It has long been the belief of policymakers that it is the role of government to ensure the general health of the public in order to head off moral hazard. As great as that may sound on the surface, preventive policies, especially prohibition laws which criminalize victimless actions, often have the opposite effect. By this, I mean that they are, in fact, responsible for creating public health crises and engendering moral hazard. The intent of the Eighteenth Amendment was to mitigate poor health due to alcohol consumption, prevent the disintegration of American nuclear family units, reduce crime and public corruption, and to reduce the burden borne by taxpayers to fund the increasing populations of prisons and public poorhouses.
Of course, history tells us that Prohibition was nothing less than an epic failure. Not only did illegal alcohol consumption approximate pre-Prohibition levels, the quality control inherent in a legal, private marketplace did not exist, resulting in wide divergences in potency and quality. Home distilleries arose, as did the amount of alcohol produced by pharmacies and religious organizations, both of whom enjoyed legal exceptions. A favorite ploy of bootleggers was to establish or partner with established pharmacies to produce “medicinal” alcoholic products. In addition to the “normal” run of alcohol related deaths, roughly 1000 Americans died each year during Prohibition from tainted and poisoned alcohol. As the pace of enforcement under the Volstead Act increased, it became ever more lucrative to bring alcoholic beverage to the market by any means necessary, increasing the spread of tainted liquor throughout society.
Moreover, the criminalization of alcohol created a market for even more dangerous substitutes. Consumption of substances such as cocaine and opioids increased; while these substances had been rendered virtually illegal by the Harrison Narcotics Tax Act of 1914 (which required non-prescribed possession of subject to taxation and licensure), they were not terribly difficult to obtain. In essence, the Eighteenth Amendment succeeded in increasing two concurrent black markets. As a quick aside, increases in the acquisition and usage of illicit drugs still shows a positive correlation with State and local alcohol prohibition today. This is, perhaps somewhat predictably, a case of misguided public policy causing two problems for the price of one.
Not only did Prohibition fail, over the long-run, to decrease the overall consumption of liquor, it also failed to decrease taxpayer burden, the prison population, and public corruption. As a matter of course, all of these things increased under the scope of the Eighteenth Amendment. According to Mark Thornton of Cato and Auburn University, crime in general increased some 24% in the 30 largest cities between 1920 and 1921, while the homicide rate during the Prohibition Era was 78% higher than in the decade preceding it. Naturally, an increase in the rate of crime corresponded with an increase in money spent on enforcement, and an increase in the number of inmates processed throughout the prison system.
Between the passage of the Harrison Act in 1914 and the repeal of the Eighteenth Amendment in 1933, the number of individuals convicted of a federal crime rose from 4,000 to 26,589, an increase of 566%. A clear majority of these individuals were not housed in federal prisons, but in state or local facilities, increasing the burden of taxpayers not only as a function of cost, but community as well. During this period, federal expenditures on prisoners alone rose some 1000%, as state and local prisons were remunerated and new facilities were built. Additionally, expenditures on policing increased by more than 11% during this period. Clearly, there was no easement on the burden of taxpayers in regard to decreasing the prison population.
Because of the large profit margins enjoyed by the most organized black-market cartels, public corruption also increased during this era. Politicians, policemen, and policymakers were all known to accept bribes and gifts from bootleggers, speakeasy owners and crime lords. Ironically, the entity most susceptible to corruption was the federal Bureau of Prohibition, the agency specifically created to enforce the provisions of the Volstead Act. Graft within the Bureau was widespread enough that its own commissioner, Henry Anderson deemed the whole program a fruitless exercise that created public disregard for the law.
Ironically, both alcohol consumption and crime had significantly decreased on their own in the decade immediate preceding passage of the Eighteenth Amendment. Not surprisingly, they decreased in the decade following its repeal. Tragically, current public policy seems to have gathered nothing from the mistakes of this well-publicized era in our history, and has taken us down this same path with the prohibition of drugs.
This is meant to be the first in a series highlighting the problems of our current drug policy. Next, we will look at some of the parallels between the Eighteenth Amendment and the War on Drugs, as well as its negative social costs.
Instead, the unintended consequences proved to be a decline in amusement and entertainment industries across the board. Restaurants failed, as they could no longer make a profit without legal liquor sales. Theater revenues declined rather than increase, and few of the other economic benefits that had been predicted came to pass.
On the whole, the initial economic effects of Prohibition were largely negative. The closing of breweries, distilleries and saloons led to the elimination of thousands of jobs, and in turn thousands more jobs were eliminated for barrel makers, truckers, waiters, and other related trades.
The unintended economic consequences of Prohibition didn't stop there. One of the most profound effects of Prohibition was on government tax revenues. Before Prohibition, many states relied heavily on excise taxes in liquor sales to fund their budgets. 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.
