Intemperate Spirits: Economic Adaptation during Prohibition 3030253279, 9783030253271

Table of contents :
Acknowledgements......Page 6
Contents......Page 7
List of Figures......Page 8
1 Introduction......Page 11
References......Page 34
2 Targets......Page 36
Beer......Page 43
Near Beer......Page 49
Soft Drinks......Page 51
Ice Cream......Page 53
Dyes......Page 55
Ceramics......Page 56
Cheese......Page 57
Malt Extract and Syrup......Page 58
Candy......Page 59
Distilled Spirits......Page 61
Wine......Page 65
References......Page 76
3 Violators......Page 80
Moonshiners, Bootleggers, Runners, and Smugglers......Page 90
Speakeasies and Blind Pigs & Tigers......Page 104
Gangsters......Page 109
References......Page 122
4 Line Tip-Toers......Page 125
Doctors......Page 126
Priests and Rabbis......Page 130
References......Page 134
5 Enablers and Hypocrites......Page 136
Politicians and Law Enforcement......Page 144
Wealthy......Page 153
References......Page 155
6 Conclusion......Page 157
References......Page 166
Index......Page 167

Citation preview

Intemperate Spirits Economic Adaptation during Prohibition

Intemperate Spirits

Alice Louise Kassens

Intemperate Spirits Economic Adaptation during Prohibition

Alice Louise Kassens Roanoke College Salem, VA, USA

ISBN 978-3-030-25327-1 ISBN 978-3-030-25328-8  (eBook) https://doi.org/10.1007/978-3-030-25328-8 © The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG, part of Springer Nature 2019 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. This Palgrave Pivot imprint is published by the registered company Springer Nature Switzerland AG The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland

For April

Acknowledgements

My first book would be impossible without the constant support of my husband Michael Enz (and our patient dogs Millie, Lily, Macy, and Zoey). Many others deserve recognition and thanks. My mother and sister championed me through this effort and all that came before it. The editors (Elizabeth and Sophia) pushed and encouraged my fascination with Prohibition from idea to product. Roanoke College and Dean Richard Smith granted time to write through a one-semester sabbatical and Chair Sharon Gibbs happily promoted my efforts over the last few years. The librarians and support folks at the Library of Congress were instrumental in gathering needed resources, while the Newberry Library in Chicago graciously provided information and a map of gangdom. Piper and Elizabeth provided last-minute, yet crucial, help from the Roanoke College Library. Clifford Thies and participants at the Virginia Association of Economists and the Eastern Economic Association gave valuable feedback on various drafts. Katie Edwards and Kevin Oakey served as excellent research assistants. Shannon Anderson, Michael Enz, Justin Isaacs, Catherine Kassens, Kate Kassens, Todd Peppers, and Yana Rodgers generously read chapter drafts, providing excellent feedback. A paid newspapers.com account provided invaluable stories and information. Finally, Cristina and Pinar kindly provided laughs, stimulating conversation, and running route and restaurant tips on my research trips to Washington, DC.

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Contents

1 Introduction

1

2 Targets

27

3 Violators

71

4 Line Tip-Toers

117

5 Enablers and Hypocrites

129

6 Conclusion

151

Index 161

ix

List of Figures

Fig. 1.1 Fig. 1.2 Fig. 2.1 Fig. 2.2 Fig. 2.3 Fig. 2.4

Fig. 2.5 Fig. 2.6

Fig. 3.1

Absolute per capita alcohol consumption, US gallons (1785–1940) (Source Rorabaugh, 1991) “Temperance movement” versus “prohibition”, 1760–1939 newspapers (Source Data from newspapers.com, analysis and graphic by author) Size of the United States brewing industry, 1865–1915 (Source United States Brewers Association, 1979) Market adjustments to changes in supply and demand (Source Author generated graphic) Gallons of wine consumed per year, 1856–1945 (Source Peninou [2004], graphic by author) Wine, beer, and spirit consumption, 1850–1919 (Source Hyman et al. [1980]; National Institute on Alcohol Abuse and Alcoholism [2014], graphic by author) Acreage allocated to wine grapes, 1919–1930 (Source Peninou [2004], graphic by author) Napa Valley harvested tonnage and price/ton (corrected for inflation, smoothed) (Source Napa Valley Agricultural Crop Reports [1921–1933], graphic by author) Per capita pure alcohol consumption for beverage purposes, 1921–1930 (Source Warburton [1932], graphic by author. Estimates from alcohol input data and death rates from alcoholism and cirrhosis of the liver)

5 6 28 31 57

59 63

63

76 xi

xii  

LIST OF FIGURES

Fig. 3.2 Fig. 3.3 Fig. 5.1 Fig. 5.2 Fig. 5.3 Fig. 6.1

Fig. 6.2

Four periods of alcohol consumption, by type (Source Warburton [1932], graphic by author) Estimates of annual national expenditure on alcoholic beverages ($millions), 1921–1930 (Source Data from Warburton [1932], graphic by author) Example labor market (Source Author generated graphic) Popularity of the 18th Amendment in 1922 and 1926 (Source Boeckel [1926], author generated graphic) Traditional prisoner’s dilemma (Source Author. The years used are selected by the author for illustration purposes) Productivity and alcohol consumption (Source The data for the figure is taken directly from Warburton [1932]. The per capita alcohol and beer indexes were not available for 1920, so the author estimated them as the average of 1919 and 1921 and calculated the correlation coefficients using the completed set of data) Regression plot, productivity, and beer consumption (1899–1927) (Source Data from Warburton [1932], regression analysis, and graphic by author. The blue dots are the coefficient estimates. The blue lines are the 95% confidence intervals. The red line at zero is simply a dividing line between positive and negative values for clarifying purposes only)

Image 1.1 Must these go down a drunkard’s grave in order that we the streets may pave? (c.a. 1915–1919) (Source The American Issue Publishing Company, Westerville, Ohio, Library of Congress) Image 1.2 In war in peace which needs it most? (1917) (Source The American Issue Publishing Company, Westerville, Ohio, Library of Congress) Image 1.3 He wants the revenue—Is the game worth the bait? (1917) (Source Deball [1917], The American Issue Publishing Company, Westerville, Ohio, Library of Congress) Image 1.4 American Federation of Labor Prohibition demonstration (1919) (Source Library of Congress) Image 1.5 States adopting Maine Laws (1851–1855) (Source Author retrieved data and generated figure) Image 2.1 Refrigerated rail car (Source: Reefers shorty Anheuser-Busch Malt Nutrine ACF builders photo pre-1911, 1911) Image 3.1 Moonshine production process (Source Kassens, 2019e) Image 3.2 Cow shoes (Source Library of Congress)

79 81 132 134 144

154

157

3 10 14 16 19 39 83 85

LIST OF FIGURES  

Image 3.3 McCoy’s first run, Nassau to St. Catherine’s Island, Georgia (Source Kassens, 2019d) Image 3.4 East coast bootleggers routes and Rum Row (Source Kassens, 2019a) Image 3.5 Map of organized crime in 1920s Chicago (Source The Newberry Library [Allsop, 2004]) Image 3.6 Juice grape racket process (Source Kassens, 2019c) Image 3.7 Industrial alcohol to cover house (Source Kassens, 2019b) Image 4.1 Prescription forms and stubs for medicinal alcohol, 1933 (Source Cassie Nespor, Curator Mednick Medical Museum [Nespor, 2010])

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89 91 105 107 111 120

CHAPTER 1

Introduction

Abstract This chapter sets the table for the rest of the book, outlining the notion of using an economic lens, specifically rational choice, to examine individual behavior and adaptation during Prohibition. That is the unique contribution of this book. A brief history of alcohol prohibitions in the United States is provided, followed by a description of the evolution of the temperance movement into a push for prohibition. The introduction is crucial prior to reading later chapters. Keywords Rational choice · Temperance · Prohibition

This is a story of the Prohibition Era in the United States between 1920 and 1933. It is a tale of hubris, failure, creative adaptation, survival, hijinks, manipulation, and thuggery. Many of the more colorful figures are already the subjects of blockbuster movies, books, and television. Names such as Al Capone and Eliot Ness. While the former is a part of this tale via a racket not heretofore detailed, there are many lesser known entities in this cast of Prohibition Era characters. The characters share an entrepreneurial1 and intemperate spirit, adapting to the 18th Amendment and Volstead Act, 1 This book uses the definition of entrepreneur allegedly first proposed by Richard Cantillon (1697–1734): someone who organizes and assumes the risk of a business in return for the profits (Rothbard, 2006).

© The Author(s) 2019 A. L. Kassens, Intemperate Spirits, https://doi.org/10.1007/978-3-030-25328-8_1

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seeking opportunities for profit and power. For clarity and decency, the actors are separated into explicit groups based on apparent motivation and legitimacy. At times characters are created by the author to facilitate an explanation. Other sections require no such fiction. This story, although told by an economist, does not focus on the economic theory or mathematics carefully crafted out by others.2 Rather it looks at the era through the lens of an economist and uses a less dismal storytelling methodology, albeit with a bit of cheek. Because prior work regarding the economics of crime and prohibition is so rich, interested readers are provided with various resources for reading more nuanced and sophisticated accounts. The fundamental and consistent theme used throughout the book is that of rational choice.3 Economists describe a rational choice as one that provides the greatest relative benefit. This economic viewpoint is useful when studying the effect of a law and the degree of enforcement on individual behavior and the overall economy, and there is much behavior to explain between 1920 and 1933. Prohibition is defined as a government decree against the exchange of a good or service, a mandate that is all but impossible and extremely expensive to fully enforce. As with any law, there are unintended consequences making our cast of characters and stories in this book possible. The US government involved itself in the alcohol markets prior to the 1920–1933 Prohibition Era, although the 18th Amendment was the most invasive interference to date. The United States has a storied, and at times violent, history with government regulation of alcohol. Historical and current government involvement in the alcohol markets ranges from temperance to outright prohibition. Temperance aims to reduce or curb consumption via mechanisms such as guilt, taxes, minimum drinking age laws, and restricted sale and distribution. The thought behind these “nudges” is that they increase the cost of the good and reduce consumption. Another benefit of some temperance-based actions is increased government revenues from taxes and sales. In contrast, prohibition, frequently invoked loudly in the name of safety, morality, and health, seeks to cease consumption rather than temper it. Finding an alternative tax resource is imperative for prohibitionists at the local, state, and federal levels (Image 1.1).

2 See Thornton (1991). 3 A rational choice is one for which the costs and benefits, explicit and implicit, are consid-

ered and the option chosen is that which maximizes individual satisfaction.

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Image 1.1 Must these go down a drunkard’s grave in order that we the streets may pave? (c.a. 1915–1919) (Source The American Issue Publishing Company, Westerville, Ohio, Library of Congress)

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The buildup to the passage of the 18th Amendment is often broken into three stages (Thornton, 1991). The first covers the years between Colonial times to the Civil War. Perhaps due to the lack of clean water (Benjamin Franklin allegedly noted that “in wine there is wisdom, in beer there is freedom, and in water there is bacteria”) or believed health benefits, drinking alcohol was commonplace among most colonists save the Puritans, slaves, servants, apprentices, and Georgians. The first group, primarily located in New England, avoided excessive drinking for moral reasons. Puritan minister Increase Mather of the Massachusetts Bay Colony opined that alcohol was a creature of God, noting his acceptance of its use in moderation, but quoted Isaiah when asking drunkards to tremble when they “see Hell gapping for you, and opening her mouth wide to receive your Souls” (Isaiah 5:14). Various laws prohibited the sale of alcohol to Native Americans, slaves, servants, and apprentices. Typically, the purpose of these laws was to maintain control and productivity of these individuals. Finally, Georgia’s origins were in an experimental society founded by James Edward Oglethorpe (1696–1785) with the aim of promoting temperance. He brought residents of British debtors’ prisons to what is now Savannah in 1733 and started a dry colony. Drinking booze was not generally tolerated in the early years of the Peach State. Alcohol consumption is as American as apple pie. Colonialists brought both their adventurous and alcoholic spirits from Europe. By the late eighteenth century, the primary refreshments were distilled spirits including rum, gin, whiskey, and brandy. Those in Virginia and farther north also consumed a considerable amount of cider due to the abundance of apple trees (Rorabaugh, 1991). The daily quantity of alcohol consumed by a typical colonist might even impress modern-day fraternity partygoers on a Friday night. The typical colonist drank 7.1 gallons of alcohol per year, or about 2.5 fluid ounces per day. Today, a standard “drink” contains 0.6 fluid ounces of alcohol. Thus, colonists drank the equivalent of over four 5 oz. glasses of wine, cans of Budweiser, or 1.5 oz. shots of whiskey starting when their eyes opened for the day and ending just before they closed for the evening (Green, 2015). The first drink of the day for the colonists might have been hair of the dog, but for the non-crapulous, the day often began with an antifogmatic, or eye-opener, followed by a steady stream of beer, cider, and rum fortifying the hardworking revolutionaries until it was time to go to the local tavern, dinner, and a nightcap (Coleman, 2015). Toddlers joined in on the action, polishing off the remnants of their parent’s

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Fig. 1.1 Absolute per capita alcohol consumption, US gallons (1785–1940) (Source Rorabaugh, 1991)

toddy. There were disparities in drinking. White males led the consumption rankings, drinking considerably more than the overall daily average. Warnings about excesses were published during the colonial period, including some quips in Poor Richard’s Almanack, mostly penned by Benjamin Franklin. Some classic morsels include “When the wine enters, out goes the truth” and “Life with fools consists in drinking; with the wise man, living’s thinking.” The first item on his list of virtues was temperance, advising readers to “Eat not to dullness. Drink not to elevation.” Franklin also offered words of wisdom that suggested benefits of drinking, such as “There are more old drunkards than old doctors” (Fig. 1.1). Colonists were more than warned about the dangers of alcohol. An early example of government intervention in the alcohol markets was the excise tax suggested by Treasury Secretary Alexander Hamilton in 1790. The tax was designed to assist with President George Washington’s Revolutionary War debt which ballooned after the federal government absorbed state debt. The Whiskey Act passed the House by a vote of 35–21 on March 3, 1791. The Act targeted producers of distilled spirits such as whiskey, a drink that rose in popularity during the Revolutionary War blockades which

