The Economics of Prohibition

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The Economics of Prohibition Page 6

by Mark Thornton


  Other methods of intervention into the sale of alcohol were licensing and protectionism, prominent features of the mercantilist philosophy. The license system provided local monopolies on the sale of alcohol in most of colonial America. Such monopolies were granted to innkeepers in order to encourage innkeeping, control the distribution of alcohol, and provide government revenue.

  Inns were associated with the extension of trade, economic development, and higher standards of living. They were a place where circuit judges held court, where public meetings were held, and where public discussion and voting took place. Therefore, by encouraging innkeeping, the license system was viewed as an aid to economic, judicial, and political development. This system, however, often benefited political insiders who had an advantage in obtaining these licenses through “good public standing” provisions.

  Corruption, poor service, and inferior products were often the result of this system of monopoly. Regulations were established regarding the quality and quantity of accommodations of these inns. As innkeepers reduced unprofitable (but required) services and the quality of their products (lodging, food, alcohol), elaborate regulations detailing the quality and prices of alcohol were established. Despite stringent penalties, these regulations proved difficult to monitor and enforce. It is ironic that the type of institution that this legislation promoted—the saloon—would become the central focus of the Prohibition cause.

  Protectionist legislation was enacted in several states and localities to promote distilling and brewing. Alcohol was a remarkably important product in domestic and international trade. According to Harold Underwood Faulkner (1924, 94), “our forefathers were hard drinkers.” Alcohol rations were given to soldiers and laborers as a practical matter of the labor contract and economic custom. Distilling rum was an important business in America. According to John Spenser Bassett (1932, 141), 1,260,000 gallons of rum were produced annually in the Boston area during the early eighteenth century. Rum was a vital component of the triangular trade between the slave coast of Africa, the West Indies sugar plantations, and the rum-producing areas in America.

  John Allen Krout concludes:

  On the eve of the Revolution, then, spirituous liquor was one of the greatest factors in moving colonial commerce. In whatever branch of trade the merchant invested his capital he relied upon rum or some other form of ardent spirits to earn profits for him. Since the traffic in intoxicants was consistently profitable for all who engaged in it, the public accorded it that approbation which attaches to most things indispensable to the world of business. Nothing short of a revolution in public opinion could remove it from its important place in American life. (1925, 50)

  As Krout notes, it was high-potency alcohol that dominated the early American experience with alcohol, although the “ardent spirits” that dominated the market were of poor quality by modern standards. Storage and transportation considerations gave rum, and later whiskey, a natural advantage over beer, and brewers and malt were scarce and therefore expensive. Whiskey was easier to transport than both beer and grain, and whiskey could be stored much longer than beer.

  In addition to these natural conditions, a plethora of government interventions distorted this market. Protectionist measures, subsidies, and local monopolies tended to promote the production of alcohol products, while taxation and regulations tended to control their use. Regulation and licensing were repressive forces on the development of alcohol. Monopoly, taxation, and extensive intervention had predictable distortive effects on prices, quantities, product quality, consumer choice, and the quality of competition.2

  From Temperance to Prohibition: Remember the Maine Laws

  The economic advantage of strong drink combined with the abuses and distortions created by the license system generated increasing concern about intemperance in American society. Reformers began to see the license system as government support for alcohol rather than a control on consumption. Early reformers such as Cotton and Increase Mather, Benjamin Rush (a signer of the Declaration of Independence), and Lyman Beecher led the battle against intemperance. The Massachusetts Society for the Suppression of Intemperance was organized to contain the heavy drinking associated with the War of 1812, and the American Temperance Society was organized in 1826. The temperance movement would evolve into an effective movement that would establish prohibition in thirteen states and territories only to retreat during the development of the Republican party, the abolitionist movement, and the Civil War.

  The temperance movement had grown to over a million members by 1833, consisting largely of northern evangelicals from the Baptist, Congregationalist, Methodist, and Presbyterian churches. Born in the revival movements of the 1820s and 1830s, evangelical Protestantism is best described as postmillennial pietism because its adherents believed that there would be a thousand-year kingdom of God on earth and that it was their job to prepare the world for Jesus’ return. It is not surprising that as this group matured it turned increasingly to the power of the state to bolster the battle against alcohol. Ian R. Tyrrell (1979, 7) notes that in addition to the evangelical ministers and their flocks, young, upwardly mobile entrepreneurs supported temperance in order to improve the economy.

