The Economics of Prohibition

by Mark Thornton

  During the 1890s the Republicans dropped prohibition in favor of moderation and woman suffrage in order to compete for the growing German vote. At the same time, William Jennings Bryan won the presidential nomination of the Democratic party. Best known for his role in the Scopes trial and free-silver position, Bryan captured the Prohibition party and appealed to the pietistic Protestants of the West, Midwest, and South (Kleppner 1987, 108–13 and 1982).

  The Anti-Saloon League and the Adoption of Prohibition

  The growing recognition of the failure of party politics to establish national prohibition and the natural impatience of the reformers led to the formation of the Anti-Saloon League in 1895. The league was the political arm of the Baptist, Congregationalist, Methodist, and Presbyterian churches. It was the league that collected and directed the efforts of prohibitionists in order to take advantage of the opportunity World War I provided.

  The church-dominated league consisted of a complex bureaucratic network supported by membership fees and individual donations. Its principal means of agitating for prohibition and local option was the operation of a publishing company that produced pamphlets and paid speakers to denounce alcohol from the pulpit at any available opportunity. The league itself described the campaign for prohibition as “the Church in action against the saloon” (Odegard 1960, 116).

  The league grew quickly. Only two state organizations of the league had been established by 1895, but forty-two states or territories had local organizations by 1904 (Blocker 1976, 157). Odegard ([1928] 1966, 20–21) estimates that when Prohibition was enacted, the league had the cooperation of 30,000 churches and 60,000 agencies.

  The activity of the league began with an emphasis on local option. This proved to be a successful strategy in establishing prohibition in rural areas and jurisdictions dominated by Protestants. The league later turned to statewide prohibition and intimidation of major-party candidates. It used the evangelical-prohibitionist vote to swing elections away from uncooperative candidates and toward supporters of their cause.

  Despite its Yankee Republican origins, the prohibition movement and the league’s success moved west and south. The South was becoming increasingly “Yankeefied” and evangelical. Odegard ([1928] 1966, 81) examined voting patterns and found that the league’s support came overwhelmingly from Democrats in the South and Republicans in the North. The drive toward state prohibition succeeded largely in rural and Protestant states, such as those in the South that were over 80 percent rural and 80 percent Protestant and in the less populous states of the West. The states and large cities of the Northeast outside New England remained dominated by Irish Democrats and wet Republicans. Jack S. Blocker (1976, 238) indicates that Prohibition never represented the majority opinion, suggesting that the success of Prohibition was based on logrolling.

  Actually the league relied on a variety of politically expedient strategies, including intimidation of political candidates and officeholders. By 1915 the league had completely split with the voluntary and educational efforts of temperance. It had become an organized effort by evangelical Protestant churches to use politics to coerce temperance through prohibition.

  The league was often criticized for its tactics by supporters, the Prohibition party, and church groups, as well as its opponents. The league’s strategy of political opportunism, consisting of large payments to professional reformers and the direct use of the pulpit for political purposes, was often criticized by member churches. The league’s criticism of blacks and Catholics, comparing them to the Ku Klux Klan or characterizing them as noncitizens or nonhumans who would sell their vote for a drink, was also criticized.

  According to Odegard (1966, 74), at the height of its propaganda campaign, the league was publishing forty tons of literature each month. This indirect approach was immune to the charges and restrictions levied on the direct approach of the alcohol industry. The alcohol industry was subject to the Corrupt Practices Act which was established to monitor lobbying efforts and to prevent corruption. However, the league did not file under the Corrupt Practices Act until after Prohibition had been enacted, and then only under protest. Odegard notes that “in failing to make returns [reports of contributions and activities] for the years 1910 to 1918 the national organization certainly violated the spirit of the Corrupt Practices Act and possibly the letter” (1966, 210). The league was therefore able to spend large sums of money (as much as $2,500,000 per year) to promote its cause without coming under the same public scrutiny as the alcohol industry (Odegard 1966, 181).

  The league’s fund-raising success was based in part on its organization of business support against alcohol. The key to this success was that the names of the principal contributors were kept secret. This secrecy was crucial to the success of the antisaloon campaign, and as Warburton (1932, 263) notes, statistical investigations have provided little support for determining the extent of commercial rent seeking against the alcohol industry.

  It is known that A. I. Root of the Root Beer Company made substantial contributions during the formation of the league. John D. Rockefeller admitted to contributing over $350,000 to the league, although unsubstantiated claims place that figure in the tens of millions of dollars. The Brewers’ Association put forward a list of “known” contributors, which included officers of Roger Peet and Company, several owners of motor car companies, James Horton of the Horton Ice Cream Company, the U.S. Steel Corporation, John Wanamaker, and several prominent officers of major corporations. Owners and operators of such companies as Coca-Cola and Welch’s Grape Juice, which could expect to benefit from prohibition, were also suspected of being heavy contributors to the cause (Odegard 1966, 271).