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Fig. 1.2 “Temperance movement” versus “prohibition”, 1760–1939 newspapers (Source Data from newspapers.com, analysis and graphic by author)

stopped the import of molasses, a necessary ingredient in the production of rum. Whiskey production, using corn or rye as inputs ascended during the blockades while spirits requiring imported ingredients, including gin and rum, faltered. Consumers substituted away from rum and toward whiskey produced by Scot-Irish immigrants. Whiskey’s relative price also contributed to its popularity. A corn surplus appeared in Kentucky and Ohio which drove down the price of cobs and pushed farmers to find a more lucrative use for their crop. They found it in intoxicating corn juice (Rorabaugh, 1991). Whiskey sold for 25 cents/gallon in 1820, a cheaper drink than beer, wine, coffee, tea, or milk, making an ideal good for consumers, but one that brought more money to farmers than corn. The Whiskey Tax was imagined as an ideal way to reduce the $54 million debt of the fledgling nation. Beginning in June 1791, distillers were taxed according to their scale of production and proof of their product. Large distilleries producing at least 400 gallons a year owed between 7 and 18 cents per gallon depending on the strength of their liquor. Smaller producers paid the lesser of 7 cents per gallon or 10 cents per month of operation. The small producers were typically low-income farmers from western

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Pennsylvania and Virginia. The tax was a significant burden on their alreadypaltry disposable income. Additionally, whiskey was often used as a commodity money in rural areas, and the tax reduced the purchasing power of that money (Whiskey Act, 1791). Many rural farmers protested the excise tax as disproportionately impacting the poor. The Whiskey Act of 1791 was not only the first direct federal tax in the United States, but the first instance of rabiatious federal government activity in alcohol markets. Such sin taxes are commonplace today. What is not commonplace is the reaction of the ferociously independent rural inhabitants of Pennsylvania. Many smaller distillers outside of New England refused to pay the tax, coming to verbal and physical blows with appointed supervisors and inspectors. In October 1791, a group of farmers near Pittsburgh kidnapped a tax collector from his bed, marched him to a blacksmith’s where they stripped him and burned him with a poker. Vicious altercations continued, including tar and featherings, shootings, and beatings, in which the government officials were typically on the receiving end. One tax collector’s house was burned. As the whiskey taxes went largely uncollected in western Pennsylvania, rebel forces multiplied and grew increasingly indignant with the roving federal government excisemen. A frustrated President Washington sent a force of 15,000 men led by Alexander Hamilton to suppress the Whiskey Rebellion in October 1794. The rebellion quickly succumbed to the federal troops resulting in many arrests but little bloodshed. President Thomas Jefferson repealed the excise tax on whiskey in the early 1800s as a part of his rollback of the Federalist program instituted by his predecessors, Washington and Adams. With the growing financial needs of the nation, liquor taxes made repeated and eventually permanent reappearances. Local, state, and federal governments became addicted to the monies generated by taxes, permitting, and licensing. America’s love of alcohol continued although its detractors grew increasingly vocal. The second stage leading to the passage of the 18th Amendment spans from the Civil War to the turn of the twentieth century and is marked by increased polarization and calls for prohibition (Thornton, 1991). A significant number of Americans stopped drinking, taking up the temperance mantle, cutting the consumption of alcohol to a fraction of its peak in the colonial period. However, those who continued to drink, drank at similar rates as before. The pernicious drinkers showed no sign of tempering their habits. Temperance leaders became impatient and looked to more coercive measures as the temperance movement metamorphosed into

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a Prohibition Crusade. Government coercion rather than spiritual direction became the mechanism of choice to banish alcohol from American’s lips. One hundred years after the Whiskey Rebellion, the temperance movement boasted fervent followers and activists, including those with legislative powers. In the late 1800s, several states instituted prohibition laws regarding alcohol. For example, South Carolina adhered to the Dispensary Act statewide between 1893 and 1907, with some counties continuing it through 1916. The law provided a government monopoly on the bottling and sale of liquor through a dispensary system. Instead of a tax, government control was in the form of market power and quantity and price controls. Riding the tide of temperate spirits in the Palmetto State, Governor Benjamin Tillman, known as “Pitchfork Ben,” got his “baby,” the cherubic nickname for the Dispensary Act, passed December 24, 1892, at 5:30 a.m. The wets awoke on Christmas Day 1892 to an environment where alcohol was not prohibited, but greatly controlled by the governor and his state board. For the foreseeable future, South Carolinians purchased legal alcohol from dispensaries. The drys, while not satisfied with the legislation, were hopeful that it was a step toward complete prohibition. The prohibition issue infiltrated politics as seen in the founding of the Prohibition Party in 1869, the third oldest political party in the United States and one that has been on every Presidential ballot since 1872. In a speech entitled The Dragon in Politics, Henry H. Roser, an active party member of the late nineteenth century, kindly noted that he possessed “no harsh feelings in my heart for any Republican or Democrat who does not yet see his way clear to leave the old party and to act with the young Prohibition party” (Roser, 1889). Roser, as typical for his party, found society to be divided between abstainers and non-abstainers, the latter group being synonymous with drunks. One of the primary pushers of this sociological rift was the wicked saloon with its “deceptive attractions and professional drunkard-making” (Roser, 1889), adding “God made a mistake when he created the species of humanity known as the liquor dealer” (Roser, 1889). To maximize happiness, social welfare, and promote peace the saloons had to go, harking “[i]f we do not crush the grog-shop it will crush us!” (Roser, 1889) In the Prohibition Party’s view, alcohol, or the Red Dragon, was a public health issue and as such, states were under the obligation to abolish liquor licensing, but questioned the willingness of the states to do so and their continuation of bartering the “happiness and lives of their citizens for money” (Roser, 1889). Roser stated that no man, Republican or Democrat, could truly care about the home and welfare of society if they didn’t

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agree with the abolition of alcohol, noting that voting otherwise was akin to praying “Thy kingdom come - then vote for rum” (Roser, 1889). He believed that the two leading parties cared more for the tax revenues from the sale of liquor than the salvation of American society. The Prohibition Crusade swelled like a rising tide on a full moon at the turn of the twentieth century as the country moved into the third stage of the voyage to the 18th Amendment. Nationally this period is known as the Progressive Era (1900–1920) in which social activism aimed at problems associated with industrialization, immigration, political corruption, and urbanization took center stage, facilitated by institution building and regulatory reforms. Religious firebrands and their camp meetings were aided in their cries by growing economic concerns. The Great War raged across the Atlantic and the economy was booming, but shortages occurred, and prices rose. Particularly after President Woodrow Wilson officially joined the United States with the Allies in the battle against Germany, an increasing number of people believed that grains from the fields should be inputs for food rather than alcohol and that sober soldiers were more effective at war-making than tipsy ones. As the photograph in Image 1.2 demonstrates, people questioned who “needs it most.” It reminded (or chastised) readers that for “three ten cent drinks a day for a year even at ‘war prices’ any grocer in your town will give you the following groceries: 10 Fifty-pound sacks of flour, 10 bushels potatoes, 100 pounds granulated sugar, 5 pounds salt, 20 pounds butter, 10 pounds rice, 10 pounds oat flakes, 10 pounds coffee, 5 pounds tea, 25 cans tomatoes, 10 dozen oranges, 10 dozen bananas, 30 cans corn, 10 pounds beans, 100 cakes soap, 1 pound pepper, 4 gallons molasses, 20 gallons oil…and there would be ENOUGH MONEY LEFT to buy a good present for your wife and babies” (In War or Peace Which Needs It Most? For the Money Represented by Three Ten Cent Drinks a Day for a Year…, 1917). Additionally, dry workers and business owners were more productive, attentive, and careful, and thus better able to generate goods, services, and profits while lending a hand to our men fighting in Europe. Support for Prohibition finally reached a level to consider a Constitutional amendment personified by a march on the Capitol Building, a double phalanx of the Women’s Christian Temperance Union (WCTU) and the Anti-Saloon League (ASL). The morphing of the temperance movement into a call for prohibition is discernible through a text analysis of published newspapers over time as

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Image 1.2 In war in peace which needs it most? (1917) (Source The American Issue Publishing Company, Westerville, Ohio, Library of Congress)

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shown in Fig. 1.2.4 Newspaper articles including the phrase “temperance movement” grew slowly over the mid- to late-eighteenth century from a count of 2 articles to 22 per year. The pace quickened substantially, with a temporary slowdown during the Civil War, hitting a peak of 197,235 articles between 1887 and 1892. The Brooklyn Eagle ran a typical article entitled “Making a United Assault on King Alcohol” detailing an “enthusiastic temperance meeting” in Old Brunswick Church concerning the evils of alcohol (“Making a United Assault on King Alcohol,” 1890). Speaker Mr. George A. Scott described a coworker who sold his shoes at work to get money for rum, the same man who signed numerous temperance pledges over the years only to succumb to the power of the drink. Scott noted “I never knew till I saw him the power of liquor over a man.” Such meetings became commonplace in the late nineteenth century. Article counts with the phrase “temperance movement” remained above 100,000 until 1917–1922, a period that saw the passage of the 18th Amendment and fell to 38,617 between 1935 and 1939 after the passage of the 21st Amendment.5 In comparison, newspaper articles mentioning “prohibition” followed a similar pattern, albeit shifted to the right and magnified. Counts remained below 1000 until the late 1800s when it surged to the forefront of national attention reflecting the relative focus on temperance over a national ban, moderation over banishment. Heading into the twentieth century, reformers looked to the state for solutions to social ills, including Demon Rum. Ink dedicated to “Prohibition” surpassed 800,000 on the eve of the constitutional amendment, sharing theatrical words from wets and drys alike. States instituting prohibitions before 1920 foreshadowed the problems faced at the national level. The Hartford Courant described the high demand for whiskey barrels, cider apples, and wild grapes used for home brewing and the exasperated Hartford policemen who daily halted men from “rolling the bones” in the shadows of boarded up saloon cellars (“What Prohibition is Doing,” 1919, p. 51). A herald scene indeed.

4 Newspapers.com is the resource used for this simplistic text analysis. The search was limited to the United States between 1760 and 1939. It is assumed that newspapers both print the news of the time and what is of interest to the public making even a simplistic text analysis as this informative. 5 Article counts retrieved for all US newspapers accessible on newspapers.com on January 20, 2019, using the author’s private account.

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George A. Scott preached a common reason provided for national prohibition: It rotted a man (or woman) from the inside out, and it took control of the mind and soul like an evil spirit. The negative externalities6 believed caused by drinking included unemployment, homelessness, child and spousal abuse, and illness. He believed alcohol a blight on American decency. Prohibitionists desired the government to act as a benevolent dictator for the sake of the country and its future and to save the weak and depraved souls who could not save themselves and did not realize the full cost of their debauchery. A variety of groups, including some strange bedfellows, supported the abolition of alcohol. Religious organizations were an obvious and outspoken source of prohibition support. They sought to save the souls of imbibers and the nation from a spirited Armageddon. The National Dry Federation, a “concentration of the forces of righteousness against those evil,” actively campaigned for the government to prohibit the manufacture and sale of alcohol for the duration of World War I. The organization of church affiliated groups, including the General Baptist Convention of North America, Catholic Priests’ Prohibition League, and the Women’s Prohibition League, viewed grains used in the production of alcohol a waste and only led to sin and sadness. The opportunity cost of manufacturing and distributing booze was bread to feed the hungry or providing soldiers with munitions (“Drive for Wartime Prohibition,” 1918, p. 5). The zealous push for Prohibition went beyond the War, joining evangelicals with hoodlums, providing some of the delicious stories to come. Many women’s groups supported the temperance movement and the 18th Amendment, often as an effort to cleanse society, keep wives and children safe from abusive, drunk husbands and fathers, and nurture imbibers back to a straighter and more righteous path. One of the most well-known women’s organizations taking up the dry battle cry was the WCTU. Taking on several social issues, including women’s suffrage, the WCTU envisioned a “sober and pure” world. Mecca Marie Varney, onetime WCTU superintendent, summarized the organization’s viewpoint on alcohol while speaking in Minneapolis in 1916: “The saloon offers the warmest welcome and the most hateful temptations to young men…the mother from every sphere in American life is no longer silent, but is saying louder and louder: 6 An externality is something that happens to a third party during the production or consumption of a good or service. They can be positive or negative. A common example of a negative externality is air pollution.