  The Washingtonians were another important group within the temperance movement, consisting largely of former drinkers. They formed a voluntary organization to provide charity to drunkards and support for those who wished to abstain from drunkenness. The group was similar to Alcoholics Anonymous in organizational structure, membership, and principles. These activists attacked the use of legal suasion as a tactic and criticized the clergy for preaching to the converted upper classes, rather than working with those who needed their help the most. The Washingtonians donated more money to the needy than other temperance organizations, despite being generally of modest means. They attracted many members, raised lots of money, and converted many drunkards. The Washingtonian societies were later co-opted by the newly formed Sons of Temperance (a fraternal organization) and other temperance and prohibitionist organizations.3

  It is useful to illustrate the transition from temperance to prohibition as a four-phase process. In the first phase, intemperance was understood as excessive drinking and drunkenness. The solution was to educate the public about the dangers of alcohol. Reformers stressed that spirits should be used in moderation and that education by example could achieve temperance in society. Beer and wine were generally of no or little concern to reformers at this time.

  The second phase involved a turn toward abstinence from spirits. Again, this goal was to be achieved through voluntary means and education by example. It was during this phase that the temperance societies were formed and strengthened. The pledge of abstinence became a prominent and important tool for the organization and radicalization of the temperance movement.

  The next phase began as a battle between temperance forces. The new force that ultimately dominated was the radical element, which called for total abstinence from all alcoholic beverages, including beer and wine. This faction was initially viewed as a threat to social custom, individual liberty, and religious tradition, and as unnecessary to the achievement of temperance. The total-abstinence groups dominated other groups through superior organization, fund-raising, and recruitment of new members.

  A concurrent development and debate ensued about the choice between voluntary and coercive means to achieve temperance. The traditional philosophy had been that the means to achieve temperance should be voluntary. Education, leading by example, and obtaining signatures on abstinence pledges were the tools of the temperance movement. The strategy was successful as measured by the number of members, the number of local groups, and the number of signers of the various abstinence pledges.

  The coercive strategy, however, gained increasing attention and importance as temperance forces grew frustrated and impatient with the long and difficult process involved with their strategy. The conversion of nondrinkers, teetotalers, reformed alcoholics, and evangelical Protes
tants was relatively easy compared with the conversion of heavy drinkers and members of immigrant groups in which alcohol was part of social and religious custom. These impatient prohibitionists often blamed their frustration on the lure of alcohol and the profits that accrued to sellers of alcohol.

  This phase represented a change in strategy toward the coercive means of government. The license system, which condoned alcohol use, was to be replaced by some form of direct restriction on alcohol consumption. The history of this phase is characterized by temperance forces organizing coalitions in order to pass restrictive legislation, such as local option, quantity sale requirements, and local prohibitions. These restrictions ultimately failed to achieve their intended results, proved difficult to enforce, and led to unintended consequences, such as increased intemperance, poor-quality alcohol, and the existence of unsavory drinking establishments.

  The radical strategists were increasingly successful in establishing these interventionist measures. True temperance organizations such as the Washingtonians weakened while prohibitionists strengthened themselves politically through alliances with the abolitionist and anti-immigrant movements.

  Interventionism, like the temperance organizations, was unable to establish total abstinence in society. After each failure, temperance groups would advocate more stringent policies. Typically, the radical strategy began with minimum-purchase requirements, then moved to local licensing options, and finally to local prohibitions.4 Each of these measures either failed to achieve the desired result or proved difficult to enforce. Competitive pressures and the lure of profits kept the supply of alcohol flowing. It was this process that led to statewide prohibition in Maine in 1851 (Byrne 1969).

  The author of the law, Neal Dow, promoted it as a model to be spread across the nation, and indeed many of the northern states and territories adopted the law between 1851 and 1855. In many cases “Maine laws” were simply stronger versions of existing laws against liquor. Maine laws allowed for search and seizure, reduced the requirements for conviction, increased fines, and called for mandatory imprisonment and destruction of captured liquor.

  But the rapid success of this prohibition movement was short-lived. By 1880 only Vermont, Maine, and New Hampshire remained dry at the state level. Among the many reasons for the failure of the Maine laws was the opposition of Irish and German immigrants. These rapidly growing immigrant groups, as well as the drinking native population, opposed and often openly violated the prohibition.

  The Maine laws suffered several setbacks in court. In many states the courts ruled that the laws or certain aspects of the law (especially the search and seizure aspects) were illegal. Ironically, the birth of the Republican party (political home for most prohibitionists) and the tide against slavery also reduced prohibitionism. Republicans understood that an outright embrace of prohibitionism would be divisive for the new party (William Gienapp 1987). The slavery issue was drawing an increasing amount of public attention away from the alcohol problem.

  By far the most telling aspect of the Maine laws was ineffective enforcement. Professional police forces existed in only a few large cities, which tended to be dominated by hard-drinking immigrant populations. This meant that prohibitionists would have to organize and finance enforcement efforts. The prohibitionists were initially active in enforcing the laws, but they found this costly. They also found that many drinkers simply did not accept the authority of democratically determined morality.