  The Progressive Era and Prohibition

  The Progressive Era represented an overhaul of American society. The combination of “progressive” thinking and World War I provided the ideal opportunity to enact national alcohol prohibition. The league provided both a clear objective (the end of the saloon) and the organization, so that a coalition of evangelical Protestants, women, professional organizations, and commercial interests could take advantage of this opportunity.6

  American society changed in many important respects during the Progressive Era. In political matters, the initiative, referendum, recall, direct election of senators, woman suffrage, and adoption of the Australian ballot and shortened ballot were both goals of the majority and means of achieving other Progressive reforms. Many of these changes promoted the prohibitionist cause. For example, James Bryce (1910, 49) notes that the Australian ballot placed illiterate and immigrant voters (who generally opposed prohibition) at a considerable disadvantage because they now had to be able to read the ballot. In addition, alien voting was outlawed, and registration requirements were established in many cities, both restricting the power of immigrants and enhancing the prohibitionist position.

  A long list of economic reforms was passed during the Progressive Era. These reforms included child-labor laws, public-education laws, labor and labor-union legislation, immigration restrictions, money and banking reform (the Federal Reserve Act), antitrust policy, and the income tax.

  The Progressive movement was based largely on the fears of middle- and upper-class citizens in a rapidly changing society. Big business was seen as a threat to the economic system and to social stability. The lower-class and immigrant populations were growing and congregating in the rapidly expanding urban areas. While Progressive policies were new to American government, they were largely the result of a conservatism and an attempt to fix society, enforce middle-class morality, and protect the old-stock American way of life. Timberlake (1963, 1) concludes that in order “to achieve these ends, the Progressive Movement embraced a wide variety of individual reforms, one of the more important and least understood of which was prohibition.”

  The scientific arguments for prohibition were based largely on studies of the effects of alcohol.7 Important evidence that associated alcohol with crime, poverty, disease, broken homes, social v
ices, and other evils was gathered. The correlation established in these early studies transformed social science from a science which examined individual character based on free will to one which placed primary emphasis on the environment. According to Timberlake (1963, 60), “the chief effect of these sociological data was to persuade many people to turn to saloon suppression and prohibition” in order to improve the environment.

  The saloon was the natural target of prohibition forces. It served a variety of functions for the poor, working, and immigrant classes. There they found comfort, entertainment, games, political discussion, job opportunities, and much more.8 The saloonkeeper was the friend, confidant, and political leader of his regular customers. The reputation of the saloon became tarnished, however, through its association with widespread corruption, criminal activity, vote-buying, and monopoly power.

  Saloonkeepers in several states often found it difficult to pay the annual license fees. One method of financing these fees was to have a brewer pay the fee in return for exclusive selling rights. Another method was to defy blue laws to generate additional revenues. Staying open for business on Sundays helped not only to pay the government fees but also to help retain the saloon’s working-class customers who drank on Sundays.

  To avoid the blue laws, bribes were paid to police and elected officials. These bribes came in the form of either money or votes. Another practice was to serve poor-quality or watered-down liquor as premium brands. Saloonkeepers also expanded their income with kickbacks from prostitutes, gamblers, and in a few instances pickpockets whom they allowed to use their facilities. Again the saloonkeeper protected himself by paying bribes to the local police and elected officials. According to Timberlake (1963, 110): “The liquor industry became thoroughly involved in political corruption through its connection with the saloon. The root of the trouble here was that the ordinary saloonkeeper, confronted by overcompetition, was practically forced to disobey the liquor laws and to ally himself with vice and crime in order to survive. Unable to make a living honestly, he did so dishonestly.”

  Prohibition forces focused on this crime-ridden industry that was capable of corrupting both the political leadership of the country and the lives of the poor immigrants. The success of National Alcohol Prohibition depended vitally on defining its goal as ridding America of the saloon. It should be noted, however, that high license fees, excise taxes, and other political requirements were responsible for this “overcompetition” and dishonest activity.

  The alcohol industry had organized to protect itself from prohibition by establishing the United States Brewers’ Association in 1862 and the National Retail Liquor Dealers’ Association in 1893. Although it used its tremendous resources directly to affect elections and legislation, the alcohol industry was held accountable to the Corrupt Practices Act and suffered several election-law setbacks. These changes were partially responsible for the success of Prohibition. For example, the Australian ballot and other changes that occurred between 1890 and 1910 not only restricted immigrant voting but limited the alcohol industry’s ability to influence elections by purchasing votes. Gary M. Anderson and Robert D. Tollison (1988) argue that the inability to allocate votes efficiently as a result of voter-secrecy laws causes instability in electoral outcomes and therefore contributes to the growth of government. The alcohol industry’s political activities were further curtailed by an election-fraud conviction in Texas and an investigation in Pennsylvania that resulted in a million-dollar fine (Sait 1939, 149n.).

  The coalition between the liquor interests and brewers broke down during World War I with the passage of the Lever Act. The act distinguished between hard liquor, which would be forbidden, and beer and wine, which would be restricted in order to free resources for the war effort. The beer industry tried to protect its interests by dissociating from the distillers: “‘The true relationship with beer,’ insisted the United States Brewers’ Association, ‘is with light wines and soft drinks—not with hard liquors. . . .’ The brewers affirmed their desire to ‘sever, once and for all, the shackles that bound our wholesome productions . . . to ardent spirits. . . .’ But this craven attitude would do the brewers no good” (Rothbard 1989, 86). Once the coalition was broken, prohibitionists turned their sights to the brewers, employing the anti-German sentiment and wartime patriotism provided by World War I to achieve their goals (Rothbard 1989).