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‘The Saloon Must Go.’” (“Says Women Are Crying Out For U.S. Prohibition,” 1916, p. 6) WCTU members believed that behind every abused wife and neglected child was a drunken husband and father, thus banning the manufacture and sale of alcohol would improve the well-being of families and protect the innocent. The poster shown in Image 1.3 illustrates a common theme of blaming the heartless saloonkeeper for turning naive boys into the nation’s drunkards. Vint C. Bates and Professor I. L. Kephart of Avalon College penned a ditty to the WCTU that starts “Hark! I hear a signal ringing, Loudly out upon the air; Thousands shouting, thousands singing, And the watchword sounds so clear. Prohibition! Prohibition! Prohibition! All hail! Let this motto ring for ever; Till King Alcohol is slain” (Bates, 1884). Economists played a leading role in the temperance movement and the eventual passage of the 18th Amendment, justifying the field’s moniker the “dismal science.” During the Progressive Era, many economists, such as Richard Ely and Simon Patten, advocated government intervention and socialism, including the prohibition of alcohol. Patten believed that abstentious nations would “outcompete” those without restraint through longevity, productivity, and wealth and that most of society’s problems were rooted in the drink. Taking a Malthusian slant, Patten indicated that Americans would starve as they overused the land in attempts to quench the drunks. He saw Prohibition as a necessity for survival. Patten believed a person was either a teetotaler or a drunken looby and there was nothing in between. Irving Fisher was the most famous, vocal, and published pro-temperance economist. The Yale economist penned three books promoting Prohibition, claiming it would reduce crime and increase labor productivity, life expectancy, and the standard of living. He later cited Prohibition as the cause of the economic boom of the 1920s known as the “Roaring Twenties.” He must have been blind to the speakeasies, gangsters, and bootleggers across the nation. Irving frequently wrote items for newspapers on the topic, extolling the benefits of casting the intoxicating demon from society. Fisher reasoned that a dry nation was healthier, wealthier, and more productive. Anti-prohibitionists included labor, alcohol producers, and followers of St. Vincent of Saragossa and St. Augustine of Hippo, the patron saints of wine and beer, respectively. Many cited pro-liberty reasoning for their challenges to the law, describing Prohibition as “un-American, oppressive, [and] despotic” (“Windle Tears ‘Dry’ Issue to Tatters,” 1917, p. 8). Union

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Image 1.3 He wants the revenue—Is the game worth the bait? (1917) (Source Deball [1917], The American Issue Publishing Company, Westerville, Ohio, Library of Congress)

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leaders likely saw Prohibition as a threat to their power as saloon workers and others involved in the liquor market were unionized, although those unions never wielded much power since the workers were a dispersed group. Each saloon only employed a handful of workers, who regularly changed jobs. The wets saw the mandate as a strange departure for a country founded on person freedom, particularly one that placed a high value on property rights.7 In May 1919, a large crowd, organized by Edward Hannah of the Central Federation Union, gathered near Madison Square Garden in New York City to voice their support of the right to drink and hear Hannah’s encouragements to join the American Labor Party. The New York Times noted that attendees were likely disappointed if they came expecting a set-to with teetotalers. Only one person heckled the speakers, but she could not be heard over the cacophony of the crowd (“Dry Law Denounced Big Crowd Cheers,” 1919, p. 3). Image 1.4 shows a similar demonstration led by the American Federation of Labor, the largest labor organization of the time, held on June 14, 1919, with the Stars and Stripes on full display in a show of support for rights to manufacture, distribute, sell, and partake in liquid liberty. The Philadelphia Retail Liquor Dealers Association (PRLDA) poured significant resources into raising local and national sentiment against the dry act. Dealers represented by the association feared for their economic welfare, survival of their businesses, and employment of their workers after the sale of liquor was no longer legal. The government was about to render their business assets worthless without providing compensation. In August of 1919, James H. Pearson, the President of the PRLDA, stated “[w]e feel that if we can impress upon the American people just what absolute, permanent, nation-wide prohibition means, they will demand that the 18th Amendment be stricken out. No nation in the world is without its beverage, and none is satisfied with anything as weak as soda water” (“Liquor Men Fight 18th Amendment,” 1919). Thus, even on the eve of the law taking effect, there existed a strong belief that the Supreme Court would deem the law unconstitutional, spurred on by a wave of consumers coming to their senses about what prohibition entailed and how grim their lives would be in a dry nation. Unfortunately, there was no cohesion among the targets in

7 “Did the government partially or fully take private property without compensation and violate the 5th Amendment?” is an interesting question, but beyond the scope of this book.

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Image 1.4 American Federation of Labor Prohibition demonstration (1919) (Source Library of Congress)

their fight against Prohibition. Going up against the focused and organized ASL and their cohorts was a hopeless battle. Plenty of every day citizens also criticized the notion of a national prohibition on alcohol. Marie McLean of the Bronx, NY penned a letter to the editor of the New York Tribune entitled “On the Absurdity of Prohibition.” Ms. McLean agreed that drunkards were a nuisance but took issue with Prohibitionists’ “claim to know so well how to handle the problem.” McLean believed that both Prohibitionists and drunkards were unwanted extremists, grouping the dries into three categories: (1) paid reformers, (2) reformed drunkards, and (3) misguided individuals. The first group, being so intent on inserting themselves in others’ lives, would, after a successful alcohol prohibition campaign, move on to removing other sins, including tobacco, playing cards, tea, coffee, sweets, and dancing from the populace. A bunch of killjoy buttinskies. The absurdity of a prohibition was “surely plain” since turning to drink was a natural thing for the weak throughout

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human history and a fine way to socialize. The “reformed drunkards” had no right, in McLean’s view, to judge or impose a law on others because of their own weakness and gluttony (McLean, 1918). The instrument the government selected for achieving a national prohibition was a constitutional amendment. The piecemeal state bans and local options were unsuccessful strategies in part because they relied upon a majority of votes cast in each state. A constitutional amendment banning many activities associated with alcohol marked the most extensive move against alcohol in the history of the nation and the ultimate government control. The framers of the Constitution set forth a process to amend the document as stated in Article V. After either approval of 2/3rds of both Houses or 2/3rds of all state legislatures, an amendment requires ratification by 3/4th of all state legislatures. Congress proposed the legislation on December 18, 1917. In 1919, after meeting the 2/3rds standard, 36 states needed to ratify the amendment for it to become law. Since 1789, the hurdles detailed in Article V were cleared seventeen times prior to 1919 and regarded weighty issues such as free speech, the right to bear arms, search and seizure, and the abolishment of slavery. The dry fervor for the 18th Amendment came to a head January 16, 1919, after the requisite number of states ratified the legislation. The United States was to become the land of the dries on January 17, 1920, without relying upon votes from everyday citizens of the United States. President Herbert Hoover described Prohibition as “a great social and economic experiment, noble in motive and far reaching in purpose” begetting the ignominious phrase “The Noble Experiment,” “the extent and difficulty of which was probably not appreciated” (Wickersham, 1931, p. 35). Business owners expected sales of clothing and household goods to rise after the passage of the 18th Amendment. Investors anticipated the real estate market to boom and rents to soar after the closure of saloons and subsequent “cleaning up” of neighborhoods. Theater owners predicted increased sales as people looked for a new source of entertainment. Henry Ford noted that “everything in the United States is keyed up to a new pace…[which] makes life impossible with liquor” substantiating a safetyminded reasoning for Prohibition and the increased productivity associated with abstinence from alcohol (Fisher, 1928, p. 68). Prohibition failed to produce the social and economic gains predicted by its supporters and the nation headed toward the Great Depression, but staunch champion Irving Fisher believed success still possible if the government, people, and law

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enforcement doubled-down. He penned the necessary steps for newspapers across the country: 1. Present conditions of law enforcement under national prohibition are intolerable and must be corrected. 2. Even so, they are not so dark as they have been painted. Moreover, if we do ultimately correct them, they are now in the nature of temporary evils, destined to fade away in a few years, while the good Prohibition will go on indefinitely… 3. Prohibition has already accomplished incalculable good, hygienically, economically, and socially. 4. Real personal liberty, the liberty to live and enjoy the full use of our faculties, is increased by Prohibition. 5. Light wines and beer cannot be legalized without another constitutional amendment. 6. No such amendment can be passed. 7. All that the wets can possibly accomplish is laxity of enforcement, or nullification; in other words, enormously to increase the very disrespect for law that they deplore. 8. Therefore the only satisfactory solution lies in fuller enforcement. Temperance and prohibition cycled in popularity throughout the history of the United States, but it took two decades into the twentieth century for it to come to fruition. The first Prohibition law in the United States was passed in Connecticut in 1795, but the first major wave of state bans on alcohol began in 1851. Image 1.5 shows a current map of the United States, minus Alaska and Hawaii, and the initial state bans before the Civil War. The darker shaded states adopted a state prohibition between 1851 and 1855. Maine was the first state to prohibit the manufacture and sale of alcoholic beverages and was championed by the state’s dry Governor John Hubbard. The passage of the Maine Law, officially titled “An Act for the Suppression of Drinking Houses and Tippling-Shops,” started a rush of other states making similar rulings, “striking a blow at the very root of evil.” Mayor Neal Dow, the author of the Maine Law, boasted that it was a model for the nation, allowing for search and seizure, reducing the requirements for convictions, raising fines, and mandating imprisonment and destruction of confiscated liquor (Thornton, 1991). Four years later another twelve states went dry, although none could prohibit importing

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Image 1.5 States adopting Maine Laws (1851–1855) (Source Author retrieved data and generated figure)

alcoholic beverages from wet states. That would violate the Constitution’s Commerce Clause.8 Ironically, that same year people rioted in Portland, Maine on the steps of City Hall demanding that “dry” Mayor Dow distribute confiscated booze that he was hoarding, an event known as the Portland Rum Riot. Apparently, he wasn’t destroying all the confiscated liquor after all but creating a sizable collection for his cocktail parties. The early state prohibitions were concentrated in the Northeast and Midwest, with Iowa being that farthest west and a bit lonely beyond wet Wisconsin and Illinois. Mayor Dow, along with Governor Hubbard, were not only Prohibition leaders in the Pine Tree State, but powerful dry leaders on a national level. Perhaps due to its proximity to Maine, Vermont was the next state to adopt a statewide ban on alcoholic beverages. The remaining eleven in the first wave soon followed. The Maine Law Monsoon was shortlived. By 1890 only Vermont, Maine, and New Hampshire remained dry. Repeal of the law was attributed to the strong resistance of a growing German and Irish immigrant populations and trouble with enforcing the law. 8 The Commerce Clause refers to Article I, Section 8, Cause 3 of the Constitution of the United States which gives Congress the power “to regulate commerce with foreign nations, and among several states, and with the Indian Tribes.”

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The Civil War (1861–1865) rose above alcohol prohibition in terms of importance, but at its close, a full court press began anew. Taxes from alcohol were desirable after the war to fund rebuilding, but a return to drunken debauchery in some areas reinvigorated temperance-minded folks, who came after Demon Rum with a renewed vigor. This was particularly true after the Republican and Democratic parties declined to tout prohibition in their national platforms. In response, activists organized the Prohibition Party in 1869. Meanwhile, sharp differences emerged between rural and urban America. Rural residents viewed large urban centers such as New York and Chicago as nasty dens of despair, teeming with hoodlums, prostitutes, and sinners with geneses in intoxicants. Residents of large cities, particularly those with large German, Italian, Irish, and other immigrant groups with a long cultural history tied to alcohol, aggressively opposed prohibition. Much of the prohibition leadership resided in cities such as New York. They viciously played upon anti-immigrant sentiment among their electorate. For example, Virginia Methodist Bishop and political activist James Cannon Jr., speaking out about New York Governor Al Smith who was running for President of the United States in 1928, stated that “the Italians, the Sicilians, the Poles, and Russian Jews. That kind has given us a stomach ache. We have been unable to assimilate such people in our national life, so we shut the door on them. But Smith says, ‘give me that kind of people.’ He wants the kind of dirty people you find today on the streets of New York.” How Godly, Bishop Cannon! While the drys continued to struggle garnering the attention of national politicians, they again found success at the state level. During this period, many states opted for local option laws which gave counties or townships the right to go dry. These were likely states in which a full state ban would be damaging politically for the leaders or where leadership did not wield the same power as Dow and Hubbard, particularly in the dripping cities. Just like the state bans, many local options were short-lived. Some were struck down as being unconstitutional, which further fueled the drys to push for outright national prohibition through a constitutional amendment. In 1881, Kansas became the first state to include prohibition in their constitution. Enforcement of prohibition even in the strict confines of Kansas was a challenge. Table 1.1 shows the liquor-related statistics from the year before and the first six months into statewide prohibition in the Hawkeye State. Although licenses, breweries, distilleries, beer, and whiskey declined after the law went into effect, clearly many were flip about following and

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Kansas intoxicating liquor statistics, May 1–June 20, 1880 and 1881

Retail liquor licenses issued Wholesale liquor licenses issued Licenses to sell beer, ale, and other malt liquors issued Number of breweries in operation Amount of beer sold by breweries (barrels) Number of distilleries Number of gallons of whiskey distilled

1880

1881

1484 37 91 33 9232 2 0

875 12 41 10 5571 1 13,542

Source Edited table from Abilene Gazette August 12, 1881

enforcing it. Dodge City added two saloons after state prohibition went into effect. The liquor and saloon opposition honed their strategy and focus heading into the twentieth century. The ASL, founded in 1893 Oberlin, Ohio as a state organization, quickly moved onto the national Prohibition scene, differentiating itself from other activist groups of the time by their laser focus on ripping liquor from American’s lips. In 1913, the ASL officially announced their intention to seek a constitutional amendment to dry out the country. Temperance and patience were things of the past. Following Kansas’s 1881 move, rather than the piecemeal local option approach the ASL wanted a permanent national mandate. The organization, dedication, and singular focus of the ASL and their supporters played a great role in accomplishing a national ban, but three things were crucial to getting them over the finish line: (1) women’s suffrage, (2) income tax, and (3) World War I. Women viewed alcohol a cause of discord and violence in the home. Although they could demonstrate and proselytize about Demon Rum, they could not officially cast their opinion in the ballot box. The ASL and others saw a tremendous opportunity by enfranchising women. Women would add votes to the Prohibition cause, and the ASL’s support would endear their liquor cause. The WCTU joined forces with the single-minded ASL. With the WCTU and the ASL standing together on the Prohibition national stage, the road to American alcohol abstinence was palpable. It was not just the numbers of activists behind the WCTU that empowered ASL’s efforts, it was their gender. If women got the vote, they could be enough to vote America dry.

