, consumers spend a lot more for the beer, wine or spirits than they should.

[T]he vestiges of Prohibition live on in our state and country, most notably in the laws that govern the sale and distribution of alcoholic beverages.”

High additional costs are only part of the problem. Because consumers cannot purchase alcohol directly from producers, it can prove impossible to track down rare bottles of wine, beer or spirits. The complex arrangements among manufacturers, wholesalers and retailers have limited the availability of rare and boutique wines, beer and spirits — especially products made by small brewers, distillers and vintners, which often lack the volume and resources necessary to market their products to distributors. It has placed consumer options fully in the hands of wholesalers and retailers.

State governments created the three-tier system immediately after Prohibition to ensure that they could collect taxes on alcohol and force organized crime out of the industry. But technological advances have made tax collection easier, and organized crime has transitioned into other industries. Accordingly, some states have changed their laws to benefit of consumers. Next door in D.C., a consumer in search of a bottle of wine from a small vineyard in California can call the vineyard, place an order for the wine and have it shipped to his or her home. Or he can visit an online retailer to purchase a hard-to-find beer. In Maryland, this is not just a crime, but a felony.

Unfortunately, few attempts to overturn these laws in Maryland have seen success, thanks to intense lobbying efforts by wholesalers, who profit greatly by the status quo, and anti-drinking advocates, some of whom support any law that hinders alcohol sales.

Proponents of the three-tier system usually couch their arguments in an unsubstantiated claim that it helps to reduce underage drinking. For the most part, this doesn’t even pass the laugh test. There’s simply no reason to believe that forcing producers to sell to wholesalers instead of directly to retailers has any effect on teenagers’ access to alcohol. Why would wholesalers care more about this social ill than liquor stores? After all, the retailer faces more direct consequences if it gets caught selling alcohol to an underage customer and thus, has all the more reason to check identification carefully.

Even without clear evidence of a link between the three-tier system and a reduction in underage drinking, alcohol wholesalers and anti-drinking zealots have succeeded in keeping most of these outdated laws on the books in Annapolis. And consumers are stuck with bad laws, higher prices and limited options when it comes to purchasing beer, wine and spirits.

So as you toast the 74th anniversary of the repeal of Prohibition this evening, keep in mind that even though the 18th Amendment was repealed decades ago, the legacy of this failed experiment lives on.

Brandon Arnold is director of government affairs at the Cato Institute.