  A good deal of the political success of Prohibition can also be attributed to the fact that it attacked the saloon and did not include any injunction against the consumer of alcohol. Only the producers and distributors of the products were legally restricted. This tactic removed the personal-liberty argument, did not alienate the general population, and, most important, increased the isolation of the alcohol industry.9

  The history of alcohol reveals several important components of the demand for prohibition that are consistent with the interest-group theory of the origins of prohibitionism. The basic demand for temperance is found in reform movements and evangelical postmillennial Protestantism. This temperance movement is then transformed into a prohibition movement through access to the political process. The prohibition movement develops and is joined by commercial rent seekers, such as competitors of the alcohol industry.10

  NATIONAL NARCOTICS PROHIBITION

  The national prohibition on narcotics was adopted before that on alcohol and has continued to the present day. This prohibition has several important factors in common with alcohol prohibition—evangelical Protestant and Progressive backing, the general impatience with progress in counteracting drug abuse, discrimination against minority immigrant groups, the unintended and unperceived consequences of government intervention, and the window of opportunity provided by World War I. Narcotics prohibition also had some important differences in the coalition that supported it. A primary difference was the role of the medical and pharmaceutical professions, which used narcotics control as a means of uniting and consolidating their professions into powerful interest groups. As David Musto notes, “Medicine and pharmacy were in active stages of professional organization when they became involved with the issue of narcotic control. . . . Their intense battles for professional advancement and unification had an effect on the progress and final form of antinarcotic legislation” (1987, 13). Politicians also took an active role in narcotics control. According to Arnold Taylor (1969) narcotics control was used to achieve influence in relations with China. And finally, bureaucrats helped to transform the regulatory role established by this coalition into a prohibition administered by a federal bureaucracy. An important reason for the longevity of narcotics prohibition is that consumers of narcotics, unlike alcohol consumers, have always been a small fraction of the population.

  The Narcotics Problem

  The raw materials for narcotics—opium and coca leaves—had been used for centuries in Asian and South American cultures before their introduction to America. Technological inventions and discoveries during the nineteenth century, such as morphine (1803), the hypodermic syringe, cocaine, chloral hydrate (1868), and heroin (1898), greatly increased the use and applicability of narcotics. Initially, these developments increased the prestige of the pharmaceutical industry and the medical profession’s ability to cure diseases and alleviate pain. It should be remembered that the healing profession still relied on practices such as bloodletting, blistering, and mercury cures. It should also be noted that in addition to alleviating pain (aspirin was not commercially available until 1899), narcotics were valuable anesthetics and curatives. Courtwright (1982) cites the medical profession as the major source of opiate addiction.

  In explaining the growth of narcotics addiction in America, authorities have often cited the Civil War. Many soldiers from both the North and South became addicts during the war. While many historians downplay the role of the Civil War, Courtwright (1982, 55) reports that 10,000,000 opium pills and 2,841,000 ounces of opium powders and tinctures were issued to the Union army alone. Statistics indicate, however, tha
t consumption of opium was already on the increase in the 1840s.

  The alcohol prohibition movement unwittingly played a significant role in the spread of opium addiction. The lack of supply of alcohol and the stigma attached to it no doubt encouraged the substitution of opiates that occurred in the middle of the nineteenth century. Dr. F. E. Oliver (1872) addressed this issue at great length:

  The question how far the prohibition of alcoholic liquors has led to the substitution of opium, we do not propose to consider. It is a significant fact, however, that both in England and in this country, the total abstinence movement was almost immediately followed by an increased consumption of opium. In the five years after this movement began in England, the annual importations of this drug had more than doubled; and it was between 1840 and 1850, soon after teetotalism had become a fixed fact, that our own importations of opium swelled, says Dr. Calkins, in the ratio of 3.5 to 1, and when prices had become enhanced by fifty per cent “the habit of opium chewing,” says Dr. Stille, “has become very prevalent in the British Islands, especially since the use of alcoholic drinks has been to so great an extent abandoned, under the influence of the fashion introduced by total abstinence societies, founded upon mere social expediency, and not upon that religious authority which enjoins temperance in all things, whether eating or drinking, whether in alcohol or in opium.” And, in other countries, we find that where the heat of the climate or religious enactments restrict the use of alcohol, the inhabitants are led to seek stimulation in the use of opium. Morewood, also, in his comprehensive History of Inebriating Liquors, states that the general use of opium and other exhilarating substances, among the Mahometans, may date its origins from the mandate of the Prophet forbidding wine. These statements accord with the observations of several of our correspondents, who attribute the increasing use of opium to the difficulty of obtaining alcoholic drinks. It is a curious and interesting fact, on the other hand, that in Turkey, while the use of wine of late years has increased, that of opium has as certainly declined.