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Votes were not the greatest challenge however. Money was. The federal government and their state and local counterparts relied upon liquor money for their budgets. Banning alcohol would not only dry out the nation, but also government coffers. A significant alternative revenue source was crucial for the enactment of the liquor ban. When President Lincoln desperately needed money to fund the Civil War, he temporarily taxed American’s income using The Revenue Act of 1862 which was not lost on Prohibitionists. They maneuvered for a permanent income tax. The federal government was not alone in its dependence upon liquor money. Local governments relied heavily on monies from saloon permits and licenses and property and sales tax revenues from bars, breweries, and distilleries. Finally, America entered World War I. Some who opposed permanent alcohol prohibition could stomach a temporary ban. Some wet Americans were uncomfortable with crucial labor, grains, and other spirituous ingredients diverting from the war effort and feeding our boys fighting the German juggernaut. Mixing the public, albeit reluctant, support for a wartime prohibition with the added votes from women, focused dedication of the ASL, and a replacement revenue source was the perfect storm. The spirit of the legislation was to create the United States of Teetotalers, free of the sins begotten by the drink. The 18th Amendment passed in January 1919 and went into effect January 16, 1920, with enforcement dictated by the National Prohibition Act (H.R. 6810), often referred to as the Volstead Act. Specifically, the Volstead Act intended to “…prohibit intoxicating beverages, and to regulate the manufacture, production, use, and sale of high-proof spirits for other than beverage purposes, and to insure an ample supply of alcohol and promote its use in scientific research and in the development of fuel, dye, and other lawful industries.” An “intoxicating liquor” was defined as anything ingestible containing over 0.5% alcohol. Sauerkraut often contained more than 0.5% alcohol, but the German delicacy was not the focus of the legislation nor the temperance movement. Cabbage “intoxicants” avoided the heavy hand of the legislation, while their grape, corn, and barley kin did not. The Volstead Act, drafted as the enforcement mechanism for the ban, included several loopholes, each providing opportunities for Prohibition entrepreneurs. Section 3 states: “Liquor for nonbeverage purposes and wine for sacramental purposes may be manufactured, purchased, sold, bartered, transported, imported, exported, delivered, furnished and possessed, but only as herein provided.” This is followed by more specifics in Section 4.

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The articles enumerated in this section shall not, after having been manufactured and prepared for the market, be subject to the provisions of this Act if they correspond with the following descriptions and limitations, namely: a. Denatured alcohol or denatured rum produced and used as provided by laws and regulations now or hereafter in force. b. Medicinal preparations manufactured in accordance with formulas prescribed by the United States Pharmacopeia, National Formulary, or the American Institute of Homeopathy that are unfit for use for beverage purposes. c. Patented, patent, and proprietary medicines that are unfit for use for beverage purposes. d. Toilet, medicinal, and antiseptic preparations and solutions that are unfit for use for beverage purposes. e. Flavoring extracts and syrups that are unfit for use as a beverage, or for intoxicating beverage purposes. f. Vinegar and preserved sweet cider. These sections provided loopholes for wine producers, industrial alcohol, physicians and pharmacists, malt extract and syrup producers, and vinegar and cider producers. The characters in the following chapters leap through these holes, propelled by their entrepreneurial spirit and quest for profits. These are our line tip-toers. We also visit blatant violators of the law, such as bootleggers, gangsters, and speakeasies. These violators are the focus of many iconic movies, books, and television series, but analyzing their activities and behavior through an economic lens is a less traveled path. The violators were a part of a symbiotic relationship with various legitimate enablers and hypocrites such as politicians and wealthy private citizens. These facilitators conclude our exploration of the various actors active in the Prohibition economy. What is the economic way of thinking? How does it help address behaviors of individuals during this time both in the legal and illegal markets? As we go, we will answer these questions and introduce more details of various economic theories and models that help explain the rational behavior of our characters, good and bad alike. At times fictitious characters are used to provide examples and demonstrate theories, in others there is no need for fiction since real-life characters are seemingly larger than life.

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Frequently Chicago is used for examples. There are several reasons for this. First, much of what was happening across the country with respect to corruption, vice, and other criminal activity happened in Chicago on an exponential scale. Chicago was “wide open” and to this day, stories out of Chicago during the Prohibition Era reap success in the box office. Names such as Al Capone and Eliot Ness are familiar to most. Telling tales of violators, enablers, and hypocrites from Chicago makes good use of ink and compelling examples. Second, Chicago-area academics, namely Northwestern University, have a long and respected history of data collection regarding social issues that are publicly available. Unlike today where researchers find vast amounts of data to study a wide variety of current topics with relative ease, the period of study in this book is before data collection and analysis was a standard part of research and policy-making. It is not because research was poor in the late nineteenth and early twentieth centuries, rather today’s technology greatly facilitates data collection, cleaning, analysis, reporting, and disseminating. The availability of Chicago data is a boon to any analysis of the Prohibition Era and adds greater depth to the stories told.

References American Federation of Labor, Prohibition Demonstration [Photograph]. (1919). Retrieved from https://www.loc.gov/resource/npcc.28234/. An Act Repealing, After the Last Day of June Next, the Duties Heretofore Laid Upon Distilled Spirits imported from Abroad, and Laying Others in Their Stead; and Also Upon Spirits Distilled Within the United States, and for Appropriating the Same. (1791). Bates, V. C. (1884). Prohibition [Notated Music]. Retrieved from www.loc.gov/ item/sm1884.21660/. Coleman, P. A. (2015, July 2). Revolutionary Drinking: A Day-Long Experiment in Colonial Boozing. Retrieved January 29, 2019, from Thrillist website: https:// www.thrillist.com/drink/nation/drinking-in-colonial-america. Deball, Z. (1917). He Wants the Revenue—Is the Game Worth the Bair? [Photograph]. Retrieved from https://www.loc.gov/item/97503749/. Does Prohibition Prohibit? (1881, August 12). Abilene Gazette, p. 12. Retrieved from newspapers.com. Drive for Wartime Prohibition. (1918, August 1). Word and Way, p. 5. Retrieved from newspapers.com. Dry Law Denounced Big Crowd Cheers. (1919, May 25). New York Times, p. 3.

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Fisher, I. (1928, November 4). Private Prohibition, Enforced By Employers, More Absolute Than That Embodied In National Laws—Principle Approved. Brooklyn Daily Eagle, p. 68. Green, E. (2015, July 29). Colonial Americans Drank Roughly Three Times as Much as Americans Do Now. The Atlantic. Retrieved from https://www. theatlantic.com/health/archive/2015/06/benjamin-rush-booze-moralitydemocracy/396818/. In War or Peace Which Needs It Most? For the Money Represented by Three Ten Cent Drinks a Day for a Year… [Photograph]. (1917). Library of Congress. Liquor Men Fight 18th Amendment. (1919, August 27). Philadelphia Inquirer, p. 7. Retrieved from newspapers.com. Making a United Assault on King Alcohol. (1890, January 31). Brooklyn Eagle, p. 1. Retrieved from newspapers.com. McLean, M. (1918, May 14). On the Absurdity of Prohibition. New York Tribune, p. 9. Retrieved from newspapers.com. Must These Go Down to a Drunkard’s Grave in Order That We the Street May Pave? [Photograph]. (1915). Library of Congress. Rorabaugh, W. J. (1991). Alcohol in America. OAH Magazine of History, 6(2), 17–19. Roser, H. H. (1889). The Dragon in Politics. Retrieved from https://cdn. loc.gov/service/gdc/dcmsiabooks/dr/ag/on/in/po/li/ti/cs/00/ro/se/ dragoninpolitics00rose/dragoninpolitics00rose.pdf. Rothbard, M. N. (2006). Economic Thought Before Adam Smith: An Austrian Perspective on the History of Economic Thought (Vol. 1). Retrieved from https:// mises-media.s3.amazonaws.com/Austrian%20Perspective%20on%20the% 20History%20of%20Economic%20Thought_1_Economic%20Thought% 20Before%20Adam%20Smith.pdf. Says Women Are Crying Out For U.S. Prohibition. (1916, July 21). The Winnipeg Tribune, p. 6. Retrieved from newspapers.com. Thornton, M. (1991). The Economics of Prohibition. Salt Lake City: University of Utah Press. What Prohibition Is Doing. (1919, September 28). Hartford Courant, p. 51. Retrieved from newspapers.com. Wickersham, G. W. (1931). Report on the Enforcement of the Prohibition Laws of the United States (No. 2). Retrieved from National Commission of Law Observance and Enforcement website: https://www.ncjrs.gov/pdffiles1/ Digitization/44540NCJRS.pdf. Windle Tears “Dry” Issue to Tatters. (1917, October 22). The News Journal, p. 8.

CHAPTER 2

Targets

Abstract This chapter describes how the three targets of the 18th Amendment, the beer, distilled spirits, and wine producers, adapted to the new legal environment. Their adaptations differed due to disparate legal loopholes and costs. Wine producers achieved legal accommodations and successfully adjusted grape inputs and their product to generate profits during the dry period. Beer and liquor producers faced greater challenges and fewer legal exceptions and thus suffered more economically than their wine-producing peers. Keywords Beer · Distilled spirits · Wine · Profit

From the moment the colonists disembarked the Mayflower, booze was a part of the character, culture, and daily lives of Americans. Heading into Prohibition, the markets for wine, beer, and distilled spirits were thriving. Rail expansion, refrigerated rail cars, and pasteurization coupled with massive immigration from Germany, England, and Ireland brought beer production from local to national production in the second half of the nineteenth century. Beer production increased dramatically between 1865 and 1914 and became a leading manufacturing industry in the United States (Stack, 2003), employing many Americans. Annual per capita consumption increased significantly from less than four gallons in 1865 to 21 in 1910 indicating that the production increase was not © The Author(s) 2019 A. L. Kassens, Intemperate Spirits, https://doi.org/10.1007/978-3-030-25328-8_2

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Fig. 2.1 Size of the United States brewing industry, 1865–1915 (Source United States Brewers Association, 1979)

just due to population growth, but also a growing taste for the beverage (Stack, 2003). Although big names such as Pabst and Anheuser-Busch emerged, the new national breweries did not have absolute control of the market. The Big Boys focused on transporting bottled beer regionally and nationally, while local breweries continued to thrive, focusing their efforts on draught brews for their neighborhood imbibers. Figure 2.1 shows both the number of breweries in the United States and the average brewery size between 1865 and 1915. The beer market was hopping on the eve of Prohibition with over 1300 breweries each producing an average of over 44 million barrels of beer each year. Distilled spirits, including whiskey, were also in the dry bullseye. Colonists threw back rum, gin, and whiskey at an aggressive rate that temperance advocates found appalling. Distillers, however, found it delightfully profitable. Many distilleries in the South were damaged or destroyed during the Civil War. When rebuilding commenced, smaller businesses struggled to pay the newly installed taxes, due upon production rather than sale. The government needed the money to cover war debts, but the tax was an onerous cost for the smaller producers. Changes in production technology,

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namely the continuous still, increased distillery productivity, offsetting the closure of smaller firms that did not survive after the war. Like the beer industry, the distilled spirits industry was modernizing, consolidating, and going national. In 1914, 634 warehouses were logging transactions across the nation.1 Consumers bought whiskey and other distilled spirits first in taverns, then saloons and retail grocery stores. The final spirited target of the drys was the wine industry. Much money and time was spent in the Colonial Era to turn places such as Georgia and North Carolina into Petit Frances. Due to poor soil, knowledge, weather, and other factors, each venture was a fool’s errand. Eventually, California and other locations in the Pacific Northwest had great success and the wine industry grew into international renown. Wine was not as popular as beer, cider, and distilled spirits in the colonial period and beyond. Wine, particularly Madeira, was typically the drink of the wealthy. Benjamin Franklin said, “I should prefer to an ordinary death, being immersed with a few friends in a cask of Madeira” (Franklin, 1793). Wine production took more time and thus risk relative to beer and liquor production but was little impacted by the Civil War since most production took place in the western part of the country, well away from the hostilities between the North and South. On the eve of Prohibition per capita wine consumption remained on a relatively steady path, largely warming the bellies of the well-to-do. Of the three production targets, wine producers were the most successful in securing loopholes, favors, adaptation during Prohibition. The saloon, the typical delivery portal for beer and distilled spirits, was such a common theme in dry speeches and vitriol that it deserves an opening comment. Colonial taverns were hot spots for politics and revolution and places for travelers to sup, tipple, and slumber. The nineteenth-century saloon varied from place to place, ranging from the frontier bar seen in countless Westerns to the bourbon spas of New Orleans (Duis, 1983). Due to variations in local laws, traditions, economics, and ethnic makeup, saloons in large cities took on styles and purposes of their own. The history of the strict laws governing colonial inns rendered Boston saloons dramatically different places than their peers in “wide open” Chicago. The first public drinking places in Chicago were inns, but instead of the quaintness of the Liberty Tree Inn, the Windy City versions were rough, primitive piles of hope characteristic of the Midwest, subject to few laws and 1 Data point from Robin R. Preston (via email) of the Pre-pro database (http://www.prepro.com/) March 20, 2019.

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regulations and even less law enforcement. As Chicago grew, so did the number of saloons. For a recent immigrant, saloons were places to hear about local jobs, speak in your native tongue, have a “free” meal, and receive mail. A safe space in a large and uncertain land. Not all was quaint. In Chicago, saloons were used by politicians to swap a pint for a vote and conduct other nasty business or serve as entries to backroom brothels and gambling joints. Prohibition Targets have a long history of regulation and a colorful cast of characters dating back to the colonial period. Those who survived the dry years creatively adapted, often finding new, legal products to produce with existing or new capital equipment. This chapter explains the actions of these entrepreneurs, while later chapters focus on other intemperate spirits who bent or broke the law to grab their profits, recognizing the little changed American demand for alcohol. Before moving on, we need a touch of economics principles. Follow along with the graphs to see the full but simple story. The footnotes provide added detail. Other economic theories appear and are explained in later chapters when specifically applied. Alcoholic beverages operate within a market. The suppliers (businesses producing the product) and demanders (individuals seeking the product) interact within the market. Two outcomes are generated by this interaction: (1) price per unit of the product and (2) quantity of the product available at that price. Figure 2.2 shows a series of diagrams. The beer market is selected as an example market, but the diagrams and theories apply to most markets. Demand, D, is a downward sloping line indicating that as price falls and everything else remains the same, the quantity demanded by consumers rises. Who doesn’t love a good deal? People are willing to buy more beer at $1.00 per bottle than at $20 per bottle. The uphill sloping supply curve, S, shows the positive relationship between the price of the product and the quantity that firms receive for each unit sold. As the price of beer increases, assuming production costs for brewers remains the same, revenues per unit sold rise, enticing firms to increase production. A brewer is more likely to produce beer when it receives $20 per bottle sold than when it gets $1 per bottle sold. One price equates demand and supply which is called the equilibrium price. If markets operate unfettered and unencumbered by government regulation and there are no market failures, the market eventually reaches the equilibrium price. At this price, everyone who wants to buy the good at the equilibrium price can do so, and all suppliers willing to sell the good at that price can do so. In each of the four panels shown in Fig. 2.2, the equilibrium price is denoted as P0 while the corresponding quantity

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Fig. 2.2 Market adjustments to changes in supply and demand (Source Author generated graphic)

is shown as Q0 .2 Demand for beer and other alcoholic beverages depends upon a variety of factors, including personal income, prices of related goods and services, demographics, religion, health concerns, market concentration, and government regulation, collectively called the factors of demand. Changes in the factors of demand shift the demand curve as shown in Panels A and B. Panel A shows an increase in demand while Panel B illustrates a 2 The following table includes supply and demand schedules.

