Prohibition, Constitutional Amendments, and the Great Depression

Problems Caused by Prohibition

• Enforcement Difficulties

  • Prohibition made it challenging for law enforcement agencies to monitor and regulate illegal alcohol production and distribution.

• Increased Speakeasies and Crime

  • The illegal production and sale of alcohol gave rise to speakeasies, clandestine bars where alcohol was served, and resulted in a significant increase in organized crime related to the alcohol trade.

• Lack of Support

  • Prohibition faced growing opposition from the public, as many were against the ban on alcohol, leading to widespread non-compliance.

Constitutional Amendments

• 18th Amendment

  • Prohibited the production, transportation, and sale of alcoholic beverages in the United States.
  • Note: It did not ban private possession or consumption of alcohol.

• 19th Amendment

  • Granted women the legal right to vote, a significant win for the women's suffrage movement.

• 21st Amendment

  • Repealed the 18th Amendment, effectively ending Prohibition and allowing for the legal sale and consumption of alcohol again.

The Great Depression and the Federal Government's Role

• Contributing Factors to the Great Depression

  • Bank Practices:

  • Banks excessively lent money, often without adequate risk assessment, leading to widespread defaults and bank failures.

  • Federal Reserve Actions:

  • The Federal Reserve's attempts to control stock market speculation by limiting the money supply exacerbated the economic crisis, as it restricted access to credit during a time when liquidity was crucial.

• Stock Market Speculation

  • Defined as the practice where investors purchase stocks using borrowed funds with the expectation of substantial profits.

• Buying on Margin

  • A method of purchasing stocks through loans, where investors pay a fraction of the stock price upfront and borrow the remainder from a broker, increasing their risk exposure in the volatile market.