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How Did Prohibition Affect The Economy

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Prohibition in the United States was a nationwide constitutional ban on the production, importation, transportation, and sale of alcoholic beverages from 1920 to 1933. The temperance movement had popularized the belief that alcohol was the major cause of most personal and social problems and prohibition was seen as the solution to the nation's poverty, crime, violence, and other ills. Lifelong teetotaler John D. Rockefeller, Jr said, “ When the Eighteenth Amendment was passed I earnestly hoped that it would be generally supported by public opinion and thus the day be hastened when the value to society of men with minds and bodies free from the undermining effects of alcohol would be generally realized”(Latson). Even though Americans hoped …show more content…

When the law went into effect, prohibition supporters expected sales of clothing and household goods to increase. Real estate developers and landlords expected rents to rise as saloons closed and neighborhoods improved. Also, chewing gum, grape juice, and soft drink companies all expected growth. Theater producers expected new crowds as Americans looked for new ways to entertain themselves without alcohol. Instead, the law proved to be a decline in many things such as entertainment industry, restaurants failed, theaters revenues decreased, and other economic benefits took the fall. In summary, the Prohibition had a very negative effect on the economy. The closing of breweries, distilleries and saloons led to the loss of thousands of jobs. Also more jobs were eliminated for barrel makers, truckers, waiters, and other related trades. Another profound effect of prohibition is on government tax revenues. Before Prohibition, many states relied on excise taxes in liquor sales to fund their budgets. For example in New York, almost 75% of the state's revenue was derived from liquor taxes. With Prohibition in effect, that revenue was immediately lost. At the national level, Prohibition cost the federal government a total of $11 billion in lost tax revenue, while costing over $300 million to enforce. The most lasting consequence was that many states and the federal government would come to rely on income tax revenue to fund their budgets going forward (Lerner). Overall, the economy suffered from the Prohibition in negative

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