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decrease in demand. The new equilibrium price in each panel is denoted as P1 . Holding all else constant, as demand increases so does the equilibrium price and quantity. The demand curve is sliding along the upward sloping supply curve. A reduction in demand results in a lower equilibrium price and quantity. Let’s take each of these factors separately to understand their influence on demand since they are pertinent to this and future chapters in this book. Income: Assume that beer is a normal good, meaning as income increases, demand for beer increases. Ceteris paribus, if income increases, beer demand rises (Panel A), resulting in increased price and quantity of beer. Prices of related goods and services: There are two categories of relationships between goods and services, substitutes and complements. Substitutes are goods that serve the same purpose, such as beer and cider. If the price of cider rises, assuming the price of beer is unchanged, beer is now relatively cheaper. Consumers then substitute away from the relatively more expensive good, cider, and toward the relatively cheaper good, beer. This increase in the demand for beer is shown in Panel A. A reduction in the price of cider would result in the opposite situation, as illustrated in Panel B. Complements are goods that go together, such as beer and sausage. Who doesn’t like to couple a brat with a cold brew? If the price

P ($)

QD

QS

1 2 3 4

10 8 6 4

0 3 6 9

At a price of $3, people are willing to buy 6 units of the good and suppliers and willing provide 6 units. Here supply  demand, and thus we have equilibrium. Instead, if price is $1 and is thus under the equilibrium price, consumers demand 10 units while no suppliers are willing to provide the product. This results in a (10−0)  10-unit shortage. The shortage puts upward pressure on price which increases the quantity supplied and reduces the quantity demanded until we get to equilibrium where the shortage is eliminated. If price is above the equilibrium value, say at $4, consumers only purchase 4 units but suppliers provide 9 units. At that price we have a surplus of 5 units (stuff left on the shelves that won’t sell). When there is a surplus, there is downward pressure on price to the equilibrium which increases the quantity demanded and reduces the quantity supplied until we reach equilibrium.

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of sausage increases, the quantity demanded of sausage declines. Since we eat sausage and beer together, the demand for beer also falls, as illustrated in Panel B. The increase in the price of sausage also reduces the demand and price of beer. This is the nature of related goods. Summer BBQs also become less enjoyable. Now that we are getting the hang of this, we can quickly explain how other factors influence demand and market price. Demographics: Demographics is a term that encompasses many items including age, gender, race, country of origin, and ethnicity. Statistically and historically demographic groups drink in disparate amounts. For example, a middle-aged adult consumes more beer on average than a ten-year-old. As demographics change throughout the country, so does the demand for beer and other alcohol types. Religion: Just as with demographics, drinking is more common or acceptable within some religions than others. As the distribution of religious groups changes in cities, states, and the country, so does the demand for alcohol. Health concerns: Alcohol is now known to cause or exacerbate various health issues. For example, cirrhosis of the liver is often caused by excessive consumption of alcohol. Increased awareness of the links between alcohol consumption and health alters the demand for alcohol. Supply of beer and other intoxicating beverages depends upon many factors other than price, particularly those impacting the cost of production. Assume that brewers and other business owners seek to maximize their profits. Economic profit is the difference between total revenue, the inflow of money from sales, and total cost, the outflow of funds to cover the production of the good or service. The goal of profit maximization doesn’t make business owners plunderbunds. When a firm maximizes profits, it has money to reinvest or expand, which can generate new job opportunities. The possibility of earning profits incentivizes innovative people to take chances, often resulting in technological or consumer-pleasing advances. There is no guarantee of success and many businesses fail. Animal spirits are cold ones, but without them firms become careless, sloppy, and inefficient. Firms often maximize some other variable rather than profit including sales, shareholder value, or growth rate, but that does not alter our conversation of supplier decisions significantly. A brewery’s cost of production rises as input prices, including labor or hops, rise and fall as those same costs decline. These cases are shown in Panels C and D. For example, if a brewery workers’ union negotiates for higher wages, ceteris paribus, the cost of producing beer increases. The brewery management then reduces the supply of beer, as shown in Panel D, which

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in turn increases the equilibrium price for beer. Costs of production are also influenced by technology and management efficiency. Ceteris paribus, technological advances allow for greater production per hour which reduces the cost of production. The same is said for a more efficient management style or manager and production techniques. Think of the advances made by using an assembly line in manufacturing. The reduction in costs leads breweries to increase production of beer, as shown in Panel C which lowers the equilibrium price for beer. Efficiency is delicious. Governments manipulate markets for a variety of reasons. One form of intervention is taxation. Governments typically tax their citizens to either raise money to pay for goods and services, such as roads and national defense, to make a good or service less attractive to consumers by raising the price, or both. George Washington and Alexander Hamilton levied a tax on alcohol to cover the new federal debt. Revenue generation is the reason most often provided for alcohol taxes in the United States. Taxes for deterrent purposes are often called “sin taxes.” Taxes on tobacco, particularly in the later twentieth century, are heralded as a lifesaving mechanism to deter smoking and reduce the health consequences for smokers and those near them. The increased price of tobacco from the added tax deters consumers with elastic3 demand. Inelastic demanders, including those addicted to nicotine, alter consumption little and contribute mightily to government revenues. Other forms of government intervention such as licensing and permitting are intended to protect the public, control supply, and generate revenues. For example, if the government requires a permit to produce industrial alcohol, the permit has a price which generates revenue when potential producers buy it. Additionally, if production requires a permit, the government theoretically has explicit control of the quantity of industrial alcohol produced. However, controls do not always work as planned and instead create new opportunities for those willing to take the risk.

3 Elasticity is synonymous with sensitivity. The price elasticity of demand indicates how sensitive, as measured by change in quantity demanded, to a price change. If a person is relatively sensitive to the price change (perhaps more common for a social smoker than an addicted one), their quantity demanded will fall substantially relative to the price change. Some smokers, particularly addicts, are relatively insensitive to the price change and their quantity demanded will fall very little relative to the change in price. Economists estimate these elasticities and predict the impact of a tax on consumption and revenue using regression analysis.

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Beer Beer allegedly landed the Mayflower in New England rather than Virginia. Although rum and other potents became more popular than beer in Colonial America, its production persisted on a small scale, often in the home, through the Civil War. After the war, mass production on a national scale emerged due to several important developments including refrigerated rail cars and pasteurization. Beer production grew from 3.6 million barrels in 1865 to 66 million in 1914 (Stack, 2003), an increase of over 1700%, due to both an increase in the US population and the amount consumed per person. Beer became a national industry. Heading into Prohibition, beer consumption well outpaced that of other intoxicating beverages. Its excessive flow and connection with the rowdy saloons rendered it a target of leading prohibitionists, particularly in the bigger cities. Our hoppy prohibition character is Michael Biermeister, a small brewer from Chicago. He opened production in the early twentieth century, primarily serving thirsty neighbors, and will assist as a juxtaposition to the national brewers. The basic ingredients for beer, water and grain, supplemented with a cultured yeast to ferment the beverage, were readily available in the New Country. Thomas Harist mentions the presence of barley in America as early as the 1580s (Baron, 1962, p. 5) and on May 24, 1607, the newly arrived settlers at Jamestown washed down a hearty feast with beer. In Europe, the waters were putrid and befouled with feces and other matter. Inhabitants were accustomed to drinking beer for hydration and hearty nutrients. The custom of regularly drinking beer was brought to the New World by the colonialists. Importing beer from England was costly and often resulted in skunked beer that could kill. The penny-wise colonialists soon set to work concocting home brews, most often ales. Colonial beer had its hiccups. One Jamestown gentleman decried “I would you hang that villain Duppe who by his stinking beer hath poisoned…the colony.” To improve the quality, Jamestown residents posted a “help wanted” advertisement in London newspapers all but begging for a brewer to hop on the next ship to the new country. Making use of what ingredients they could find or grow in the colonies and importing what they lacked, seventeenthcentury settlers soon drank from sun-up to sun-down, kicking the day off with an antifogmatic and ending it with a nightcap. Common brews included spruce and small beers, or whistle belly vengeance which made use of sour old home brew (waste not, want not!) Beer was also mixed

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with liquor for the flap dragon, in which highly flammable liquors were set aflame atop beer (Nathan, 2006). Initially brewing was largely done in the home, but enterprising maltsters soon saw an opportunity and began commercialized brewing. In fact, brewing was encouraged among the settlers as exampled by the General Court of Massachusetts who passed an act in 1789 “to encourage the manufacture of strong beer, ale, and other malt liquors…to promote the purposes of husbandry and commerce…and…preserving the health of the citizens of this commonwealth and to prevent the pernicious effect of spirituous liquors” (“Closing of the 29th Brewing Course at the Wahl-Henius Institute,” 1908). One of the first hoppy entrepreneurs in the colonies was Robert Sedgwick, a successful merchant and military and civic leader who set up shop in Charlestown, Massachusetts. Sedgwick sailed for the Massachusetts Bay Colony aboard the Truelove from Yorkshire, England on September 19, 1635, and was quickly immersed in the development of Charlestown. Although busy as Captain of the town and various missives from Lord Cromwell, Sedgwick was granted the first license to brew beer in the Colony (Nathan, 2006). Samuel Cole was the first person licensed to open a tavern in Boston, while the first recorded public brewery in the colonies was established in New Amsterdam, now known as New York City, in 1625. Together the brewers and taverns flourished throughout the colonies, becoming central locations for socializing, networking, business, and politics and crucial places for the dissemination of information leading into and during the Revolutionary War. Regulation of taverns came quickly, initially fostering their growth. Connecticut in 1644 and Massachusetts in 1656 required each town to have at least one tavern. Taverns were the epicenter of business and socializing, but a license was required to open one. Owners needed impeccable backgrounds and were typically prominent members of the community. As the number of taverns grew, so did concern about promoting a lush society. For example, Framingham, Massachusetts boasted six public houses for a population of 1300. Harvard University brewed their own beer, serving the young academics four to five times throughout the day, beginning with a 5:00 a.m. breakfast of bread and a mug of beer (Hirsch, 2014, p. 27). Excessive drunkenness became a concern to Puritan-minded folks like Judge Samuel Sewell, who preferred that people follow his example and drink in moderation and cut back on the incessant toasts to “health” for the Queen and whoever else grabbed tavern attendees’ attention. It was considered unacceptable to not polish off a drink when a toast was hoisted,

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regardless of number. Temperance-minded legislatures began regulating every aspect of drinking including the number of taverns, prices, and duration of tavern visits. Additionally, innkeepers were required to record who drank and how much. Judge Samuel Sewell was known to patrol the streets of Concord looking for violators and threatening fines, the stockade, or imprisonment. A colonial spoilsport. Single taverns and solo brewers were enough to serve most towns through the eighteenth and first half of the nineteenth centuries. The middle of the nineteenth century witnessed a move from English style beers such as porters to German lagers, likely due to the significant number of German immigrants and their influence in the beer market as both suppliers (brewers) and demanders (consumers). Valentin Busch and Michael Brand, brewers from New York, introduced lager to Chicago in 1854. Many existing brewers switched from ales to lager to survive the evolving taste and demands of customers. The move to lager was coupled with an expansion in population and per capita alcohol consumption. The number of brewers increased in Chicago from 14 to 23 between 1860 and 1870. Consumers purchased brews largely in saloons, which grew in number at a rate greater than the shocking population growth in Chicago. Between 1884 and 1916, the number of saloons in Chicago increased from 3500 to 7000. The relationship between these saloons and the brewers changed dramatically during this period as well. The large number of saloons per capita created a highly competitive marketplace, reducing the price each charged. Unhappy and overcharged customers had many options. Additionally, the traditionally low licensing fees increased, further eroding the gap between inflows and outflows of green for saloon owners. Many saloon owners turned to the brewers for help, transforming the saloon keeper from an owner to an employee, as the US market adopted the British model of a “tied house.” In exchange for bonds, glassware, signage, furniture, and other fixtures crucial for a competitive saloon, the bar agreed to sell beer made by the benevolent brewer. The tied house was common in Britain. Guinness, for example, adopted the model over a hundred years earlier. Eventually, brewers also went into the real estate business, buying prime locations for saloons and renting the facilities to eager barkeeps. Benefits of the new relationship included added revenues and the ability to fire unproductive or disagreeable saloon keepers. In economic terms, the conjoining of the brewer with the saloon was a vertical integration, describing the ownership connection between the producer of a good and

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the delivery vehicle for the product. These connections were cemented with financial incentives such as mortgages, loans, and other monetary treats. The age of the National Brewers began at the turn of the century. Between 1880 and 1910, the number of brewers was falling as the production of beer increased rapidly. The market was consolidating on a national level. Improved methods of production, distribution, and transportation changed the business from a small local one, with brewers delivering their wares via horse-drawn wagons, to a national enterprise with railroads, refrigerated cars, agencies, and mergers utilized for transportation and distribution efficiency. Railroads made for faster delivery in greater quantities than earlier methods of transportation. Beer companies penetrated local markets not previously available to them. Many large producers built agencies to store, and at times sell, large deliveries of beer by rail. These agencies ranged from basic ice storage to heavily advertised stores. The railroads and agencies, however, were of limited use without the development of the refrigerated rail car and pasteurization. The refrigerated cars maintained beer quality over long distances, unlike the ships from England during Colonial times. Pasteurization was first developed for preserving beer and wine, allowing for quality maintenance of non-refrigerated products over long periods of time. For beer consumers, these advances further increased local competition and choice. Local brewers, big and small, now competed not only with one another but also brewers from across the country. Beer prices fell accordingly (Image 2.1). On a national level, the beer industry became more concentrated as smaller producers often failed to keep up with their larger competitors due to economies of scale. Local competition endured, but the emergence of large, national breweries with large market power was a new phenomenon. Anheuser-Busch competed with Pabst on a national scale but had to contend with Michael Biermeisters at the local level. Beer spoiled before getting to its destination. The small brewers continued to give the big guys local competition but could not match their national distribution made possible by refrigerated cars and pasteurization. An economy of scale is a proportionate saving in cost of production with an increased level of production, or when the average cost of production falls with output. The big producers enjoyed lower average costs, thus for a given average inflow of funds, their per unit profits were higher. On the other hand, the national distribution of the large firms, although increasing the concentration at the national level, added to the competition at the local level. The entry of national firms on the local level pushed out the inefficient smaller brewers.