On December 5, 1933, the Twenty-First Amendment was ratified, repealing Prohibition and ending a thirteen-year experiment in legislated morality. Since the nineteenth century, temperance reformers had argued that alcohol debased people’s characters, destroyed domestic happiness, filled the nation’s prisons, ruined moral sensibilities and physical vitality, and brought millions to poverty, misery, and premature death. Prohibition, authorized by the Eighteenth Amendment and enforced federally by the Volstead Act, sought to bring a utopian future of unprecedented health, morality, and productivity into being by prohibiting the manufacture, sale, transportation, importation, and exportation of intoxicating liquors. The Volstead Act did not ban the actual consumption of alcohol, but reformers believed that once it was no longer aggressively marketed by the liquor industry Americans would lose their taste for it. Certainly many did, as consumption declined considerably and remained lower even after repeal. But not nearly as many Americans gave up drinking as temperance advocates expected, and the rosy predictions of Prohibition’s supporters hobbled the law from the start. They insisted that the resources needed to enforce the law would be minimal and would diminish as demand for alcohol disappeared. In this especially, they were mistaken.
By attempting to restrict the supply of alcohol rather than the demand for it, supporters of Prohibition virtually guaranteed the growth of a vast black market in booze. By 1930, the National Commission on Law Enforcement and Observance reluctantly conceded that illicit alcohol continued to flow freely from three primary sources: industrial manufacturers who diverted production to bootleggers; household and backwoods distillers; and smugglers who brought liquor to the United States from nations where alcohol was legally produced, sold, and exported. Indeed, at the outset of Prohibition, European and British distillers, loathe to lose their American market, flooded Caribbean islands like the Bahamas and Cuba with their wares, knowing that rum runners would “land their cargoes on a thousand thirsty beaches from Cape Breton to the sunny shores of Florida.” Smuggling syndicates supplied the liquor markets of New York, Chicago, and other northeastern cities and protected their turf with violence, while in the South entrepreneurial locals participated in the liquor trade without much violence at all. Enterprising compatriots, meanwhile, chartered schooners to bring cargoes of liquor to the edges of territorial waters or used small boats to import cases of illegal booze for themselves or for larger syndicates. With so much illicit supply available, liquor could be had well beyond the underworld of liquor joints: the speakeasies, “blind tigers,” and “blind pigs.” Cafes, boarding houses, hotels, filling stations, and even hot dog stands and candy stores often sold liquor by the drink or by half-pint. Instead of curing social ills, Prohibition ultimately spawned organized crime, corruption, and disdain for law observance even among ordinary Americans.
It was not uncommon for Prohibition agents to be on the take, but even honest officials who did their best to enforce the law were hampered at the outset by insufficient resources. The initial appropriation for enforcement was a paltry $2.1 million. Six years later, in 1927, the head of the Prohibition enforcement asked for at least $300 million per year to enforce the law effectively and he received only $12 million. By the end of the 1920s, meanwhile, the Coast Guard had tracked, trailed, boarded, and seized hundreds of suspected smuggling schooners and motor boats, but realized that it faced a losing battle. “To keep out all smugglers,” it reported in 1929, “it would be necessary to have vessels stationed every 500 yards along the coasts.”
Inadequate resources at the federal level were matched by a lack of commitment to the law at the state and local levels. Several states refused to pass state-level prohibition laws, which meant that their law enforcement personnel had no authority to enforce federal prohibition laws. Other states passed Prohibition laws but refused to allocate state funds to enforce them, again tying the hands of state forces. Still other states faced persistent corruption among the very state and local officials assigned to make sure Prohibition laws worked, and local law enforcement officers, no less than their federal counterparts, sometimes participated in smuggling organizations themselves or received payments from smugglers and bootleggers to turn a blind eye to their activities.
By 1930, the failures of Prohibition were hard to miss. Despite an effort of nearly a decade, the federal government had been unable to stem liquor traffic, and indeed found itself in the midst of increasing complaints about corruption, crime, casual disregard for the law, and diminishing support for Prohibition itself. While the numbers of drunks staggering in the streets had reportedly declined, the character of drinking had changed. Prohibition encouraged the popularity of the cocktail as a mark of modern sophistication by encouraging mixers that disguised the foul taste of low-quality spirits. Drinking moved away from the dinner table into the public world, and women joined men at speakeasies and nightclubs. Alcoholic beverages accompanied college men and women on their dates. Even Americans who might be leery of indulging in alcohol near their neighbors were more willing to do so far from home. American tourists sought out destinations like Miami and Havana where alcoholic beverages were readily available. As one law enforcement officer wryly noted, in Miami every bellhop served as a bartender.
Liquor flowed, of course, because, despite the fervent hopes of temperance activists, Americans never lost their taste for booze. Many of them expressed little real concern about violating the law to quench that thirst, and despite the concerted efforts of the Coast Guard, federal Prohibition agents, and local police to deprive them of alcoholic beverages, Americans continued to drink. Repealing the Prohibition amendment in December 1933 ended bootlegging and the free-for-all that was so profitable for the bootleggers, and brought back a legal trade in alcohol controlled through government regulation. The timing was no accident. Tax revenues from the sale of booze helped support government programs during the Great Depression, making the song “Happy Days Are Here Again” doubly appropriate.