  One notable event involved the father of the Maine law and mayor of Portland, Neal Dow. Dow was accused by opponents of personally profiting from the government-controlled sale of alcohol for industrial and medicinal purposes. As described by Tyrrell the confrontation between Dow and his accusers had a dramatic effect on the momentum of the prohibitionist movements:

  An angry mob assembled at the liquor agency on the night of June 2, 1855, after the existence of the liquor had become common knowledge. The mob demanded destruction of the liquor and threatened to break into the agency if the demand were not met and Neal Dow arrested for violation of his own law. Dow, who was always quick to look to force in defense of morality, assembled the local Rifle Guards. In the confrontation which followed with the stone-throwing mob, Dow ordered his troops to fire when several rioters broke into the liquor agency. (1979, 295–99)

  Dow was labeled a fanatic and a murderer (Byrne 1969, 60–69). The emerging distilling, brewing, and saloon interests made the “tyranny” of Dow and the Maine laws a major issue of subsequent elections, and the prohibition movement quickly retreated from political prominence.

  The Coalition of Prohibition

  The second half of the nineteenth century was a period of retrenchment and coalition building for the prohibitionist movement. After the defeat of the Confederacy and the “reconstruction” of the South, social reformers once again turned their full attention to eliminating evil spirits from society. (See Richard Jensen [1971; 1983] and Joel H. Silbey [1967; 1973; 1978] for the important political changes in the second half of the nineteenth century.)

  The important parts of this reform movement consisted of the women’s movement, the Prohibition party, the Anti-Saloon League, and professional organizations. Structural changes within the major political parties also provided a catalyst for national prohibition. As was the case before the Civil War, evangelical Protestantism was a central force in all these parts, and alcohol was but the leading villain for a prohibitionist movement that was preparing the earth for the coming of Jesus.

  Women were an important source of support for prohibition. The woman-suffrage movement, which was born before the Civil War, reemerged in full bloom in 1869. In that year the National Woman Suffrage Association and the American Woman Suffrage Association were formed, and women received the right to vote in the Wyoming and Utah territories. Several leaders of the suffrage movement, such as Susan B. Anthony, Elizabeth Cady Stanton, and Lucy Stone, were involved in the temperance movement (Rosenstone, Behr, and Lazarus 1984, 75). Between the suffragettes and the female abolitionists, women swelled the ranks of prohibitionist organizations.

  In 1873 the Women’s Christian Temperance Union was formed to unite Protestant women behind the cause of prohibition. Women believed that they would be the prime beneficiary of temperance because intemperance was generally a male problem, more specifically, a husband problem (Grimes 1967, 78). Women also played a prominent part in both the Prohibition party and the Anti-Saloon League. The relationship between suffrage and prohibition was a two-way street: prohibitionists and nativists supported woman suffrage because it was felt that women would vote for prohibition and immigration restrictions (Grimes 1967, 140–44).

  The formation of the Prohibition party in 1869 and its first presidential campaign were the most tangible manifestations of the politicalization of the temperance movement. The third oldest party in the history of the United States is often characterized as ineffective and of little importance to the Prohibition movement. This interpretation, however, overlooks the role of third-party movements: the introduction of public policy, attraction of public attention to social problems, accurate demonstration of voter preferences, creation of pressure for changes in the major political parties, and provision of political experience and training for reformers.

  The Prohibition party was the first party to endorse prohibition of alcohol, child-labor laws, direct election of senators, an income tax, and woman suffrage. All these “reforms” were eventually incorporated into the platforms of the major parties and passed into law. Temperance advocates gained insight into politics and political experience, which they applied to later efforts. As late as 1926 the Prohibition party was a member of a coalition consisting of the Women’s Christian Temperance Union, the Anti-Saloon League, and local organizations which defeated the Republican senator James Wadsworth of New York, a leading supporter of the repeal of Prohibition. Valdimer O. Key (1958, 171) discusses the division of labor between political parties and special-interest groups:
r />   In the workings of the political system a division of labor occurs between political parties and pressure groups. This is not necessarily a clean-cut separation of functions. Parties perform some functions almost never undertaken by pressure groups; and some of the activities of groups—and perhaps most of the activities of many groups—concern matters that parties seldom take a position on. On the other hand, on some matters parties and at least some groups work either in collaboration or in opposition.

  Given a division of labor between pressure groups and political parties, it would be easy to overlook the fundamental importance of this third party. Peter H. Odegard, however, one of the important historians of the Anti-Saloon League, points out: “It would, of course, be erroneous to minimize the importance of the Prohibition Party in creating dry sentiment. The long and persistent battle which it waged certainly made the League’s fight less difficult” ([1928] 1966, 101–3). It would be appropriate to consider the Prohibition party an important component of the politicization and political success of the prohibition movement.

  The presidential vote total of the Prohibition party rose from 0.05 percent in 1872 to 2.25 percent in 1892, peaking just before the state prohibition movement. States in which the Prohibition party had the most success were the ones in which prohibition was first enacted.5 More important, the Prohibition party was draining votes away from the Republicans (Kleppner 1979, 246–48). Combined with Populist party victories and economic depression, the agitation of the Prohibition party helped bring about dramatic realignment of the major parties.

 

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