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Image 2.1 Refrigerated rail car (Source: Reefers shorty Anheuser-Busch Malt Nutrine ACF builders photo pre-1911, 1911)

The contrasting national versus local market concentration is not unique to the beer industry nor the pre-Prohibition period (Rossi-Hansberg, Sarte, & Trachter, 2019). In 1910, there were 1568 breweries in the United States producing a total of 59.5 million barrels of beer. The average number of barrels produced by each brewery was 37,946 and the largest brewer generated 1.5 million gallons that year (Stack, 2003). Just five years later, the number of breweries declined to 1345, but production increased to 59.8 million barrels with each brewery pumping out 44,461 barrels, the largest contributing 1.1 million barrels. Without knowing the market share of each firm, determining a value for beer market concentration is not possible. We can, however, make some observations about the market on the eve of prohibition: (1) beer was popular as were the saloons where many drank the suds, (2) there were some big breweries, but the biggest accounted for less than 2% of the total market production (competition continued as the saloon-brewery relationship evolved), and (3) The brewers were organized to a degree but were not aligning with the liquor forces to oppose national prohibition effectively. Upon ratification of the 18th Amendment, there was no denying a dry America. What were brewers to do? It was clear that the government was not going to provide reparations for brewer investment and assets, that if unaltered were essentially worthless in the Prohibition Era. The brewers

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did not get the loopholes and exemptions allocated to the wine and liquor interests. They were permitted to produce beer with less than 0.5% alcohol, known as near beer, but brewers and consumers quickly determined it was far from a perfect substitute. Some, particularly smaller, regional brewers, chose to shut down their plants and take the financial loss. Brewers who wished to remain in the legitimate world of commerce needed to adapt. Desperation and the desire to survive bred creative ideas. Many brewers, particularly the larger ones, modified their capital equipment to produce goods with production processes like brewing beer. Conveniently, there are many goods with high demand meeting this description including ice cream, dyes, ceramics, cheese, malt extract, and candy. The rest of this section discusses these entrepreneurial modifications and successes by brewers that some continued after the 21st Amendment passed, and real beer was again legal. Near Beer Some beer companies played to their strengths rather than shutting down and produced a product or mix of products that maximized their profits in the new legal environment. Several breweries adjusted their capital equipment and labor resources to produce a product that was seemingly quite different from beer. The choice made depended upon the resources and assets available to each brewer. A simple choice was producing legal beer, frequently called “near beer” by consumers, containing less than 0.5% alcohol (oh dear!) The Volstead Act officially defined an “intoxicating beverage” as that containing 0.5% alcohol or more, providing the maximum alcohol content near beer could contain. The diluted product was not new. In medieval times near beer was a safe alternative to foul water and was less expensive than its more potent kin. The problem was the taste. Prohibition laws not only specified the potency of legal beverages, it also restricted how they were marketed to the public. Brewers could not market the drink as “beer” in the dry era. Instead it was called a “cereal beverage” or a “malt tonic.” One method of removing alcohol is to heat fermented beer. It added one simple step at the end of the usual production process. As many of the near beer producers would find out, the added heating altered the taste of the beverage, which not only took the spirit out of the drink, but also its distinctive, and much loved, flavor. The largest pre-Prohibition brewers Anheuser-Busch, Pabst, Schlitz, and Blatz sold off their saloons and related real estate and modified their

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production process to produce the lower octane beverage. Not only was it low cost, but it kept their capital equipment running and not gathering cobwebs and quickly depreciating. Also, by maintaining operations producing a product similar to the previous one, brewers kept their labor force on staff without the need to retrain them in a new production process. The breweries came up with creative names for their “new” products. Bevo,4 produced by Anheuser-Busch, was the most popular near beer of the Prohibition period, the name a combination of the word “beverage” and the Slavic term for beer, “pivo.” Anheuser-Busch saw the inevitable coming and began brewing Bevo in 1916. Anheuser-Busch built the Bevo Packing Plant in 1917, an eightstory facility, including 27 acres of floor space and 25 miles of conveyor belts (Axelrod & Brumberg, n.d.). The product was popular in the early 1920s before people tired of the ban on alcohol and the poor taste, maxing production at 5 million cases per year. Marketing exploits included Renard the Fox and “Bevo Boats,” boat-bodied cars showcased in St. Louis stores. Renard continues to adorn the Anheuser-Busch buildings in St. Louis today. The drink was touted as a healthy beverage, superior to milk or water since it did not contain bacteria. The drink gained popular notoriety, getting mentions in plays and books of the period. Perhaps the notoriety was more due to the infamy of the alcohol ban than the love of the beverage. Renard was more endearing than the taste of Bevo. A few years after reaching its height of 5 million cases, Bevo sales flatlined at 100,000 cases per year and Anheuser-Busch ceased production. Anheuser-Busch was not the only brewer entering the near beer market. Other offerings came from the Pittsburgh Brewing Company and Stephens Point Brewery (Wisconsin). The Pittsburgh Brewing Company (PBC) formed a regional trust of 21 Pittsburgh-area breweries in 1899 based on the success of Iron City Beer, a recipe brought to the United States by German immigrant Edward Frauenheim in 1861. The regional trust was the third largest brewery in the nation before Prohibition producing up to 1.5 million barrels in a year. In 1921 they announced that they “decided to quit the field in these days of prohibition” since they were not realizing adequate revenues (“14 Breweries of Pittsburgh Company to Be Sold; Keep Two,” 1921, p. 5). PBC were sold off 14 of 16 breweries. 4 The drink Bevo is allegedly related to Bevo the Texas Longhorn mascot, a longhorn steer named Bevo. Bevo is a slang term for an inexperienced officer, a name adopted for the University of Texas mascot.

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Iron City and Straub turned into industrial plants while Keystone morphed into a grocery. Stevens Point Brewery (SPB) followed a similar path as Anheuser-Busch and PBC. Founded in 1857 by German immigrants, they attracted substantial attention by concerned citizens leading into Prohibition. In 1914, a question arose about the enforcement of Sunday closing laws. At a meeting at the Stevens Point Library, 35 business owners voted for “open” Sundays, while only two voted to close. One person did not mark a ballot, perhaps too snookered to participate. The meeting was called to order by Mr. I. S. Hull who expressed that the purpose of the meeting was for businessmen to state “their views as to whether the community is ready for the Sunday closing laws to be applied to the extreme point” (“‘Let’s Compromise’ Say Businessmen,” 1914, p. 1). Businessmen argued that following the laws to the fullest would cost a total of almost $10,000. They preferred that Section 130 of the city ordinances be “waived” and continue operating their saloons on Sundays between noon and nine p.m. Temperate enforcement. After all, they argued, why single out Stevens Point? Saloons in Grand Rapids and other locations nearby were open despite the Sunday law. The businessmen pointed out that there were more drunks on the street with the saloons closed, which was unfortunate for the city and their fellow businessmen. “Strife such as this hurts business of all kinds and makes enemies of friends.” Soft Drinks Fizzy mineral water captured the attention of physicians in the colonial period and continued with holistic healers of the nineteenth century. Dr. Benjamin Rush, a well-known Philadelphia physician who made considerable contributions during the Revolution, was fascinated with the curative aspects of mineral water and took great interest in several Pennsylvania sources, including a well located in Philadelphia (Donovan, 2014). Despite its “slight fetid smell” and “strong ferruginous taste” he recommended drinking it for curing many maladies. Based on Rush’s renown and the historical mystique of mineral water’s healing powers, citizens flocked to the well and drank it dry in their quest for health and longevity. Ironically, while searching for the source of the well after it ran dry to tap into it in another way, people discovered that the fetid smell and ferruginous taste was due to runoff from a privy. Poop water in the emperor’s new clothes. E. coli aside, the fizzy beverage fad was on. Entrepreneurs jumped to

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supply the sizzling demand, including Benjamin Silliman, Charles Hires, John Pemberton, and Caleb Bradham. Pharmacists began selling the product at soda fountains. People came by the droves to enjoy the refreshment and the socializing. Customers would buy a glass and take it outside to hobnob and chinwag, vacating a spot for a fellow socializer to do the same. Before long, soda fountains became a common complement to drug stores, and soda jerks5 sought new flavors and mixes to differentiate their product from the guy or gal next door. Flavoring often came from syrups and choices included vanilla, cherry, and spearmint. Perhaps due to the connection of the soda fountain with the pharmacy coupled with America’s enchantment with alternative and holistic medicine, some medicine men started peddling their potions as syrups to be served at the soda fountain. John Pemberton, a trained physician from Georgia who served in the Confederate Army, joined the masses that sought their fortune in the rebuilding and opportunity of postbellum Atlanta. He incorporated the popular wonder-drug, cocaine into a syrup coupled with caffeine from the kola nut and sold it to drug stores touting its curative nature for mental exhaustion, headache, gastric issues, and a multitude of other conditions. After playing with the mixture until he found the public’s favorite, Pemberton and his investors began marketing Coca-Cola in 1886. He and his successors clearly conquered the American, and eventually global, soda market. The soda fountain was a popular locale for drinking and socializing in the early twentieth century. The soda titans, including Coca-Cola, were led by strong prohibitionists. Getting intoxicating liquors banned and the subsequent closing of saloons was anticipated as a boon to the soda tycoons. During Prohibition, prices of alcoholic beverages increased. Although there was no legitimate market for booze, illicit markets persisted, but with heightened prices due to the risk involved. Soda jerks and fountain owners drooled at the thought of consumers exiting the saloons and entering the drug stores looking for refreshment and entertainment. The soda industry allied itself with the temperance and prohibition movement and licked up the sticky benefits after the ratification of the 18th Amendment. If the drug stores sold medicines for rotten teeth, the increased demand for their soda fountains was a sweet development indeed. 5 Dispensers of soda from the fountains became known as soda jerks because of the jerking motion made when pumping the water into a glass.

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It was perhaps, a bit of bubbly karma that some brewers turned to soda to survive the dry spell competing directly against those who pushed to stamp out their market. Anheuser-Busch, Schells (Minnesota), Saranac (New York), and SPB entered the soft drink market. Producing soda required little alteration in the existing capital equipment or production process. Soft drinks ferment for a shorter period than beer (or near beer). As soon as it is carbonated, soda is refrigerated to slow the yeast from consuming all the sugar (Vassal & Phelps, 2004). If prohibition was repealed, brewers could continue making it to serve the underage and rest of the population who wanted to drink alongside beer drinkers. SPB produced sodas, including the Cherry Soda, sold in 24 fluid ounce bottles. In Utica, New York, Saranac also produced a cherry soda and Ginger Ale under the Utica Club label, advertised as “a distinctive product that you’ll like.” They brewed ginger ale using the same capital equipment and a similar process as their banned beer, which “develops the natural ginger flavor” and “has medicinal value or virtue in acute or chronic indigestion, stomach acidity in excess, and all stomach disorders” (“Ginger Ale Is Brewed,” 1919, p. 5). A tasty, fizzy Pepto Bismol that improved health. Saranac sold the elixir at grocery and drug stores. In St. Louis, soft drinks did not satisfy saloon goers as much as beer. The mere mention of them incited men to near madness. In March of 1925, bartender Joe Konich, a known associate of the Cuckoo gangsters, shot and killed 21-year-old George Hale. Allegedly Hale requested a round of drinks. Konich informed the group that all he had was soft drinks. Hale next insisted on hot beer to which Konich countered that he would give him some “hot lead instead.” Hale took him up on the offer and Konich obliged but fired over Hale’s head. Hale mocked Konich’s aim, shouting “You are a damn poor shot, shoot again.” The second round went into Hale’s head and killed him on the spot. During Konich’s defense he admitted to killing Hale, but claimed it was self-defense as Hale and his pals reached in their pockets as if for weapons when he mentioned soft drinks (“Ex-Convict Held for East Side Saloon Murder,” 1926, p. 2). Ice Cream Among the millions of German immigrants seeking economic freedom and opportunity in the United States in the 1820s was David Gottlieb Jüngling. He soon thereafter altered his name to Yuengling and established the Eagle Brewery in 1829. Joined by his son Frederick, David modified the company

