Prohibition’s lessons for today’s economics and politics

Filed under: Contributed Column,Opinion,Print | Tags:

Prohibition seems like a strange 14-year anomaly in U.S. history, when common sense gave way to a utopian crusade against the consumption of alcohol. But if you think there’s nothing to be learned from this odd period, you’d be wrong.

Early this month, a new documentary film by Ken Burns and Lynn Novick titled “Prohibition” premiered on PBS, and was released on DVD and iTunes. The film brings the topic to life, from the temperance movement’s beginnings in the early half of the nineteenth century, to the 1919 ratification of the 18th constitutional amendment imposing Prohibition, and finally to the repeal of Prohibition with the 21st amendment in 1933.

Burns and Novick relay a rich tale, including Christian women understandably seeking to stop the ravages of drunkenness; the anti-immigrant aspects of Prohibition; the pitting of rural versus urban America; public schools used for anti-alcohol propaganda; speakeasies; rum running; gangsters; and various activists and politicians.

It’s the activism, politics and economics swirling around Prohibition that supply lessons for today.

Let’s consider the economics. Outlawing the manufacturing and sale of alcoholic beverages, including beer and wine, created tremendous opportunities for criminals. As the documentary points out, within minutes of Prohibition taking effect, Chicago gangs were already hijacking booze. Meant to reduce crime, Prohibition actually took crime to a new level, creating criminal syndicates that grew and thrived even after Prohibition ended. Prohibition gave us organized crime.

But the obvious, immediate economic casualties were lost businesses and jobs. Burns and Novick point out that the beer, wine and liquor business, the fifth largest industry in the nation, was suddenly illegal. Tens of thousands of industry jobs vanished, along with hundreds of thousands more in related fields.

How could this happen? That’s where the activism and politics come into play. It’s pointed out in the film that when passion and commerce clash, passion often wins in the end. But with Prohibition, it was passion combined with politics.

Early on, the numbers in favor of Prohibition were impressive. In the 1870s, for example, the Woman’s Christian Temperance Union hit 250,000 members.

But it was the Anti-Saloon League, born in 1893, that would rise to become, what one observer called, the “most effective political pressure group in American history,” with its single issue being the elimination of alcohol. Every Protestant church in the land, except for the Episcopalians and Lutherans, signed on (leading one commentator to wonder if they would throw Jesus in jail for turning water into wine). The league had annual dues, full-time staff, and its own printing plant. It wielded enormous political influence, as league opponents were booted from office.

Political alliances also played major roles. Women’s suffrage and temperance became wedded.

And since taxes on alcohol accounted for 70 percent of federal revenues in some years, the Anti-Saloon League had to find a revenue substitute to make Prohibition happen. So, it threw in with populists and Progressives to get the 16th amendment allowing for an income tax passed and ratified.

Meanwhile, the opposition to Prohibition — known as the “wets” — made bad political errors. Brewers undercut their cause when turning on distillers, trying to paint beer as healthy but hard liquor as evil.

Wet members of Congress allowed votes on the 18th amendment, but with the stipulation that it needed to be ratified by the required three-quarters of the states within seven years. Wets believed that was impossible. Ratification took less than 13 months.

The nation, though, soon came to see the problems of Prohibition. Millions of Americans became lawbreakers. Booze was delivered to Congress and the White House by bootleggers. Respect for the law suffered, while the law of unintended consequences flourished.

Speakeasies multiplied. Violent crime skyrocketed. Law enforcement and courts were overwhelmed by petty alcohol infractions, with resources diverted from more serious crimes. Corruption in political and law enforcement circles boomed. And lives were lost.

A key group that aided repeal was the Women’s Organization for National Prohibition Reform, led by Pauline Sabin. She not only came to resent the idea that Prohibition groups spoke for all women, but with experience in Republican politics, she knew how to run the campaign, bringing together women from all walks of life, organizing rallies, marches, and radio spots.

At the same time, Prohibition forces refused to bend. They actually might have salvaged Prohibition if willing to give on issues like beer and wine. But they rejected any reforms, and thereby lost it all.

As quick as Prohibition passed Congress and was ratified by the states, it was just as quickly reversed. The 21st amendment passed Congress in early 1933, and was ratified before the end of the year.

There are plenty of lessons here for today’s politics. For example, well-organized, single-issue efforts should not be underestimated. The business community must not divide during major political battles. Propaganda and wild assertions cannot be allowed to spread unanswered. And sometimes compromise is the best option to keep an issue alive.

Perhaps most important, Prohibition tells us that when economics is ignored in politics, the results turn out messy — often a deep, dangerous, corrosive mess that undermines the nation.

Raymond J. Keating is the chief economist for the Small Business & Entrepreneurship Council. His new book — “Chuck” vs. the Business World: Business Tips on TV — has just been published.