There has been much discussion surrounding marijuana regulation and a stated goal of a need “to regulate marijuana like alcohol.” The pros and cons of marijuana legalization are far beyond the scope of this column, but a deeper dive into the goals and purposes of alcohol regulation is something that is often missing from the current debate over marijuana. People who seek to “regulate marijuana like alcohol” may need to have a deeper understanding of the goals and purposes of alcohol regulation and how it works.
Alcohol, as the 21st Amendment notes, is “intoxicating.” While it can be used for joy, it also can be misused and abused and has a regulated industry to mitigate the abuses of the product. The Centers for Disease Control estimates over 80,000 deaths a year in the U.S. are related to alcohol. Too often this estimate is glossed over in policy debates, and efforts are made to treat alcohol like any other commodity.
Alcohol has many religious, historical and legal heritages around the world and particularly so in the United States. Alcohol regulation in the United States is celebrating its 80th year anniversary of modern incarnation with the passage of the 21st Amendment in 1933. This unique religious, historical and constitutional background highlights the important sources of diverse stakeholders and the various prisms that shape their views on the subject.
The 21st Amendment was a national exercise of constitutional policy-making. It rejected the 18th Amendment’s federal “one-size-fits-all” approach to dealing with the sensitive issue of alcohol policy. What is good for New York City may not be good for Utah or vice versa. Section three of the 21st Amendment put ratification on a fast track with special conventions. States rushed to pass this amendment for various reasons. Some states wanted the constitutional amendment to protect the state and to go “wet” while others wanted the 21st Amendment passed to be empowered to regulate the alcohol industry more severely or stay “dry.”
As a result of the 21st Amendment, alcohol is primarily regulated at the state level. Section two of the 21st Amendment specifically highlights this state-based approach:
The transportation or importation into any State, Territory, or possession of the United States for delivery or use therein of intoxicating liquors, in violation of the laws thereof, is hereby prohibited.
The federal government’s regulation is more limited and falls mainly under the Federal Alcohol Administration Act of 1935 (27 USC 201) and, in fact, this federal law references the need to help enforce the 21st Amendment as part of the statute setting up the federal oversight. An alcohol industry member’s compliance with state law is a condition of their federal permit.
The emphasis of regulation both at the federal and state level is of alcohol industry regulation. The government regulates the industry to shape markets to make policy changes effective. Legislative concerns such as drunk driving or sales to underage consumers are a much more recent policy concern and development and these laws further support industry regulation, not replace it.
The concept of industry, as opposed to individual, regulation serves as a stark reminder that the alcohol industry is not a free market by government design. There is only one consumer product subject to two U.S. constitutional amendments. The United States, via a rare exercise of collective national legislation in the constitutional amendment process, created a system guaranteeing not “one national market” but fifty independent state markets. As a result, each state set up systems that are purposefully unique and differ from neighboring states. These differences may chafe the nationalistic one-size-fits-all desires of certain corporate or academic interests; however, on balance they work well for all Americans.
The state level debates on how to regulate alcohol once it was made legal again were mainly inspired by the report Toward Liquor Control, which was funded by John D. Rockefeller, Jr. In this study written by Raymond Fosdick and Albert Scott, the authors identified the problems facing alcohol regulation and contrasted the alcohol industry’s desire for moving maximum volume of alcohol to the public versus the state’s interest in promoting temperance, an amount of alcohol to satisfy demand but not overstimulation. The authors recognized that the challenges of regulating alcohol would be an evolving goal, hence the choice of the word “Toward” in their title.
Temperance is a term that is a bit of a moving target for policymakers. For some, temperance is the complete avoidance of alcohol. For most, it is the sensible, non-destructive use of alcohol. As a result, most alcohol industry regulations work toward this latter definition as a way to satiate the drinking desires of a state’s population while avoiding policies that would over stimulate the sale on “intoxicating liquors.”
The authors of Toward Liquor Control preferred the “control” model of alcohol sales. That is the system used by 18 states where the state controlled the alcohol market through direct control or distribution and/or retail sale. This system has allowed all profits of the alcohol sales in the state to flow to the state coffers while providing additional tools to limit the outlets, hours and sales of alcohol.
A key recognition by the Toward Liquor Control authors was the need for industry regulation to separate those making alcohol from those selling alcohol. As states interpreted this book, they adopted various forms of what is commonly called the three-tier system. Although Fosdick and Scott preferred the “control” model, most states adopted the “license” system of alcohol sales. These licenses systems adopted three-tier systems to help provide oversight of the alcohol industry and mechanisms for the government to regulate the industry. Although the mechanics of the three-tier system vary from state to state, the goal of the three-tier system was to regulate alcohol manufacturers, distributors and retailers and promote independence from one another. Preventing one entity from controlling the other entity would allow states more ways to regulate the industry and avoid the specter of unregulated, high volume alcohol sales which helped cause the 18th Amendment to be passed in the first place.
With state-based regulation and the three-tier system in place, the country began to allow regulated alcohol in the market. 80 years later, the results of state-based alcohol industry regulation are strong. According to the Nielsen Company, there is more consumer choice in alcohol products and brands than any other consumer product. The number of breweries, wineries and distilleries are at all-time highs. The alcohol industry in the United States is the most profitable in the world and the industry contributes $400 billion to the national economy.
At the same time, the issues facing the United States from the misuse of alcohol continue but reflect a much better approach than the deregulatory approach taken by other countries such as the current public health debate on alcohol in the United Kingdom. In the United States, alcohol is available, but restricted. It is affordable, but not ubiquitous. States have degrees of control over the consumer product, yet businesses have rules in which to prosper.
As Americans consider issues related to marijuana legalization, it is important to understand the alcohol experience and learn from it. The national debate over alcohol regulation which resulted in the 18th and 21st Amendments has produced a working, state-based system that has produced tremendous choice and value to the consumer and economic prosperity to an industry, as well as checkpoints for government regulation to monitor a product that has a well-documented history of misuse and abuse.