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name to D. G. Yuengling and Son in 1873. It is the oldest American beer company still in operation in the United States. The Yuengling kin faced the same dilemma as other barley-based targets of Prohibition: how could they reallocate capital and labor resources to produce a legal product and survive the Great Moderation? Beer and dairy production required similar capital equipment such as refrigerated storage and transportation. Yuengling (and Anheuser-Busch) bought a dairy farm and began manufacturing ice cream. The Yuenglings were no strangers to either government interference or government handouts. Yuengling received a stiff arm from the government in 1909 when a judge declared it a violation of the law for brewers to own or lease property hosting retailers, including saloons. David Yuengling and other brewer showed interest in owning complementary services for their beverage including ownership in an outlet selling cold Pilsners to the public. Specifically, a Pennsylvania law from 1887 forbade anyone, other than the applicant for a lease or owner of a retail property, to benefit from its profits. Although not the named applicant for the purchase of a saloon, D. G. Yuengling & Son owned the bar, fixtures, and “other things pertaining to the business,” providing the presiding judge evidence to refuse the deal (“Setback for Brewers in License Contest,” 1909, p. 1). Frank Yuengling took over the company in 1899 when his father Frederick died and captained the brewery through Prohibition several decades later. While Yuengling did produce a few near-beers (and open dance halls), dairy was their salvation from the temperance statute. The large tanks that previously brewed beer were converted to churn milk and sugar into sweet, creamy confections. The refrigerated trucks that previously dispatched sinful, hoppy beverages were retrofitted to truck cartons of frozen delights to neighboring sweet tooths. From Dionysus to Willy Wonka, Yuengling’s economic adaptation to the Volstead Act was rational, efficient, and provided a golden ticket to survival during the dry spell. Learning-by-doing, listening to consumers, and innovation generated success for Yuengling in the dairy industry. For example, the company adjusted their ice cream packaging to better serve both consumers and vendors. Through experience, and likely complaints, the company learned that sending the product to stores in large containers, requiring store employees to scoop the treat into sealable containers, was not optimal. Instead, Yuengling began delivering ice cream prepackaged in quart and pintsized containers with a “sanitary handy-handle.” Advertisements touted the increased creaminess and freshness of the product and proclaimed that dealers forget the back-straining work of scooping, particularly on hot

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summer days and reallocate store workers to other chores to increase profits (“From the Freezer to Your Plate (Advertisement),” 1922, p. 9). “You can wait on a dozen customers in less time than it takes to serve one customer the old way” (“Mr. Ice Cream Dealer!,” 1922, p. 5). Other packaging innovations included adding a smaller, single-serving size to their menu: “It’s so easy to serve ice cream from this new Yuengling package…Just push out the bottom and cut like a cake…no dipping, no fussing” (“It’s so easy to serve ice cream from this new Yuengling package (Advertisement),” 1931, p. 22). The Yuengling Ice Cream Company busied itself with the buying up ice cream plants in Pennsylvania. By the end of 1928, they owned five plant, bringing production capacity up to 2,000,000 quarts per year (“Yuengling Co. Buys Plant of Local Concern,” 1928, p. 1). Ice cream was also made by Anheuser-Busch, Stroh’s, Pittsburgh Brewing Company. Dyes A World War I British blockade of German ships indirectly created a ban on dye imports that typically came from Germany into the United States. The dye dry spell was called the Dye Famine. Why was the Dry Famine an issue? For one, 1920s women’s fashions included dresses in Gas Blue, Palmetto Green, and Briar Rose. Men dressed in army green and navy blue. These cotton, wool, and silk garments required dye to liven up the naturally drab hue. The dye shortage caused dye prices and any good using it as an input to soar. The unmet demand signaled opportunity to American companies and entrepreneurs. Companies such as DuPont got into the business. Breweries are like chemical plants, so many breweries either started making dyes or sold their facilities to other companies who used them for that purpose. Brewery processing equipment was readily adaptable to synthetic chemicals. They had access to clean water, storage and fermentation tanks, filter presses, pumps, steam boilers, cooling capacity, warehouses, laboratories, and chemists. Additionally, breweries were typically multi-storied which was idea for using gravity to aid in the production process of dyes (Baptista, 2009). New York City brewery Lion Brewery was the first to produce dyes under the new name Noil Chemical and Color Works. Noil is Lion spelled backwards. Sneaky. Prior to going into the dye business, the Lion Brewery sued the Federal Prohibition Director for the State of New York, Charles R. O’Connor, in federal court. The suit alleged that the government deprived “the corporation of its liberty and property without due process of law

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and because they attempt to abridge and nullify the duty reserved and concurred in powers of the Legislature of the State of New York and are therefore in violation of the 10th and 18th Amendments to the U.S. Constitution” (“Brewery Sues Dry Officials; Say Law Is Unconstitutional,” 1920, p. 61). At the time of the injunction, Lion Brewery held a capital stock of $100,000 and property worth $1,320,000 ($1.3 million and $17 million in 2018, respectively.) They were a bit peeved and considered their rights violated that, overnight, the federal government rendered their property and production worthless. The US District Attorney dismissed the case a few weeks later citing, among other things, lack of proper jurisdiction. Lion became Noil to survive the new legal environment. Their facility also continued to produce near beer. A fire in 1927 caused $250,000 in damages, but most of the near beer supply was salvaged and dye operations resumed shortly thereafter (Baptista, 2009). In 1932, the Noil Chemical and Color Works was bought by Calco Chemical and production was transferred to New Jersey. The Lion Brewery resumed beer production after prohibition and continued until 1942. Several chemical manufacturers took notice of the similarities between brewing beer and making dyes, electing to go into the illicit hooch business on the side. It was to dye for. Ceramics Prohibition came to Colorado in 1916. One of the large brewers was Coors. They needed to either sell off their facilities and take a loss or find an alternative product to get them through the 18th Amendment. Coors founder, Adolph Coors, a brewer’s apprentice from Prussia, founded the company in 1873 during the gold rush in Golden, Colorado. Local miners lovingly referred to the beverage as the “banquet beer,” a term later used in Coors marketing. Coors took a diversified approach, including near beer, malt syrup, and ceramics. The later product became a gold mine for the company. Sensing the impending dry spell, Coors purchased the Herold China and Pottery Company 1913 (Maloney, 2015). In 1920 the company was renamed the Coors Porcelain Company. For the ceramic business, Coors took advantage of a natural resource available in the Centennial State: the clay deposits of Golden, Colorado. The new acquisition produced tea sets, creamer, sugar bowls, cookware, and spark plugs. Thomas Edison was a reported early customer. Coors expanded into the quirkier side of enamelware. In 1925 Coors began construction on a porcelain plant in Inglewood, California with the

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purpose of producing heads, busts, and arms for “fancy covers for telephones,” a great departure from lager (“Porcelain Plant Now Under Way,” 1925, p. 124). The porcelain business was so fruitful that after the country was wet again, and Coors returned to the national beer business, it stayed in the ceramics business. Today Coors’ porcelain interests are under the name CoorsTek and is one of the largest technical manufacturers in the world with sales of $1.25 billion today (Alexander, 2015). Customers include IBM, General Electric, and Ford. For Coors, Prohibition was costly in terms of lost beer revenues, but the company realized a profitable diversification venture. Cheese Jacob Best, with the employ of his four sons, founded the Best and Company brewery in 1844. The Milwaukee, Wisconsin brewery experienced success almost immediately, making 300 barrels of suds per year. Two of his sons moved on to start ventures of their own6 and in 1859 Jacob Best had retired, leaving his son Phillip in charge. Phillip’s oldest daughter Maria married Captain Frederick Pabst in 1862 who soon thereafter purchased half of his father-in-law’s business for about $21,000, or $172,000 in 2018 (“Pabst Brewing Company,” n.d.). Production increased to over 14,000 barrels by 1866 and topped 100,000 in 1873. The return on Pabst’s investment is remarkable given the brewery, later known as the Pabst Brewing Company, became one of the largest and most profitable in the nation. Pabst embraced new technology and curated a marketing campaign that was ahead of its time. The company entered the real estate market, owning tied houses throughout the country. Similar to Yuengling, Pabst purchased a nearby dairy, but instead of producing ice cream during prohibition, it used the dairy to support a new cheese business. Pabst-ett Cheese was a processed whey-based product, aged in the dairy cellars. Pabst-ett, came in the spreadable or block forms and in cheddar, swiss, or pimento varieties. The cheese was so successful that Kraft took it to task over copyright infringement. Kraft won the case but gave Pabst a royalty-free license to continue making the cheese. The cheese was marketed as easily digestible and “something to serve that will add to your reputation as a hostess” (“Are

6 One of Best’s sons, Charles, started the Plank Road Brewery, which eventually became the Miller Brewing Company.

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You Fond of Pabst-ette?,” 1930, p. 5). At the close of prohibition, Kraft bought Pabst’s cheese division and continued making Pabst-ett for years. Malt Extract and Syrup Another popular alternative product for the breweries during Prohibition was malt extract and malt syrup. Malt extract is used to make many foods, especially baked goods such as pizza crust and bagels. Adding malt allows the food to take on a brown color and adds a distinctive sweet flavor. As such it is also used to make confections including ice cream and candy. Malt’s history as a food ingredient goes back hundreds of years. The process of producing malt extract is like beer, with steps including milling, mashing, boiling, and cooling. Beer brewers could easily switch to brewing malt when the former became illegal. Malt syrup is a more viscous, sticky product than its extract counterpart, but has a similar production process. It is also used in baking as a syrup, serving as a condiment such as caramel and chocolate. Unlike dyes, there was no shortage of malt during the War, yet malt demand soared during Prohibition. Did America develop a sweet tooth? Perhaps. More likely the surge in demand was due to another use for malt: home brewing. Miller offered a diverse portfolio of non-intoxicating products during Prohibition including malt. Advertisements for Miller’s malt graced newspapers from California to Pennsylvania, including its hop flavored malt syrup. Much of the malt market activity was a series of winks and nods between producers and consumers. Breweries advertised it as a baking ingredient, and home brewers bought it up without having to draw attention to their illegal intentions. After all, they were just making cookies! Getting caught making beer in one’s home, however, could be a sticky situation. That was a Volstead violation. The winks needn’t be too intense. The home brewing intent of the trade was described in the newspapers as if it were a legal operation. In 1932, Max Miller’s 23-year-old son Gus was allegedly kidnapped by gangsters in Joliet, Illinois. The kidnappers demanded $50,000 for his safe return. The Daily News (New York) described the wealthy elder Miller as follows: “Since Prohibition he has operated a business of selling malt, hops, bottle supplies, and other equipment for the manufacture of beer and wines” (“Home Brew King in $50,000 Deal for Kidnapped Son,” 1932, p. 30). This was published a full year before the repeal of the 18th Amendment. The location of the malt brewing locations was well known, and the product advertised daily in the paper. This blatant and nonchalant disregard of the

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law signals the level of enforcement and respect for the dry law with respect to home brewing. Pabst, Anheuser-Busch, and Stroh’s also supplied the malty markets during Prohibition. Cars, Trucks, and Machinery An expensive, but alternative for breweries was the production of cars, trucks, and heavy equipment. The Monroe Brewery was founded in Monroe, Wisconsin in 1845 by Swiss immigrants who utilized their dairy manufacturing skills to strike out on their own. The business changed names and ownership frequently over the next fifty years. In 1892 Adam Blumer Sr. became the sole owner of the establishment, buying out the interest he shared with his brother-in-law (“Minhas Craft Brewery—Family,” 2019). The name of the brewery did not take his name until 1906. By that time the facility used top of the line equipment and emerged as a major regional brewery. Innovations continued when the brewery came under the control of Blumer’s sons, producing 12,000 barrels of suds on the eve of Prohibition. During Prohibition the Blumers not only produced near beer and ice cream but also distributed case tractors, separators, silo fillers, and road machinery under the name Blumer Products. Ironically, after Prohibition ended and the Blumers went back to making “real beer” they struggled and eventually sold out to Carl O. Marty, a local cheese magnate. He used the brewery’s refrigerated spaces for storying his cheese.7 Anheuser-Busch also got into the automobile industry as a part of the Prohibition portfolio. The company had an entire vehicle department that produced campers to sit atop a Ford chassis, called the Lampsteed Kampkar, and the Bevo Victory Boat, a vehicle similar to the Duck Boats seen in big cities today, designed to cruise on land and water. Seemingly taking prohibition in stride, the company produced vans used by police departments to round up bootleggers and other Volstead violators. The vehicle should have been crowned the Volsteader. Finally, the revolutionary refrigerated trucks that Anheuser-Busch previously used to transport suds were used to move their ice cream, near beer, and other goods in need of chilling and sold to other businesses in need.

7 Eventually the brewery fell back into the hands of beer men and in 2005 became the Minhas Craft Brewery.

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Candy Milwaukee, Wisconsin was swimming in beer from local breweries in the later nineteenth century. Not only did the area have many breweries, but there were several large corporations including Pabst, Blatz, Miller, Fauk, and Schlitz. Attracted by the cheap lumber, clean water, and railroads, German, Polish, and British immigrants used their brewing skills to meet the local, regional, and national demand for beer. The Jos. Schlitz Brewing Company, opened in 1849 by Georg August Krug as a saloon and brewery, was incorporated in 1873 (Spiekermann, 2013). It did not get the name that we know today until Joseph Schlitz took the business over in 1853 after Krug’s death. The Schlitz family enterprise became one of the most successful tied house organizations in nearby Chicago, buying up significant amounts of real estate. Between 1897 and 1905 the company invested over $300,000 building over 57 saloons in the Windy City, an amount close to $9 million in 2018 dollars. By 1900 Schlitz production surpassed one million barrels, making Schlitz one of the nation’s largest producers in the nation. One angle some Prohibitionists took to darken the image of brewers and their devilish product was to use the nation’s anti-German sentiment fostered by World War I. Many of the brewers, including those in Milwaukee, were loyal American citizens, a fact that the Prohibitionist slanderers chose to ignore. German brewers, then, were particularly challenged when their product was made illegal in 1920. Schlitz retained much of their real estate and successfully ventured into the steel, malt, and soft drink industries to survive, but the beer-ban still necessitated laying off 80% of its labor force. Their near beer, Famo, was famously unpopular even though advertisements told potential consumers of both its healthy attributes that did not ferment in the stomach or cause biliousness and that it could be drunk at noon without shame. Candy was another prong in Schlitz’s Prohibition plan. In 1920 there were 16 established Milwaukeean candy confectioners in operation, suggesting a knowledgeable local labor force and sweet tooth. Dairy, a crucial ingredient, was in great supply in the Badger state. Finally, Joseph Uihlein, a Schlitz nephew running the company in 1919, believed that Americans would turn to candy since their steins were permanently dry, making it a wise investment for the future of Schlitz. The company invested heavily in Eline’s Candy but faced substantial market power from Hershey’s. Schlitz built a large facility to produce their candy in Glendale, Wisconsin.

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“The beer that made Milwaukee famous” went headstrong into the cocoa candy market, hiring experts, developing a national marketing campaign, and hiring a large labor force. The facility was fantastical with entry columns modeled after Harvard, an Italian marble coated lobby, a fireplace in each office, a garage mimicking the orangery at Apethorpe Hall in England, and a grand timber gatehouse complete with a sundial, wrought iron gate, and doves (Swanson, 2017). Sadly, the factory was liquidated in 1928 and in 1929 the Pittsburgh Plate Glass Company took a $5 million option on the now-shuttered candy factory sending their sweet venture down the same road as Famo. What about small brewers during Prohibition? Did they adapt like the big boys? Or did they lose their assets without a fight or compensation from the federal government? Michael Biermeister had some of the options available to Anheuser-Busch and other national brewers, but not all due to his relative lack of resources and assets. The relative impoverishment did not concern the government passing the 18th Amendment. Like the national brewers, Biermeister had two (legal) choices: (1) adapt or (2) close shop and take a loss. The most likely choice for him was near beer since it required few production modifications and remained in a similar market space. Alternative products such as ice cream, candy, soft drinks, and cheese were in market spaces with different competitors, some of which held significant market power, including Nestle and Kraft. Entering those markets required significant investments in advertisement and other efforts to differentiate their product and compete with large, established firms. Biermeister did not have the financial resources or connections to do so. Likewise, dairy and machine manufacturing required significant investment in equipment, putting them out of the reach for him. Being in Chicago, Biermeister did not have the natural resources for products like ceramics. In sum, near beer was the option for Michael. Malty, sweet, cheesy, and machine Michael were not feasible.

Distilled Spirits “Oh we can make liquor to sweeten our lips, Of pumpkins, of parsnips, of walnut-tree chips.” The short ditty, a New England rhyme of the colonial period, highlights colonists’ adoration of liquor and resourcefulness in its creation. Rum was the primary liquor of the early days, a more efficient inebriate than cider or beer. Allegedly before Paul Revere set out on his famous ride he stopped for a quick tipple. The first legislative reference to

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rum in the colonies dates to 1657 in an act put forth by the General Court of Massachusetts which prohibited the sale of strong drink in certain circumstances, likely due to concerns about the constant flow of alcohol and the desire for sobriety in certain situations. Dry decorum. Of the 4 gallons of spirits consumed per capita, most of it was rum. Some taverns only sold rum, earning the names “grog” and “dram” shops (Nathan, 2006).8 For variety, early drinkers in the colonies didn’t just drink drams, but fancied-up rum by way of punch, notoriously strong in Boston, of the plain, Colonial, or hot spiced varieties, and flip.9 The latter, also known as “bellows-top,” was a popular, dramatic, and messy concoction, one that would make for a legendary college party theme.10 The December 1704 issue of the New England Almanac noted “[t]he days are short, the weather’s cold, By tavern fires tales are told. Some ask for dram when first come in, Others with flip and bounce begin.” Temperance supporters believed that beer was healthy, while liquor was the devil. William Hogarth illustrated this viewpoint in his famed print coupling. The first shows a sketch of “Beer Street” where people are happy, healthy, productive, and intellectual. This road must pass through the middle of Utopia. Comparatively, the second print of “Gin Lane” travels through an inner layer of Dante’s Inferno, overrun by the destitute and savage, abounding with infanticide, suicide, and insanity (Hogarth, 1751). Although Hogarth resided in England and depicted the wantonness surrounding the Mother Country, similar temperance sentiments hailed across the Atlantic in the colonies. The history of liquor regulation, like beer, goes back to colonial times. The first such laws largely prohibited the sale of the good to certain people, including Native Americans, and times of sale. By 1777, concern about the “Gin Lane” passing through the colonial settlements brought about the February 27, 1777 proclamation from the Continental Congress “that it be recommended to the several legislatures of the United States immediately to pass laws the most effectual for putting an immediate stop to the pernicious practice of distilling grain, by which the most extensive evils are likely to be derived, if not quickly prevented.”

8 “Grog” is rum diluted with water and was a staple amongst British soldiers. A dram is a standard measure of rum. 9 Nathan (2006) offers recipes for these Colonial delights. 10 Heating a loggerhead and thrusting it into the drink is required, so the bartender should

avoid partaking for the sake of safety.

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The United States boasted over 2000 distilleries before Prohibition, their revenues generated by selling liquor to consumers across the country. Prohibition made this practice illegal. Some distillers shut down and left the market, but others utilized Volstead loopholes and creativity to survive the thirteen dry years. One of the allowed uses of liquor during prohibition was for medicinal purposes. Whiskey has a long medicinal history, mainly serving as a painkiller. During the Revolutionary and Civil Wars, injured soldiers were given nips to dull their pain. A shot and a belt to bite on were common instruments to overcome the pain of surgery on the battlefield. Whiskey also served as an antiseptic once the dangers of bacteria were known. In the twentieth century, physicians prescribed whiskey for anemia, tuberculosis, pneumonia, and high blood pressure (Cohen, 2018). During Prohibition, the government licensed six distilleries to produce medicinal whiskey including Old Grand-Dad, Brown-Forman, Frankfort Distilleries, and Schenley Industries. The product was unchanged from the pre-Prohibition period but bottled in special pint bottles with a measuring cap on top. Initially, medicinal whiskey came from thirty-seven bonded warehouses produced before the liquor ban. The supply rapidly depleted and needed replenishment. By 1926 only 15,000,000 gallons remained, enough for about five years based on historical consumption and evaporation rates. Lincoln Andrews, head of Prohibition enforcement, sought to restart production, closely monitoring the distribution to druggists who would sell to customers bearing physician prescriptions. He aimed to keep the new whiskey out of the hands of illegitimate businessmen and manage prices (“To Restock U.S. Liquor Supply,” 1927, p. 6). The government sanctioned the production of over two million gallons of alcohol per year for medicinal purposes (“Record Arrests by Dry Unit Men,” 1930, p. 2). Six distilleries from Kentucky (bourbon) and Pennsylvania (rye) brushed off the dust accumulating on their capital equipment and took up the production of whiskey in 1930. Quotas were determined by Washington and permits allocated by state prohibition boards to the chosen distilleries. Fourteen applied for the honor, but less than half were chosen for their large and thief-proof warehouses. Each was to produce the good and age it for four years before putting in on the market (“Six Distilleries Will Brush Dust Off Equipment,” 1929, p. 1). The effectiveness of medicinal alcohol was questioned by the American Medical Association which publicly supported Prohibition via a resolution passed in 1917. Brandy and whiskey were removed from The Pharmacopeia

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of the United States list of approved medicines in 1916 (The Ohio State University, 2019). Regardless of the AMA’s stance on the medicinal value of alcohol, it was permitted under Prohibition. Physicians and pharmacists enjoyed the lucrative loophole prescribing the elixir for various ailments. Winston Churchill received a prescription for an indefinite amount, especially at mealtime, after a car wreck while on a U.S. speaking tour. The U.S. Treasury Department regulated the amount of liquor prescribed and purchased, allowing adults one ounce every few hours with a special prescription form. Like prescription marijuana today, medicinal whiskey was not permitted in all states. By 1929, 22 states did not allow for it. For example, West Virginia outlawed medicinal whiskey through the Yost Act in 1912, which was repealed in 1932. However, U.S. Treasury records suggested that the majority of the 144,977 physicians nationwide prescribed it (Neal, 1929, p. 4). The medicinal loophole was only available to distilled spirit producers. Neither Anheuser-Busch nor Michael Biermeister were permitted to utilize it. The Willis–Campbell Act of 1921, also called the “anti-beer bill” banned the use of beer and other malt beverages for medicinal purposes. Championed by drys Senator Frank Willis and Representative Robert Campbell who were concerned about the medicinal loophole in the Volstead Act, “An Act Supplemental to the National Prohibition Act” passed the Senate 39-20 and the House 250-93. It remained law until the 21st Amendment. Hops were out, despite protests by physicians citing its healing powers. The dry Congressmen supported prescribing wine and distilled spirits to patients for various maladies if they did not exceed 24% alcohol by volume. Additionally, the law limited the number of prescriptions physicians could write to 100 per month and the number of prescriptions per individual to one-pint per person per ten-day period. The bill restricted the rights of consumers and physicians. Jack Franklin, another Prohibition character, was a small distiller near Lexington, Kentucky. He employed a small number of local men and sold his product largely within the Commonwealth of Kentucky. He did not receive a permit to restart production for medicinal whiskey. Prior to Prohibition, he sold his warehoused product to buyers around the country looking to fill their personal bars while it was still legal to do so. He laid off his employees once the stores were gone and let dust accumulate on his capital equipment during Prohibition. There were no buyers for it since no one knew when or if the 18th Amendment would be repealed. Franklin knew that he would never be selected as a government medicinal whiskey

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producer since he could not produce a large amount and his facilities were not thief-proof. Jack Franklin, like many of the pre-Prohibition 2000+ distillers, went out of business. The federal and state government never compensated him for his business which put food on his family’s table before 1920 but became illegal thereafter. He gave up the role of a firm owner and employer and took on the role of an employee at a local business. Franklin’s reward for pursuing the American dream and building a successful business was impoverishment via legislative maneuvering and the swipe of a pen.

Wine On the eve of Prohibition, California produced most US wine. In 1908, 220,000 of the 300,000 total vintage acres in the United States were in California and 85% of American wines were produced in the state. An industry that started in the eighteenth century by San Diego missionaries from Mexico who made sacramental wine, produced close to 11 million cases of wine per year by the end of the nineteenth century (Wine Institute, n.d.). Missionaries traveled up the coast spreading their gospel and wine-making skills. Several other events paved the way for the massive grape and wine industry in California. The Mexican-American War ended in 1848 and by the next year the Gold Rush was on in California bringing an emigration and economic boom. California officially joined the United States in 1850. Investment in vineyards increased over this period with the aid of industrialization and the Gold Rush booty. Demand for California wines increased state- and nationwide while transport was eased with the expanding rail and road systems. The pest phylloxera, a root destroying insect, discovered in California in 1873, hampered growers for the rest of the century, many vines being replaced with resistant hybrids. However, the damage and change brought about by phylloxera paled in comparison to that brought to the industry by Prohibition, a pestilent royale. Although the temperance movement was not young, the wine and grape industries were not openly opposing legislation at the turn of the twentieth century. As the movement continued to gain ground, demand for all alcohol, including wine, began to decline, which got the attention of viticultural industry stakeholders who believed that wine “should not be…opposed on the same basis as the stronger drinks” (“State Wine Growers Association Formed,” 1908, p. 1). According to data from Peninou (2004), pre-Prohibition wine production peaked at 45.5 million gallons in 1910. In the decade leading up to this zenith, the temperance movement also

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Fig. 2.3 Gallons of wine consumed per year, 1856–1945 (Source Peninou [2004], graphic by author)

grew and gained considerable traction and publicity. A wine growers association was created in California in 1908 out of concern for the “alarming spread of temperance doctrine and movement throughout this country” (“State Wine Growers Association Formed,” 1908, p. 1). Industry leaders brought their case to Washington and argued that light wine and beer were the way toward temperance. Enjoying a chilled glass of wine or a cold stein of beer was high class, taught a person control, and promoted good health, civility, and virtue. Visiting a saloon and drinking hard liquor was the making of the devil, causing social ills such as child and spousal abuse and other various criminal activities. As evidence viticultural spokespersons attributed the lower hospitalization rates for alcoholism among soldiers in armies permitting troop light wines and beer versus those that prohibited the canteen altogether to the virtues of moderate and responsible drinking (Fig. 2.3). By 1913, over half of the US population lived in areas bound by prohibition laws while the Webb-Kenyon Act (1913) banned the shipment of alcohol to any state in which the drink was prohibited. Between 1910 and 1914, California wine production fell by 8%, although acreage dedicated

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to grapes increased by 16%. National consumption of wine fell after 1910, as did the consumption of beer and spirits (Hyman, Zimmerman, Gurioli, & Helrich, 1980). On the eve of national prohibition, the viticultural industry’s survival strategy evolved. Although they previously promoted the consumption of light wines and beer as avenues toward temperance, by 1917 California grape growers portrayed their product as distinct from other inebriates such as beer, even light versions, and whiskey. No longer did they tout the morality of light beer as they had done in the previous decade. The January 1917 issue of the California Fruit News lauded the courage of the grape growers for speaking out publicly because “the fanatical prohibitionist does not differentiate between the viticultural industry in California with its light wines, and the evils of the strong intoxicants and saloon” (“State Wine Growers Association Formed,” 1908, p. 1). The publication further noted that there “is no possible connection between the well-known and admitted evils of excessive use of strong intoxicants and the numerous and frequently disgusting problems of the saloon, on the one hand, the viticultural industry and wine business of California” on the other (“State Wine Growers Association Formed,” 1908, p. 1). Spewing words that would make Bacchus proud, the publication made no mention of wine being the “drink of the condemned” nor the alcohol equivalence of a shot of whiskey, a pint of beer, and a glass of wine (Amos 2:8). Separation from others involved in the alcohol trade was a strategic move on the part of the grape growers as momentum for national prohibition gained traction. If the public was convinced that it was indeed separate from the sins of liquor, beer, and saloons, allowances might be made in the prohibition laws lessening the economic losses to the wine industry (Fig. 2.4). California vineyard owners were faced with an economic dilemma on the eve of Prohibition: (1) tear out fruit producing vines and reallocate the land and capital to an alternative production, such as apples or (2) find different uses for their grapes in hopes that Prohibition was not long-lived or the grape by-product markets grew to replace the lost wine revenues. Grape vines were an investment that took up to ten years to bear quality fruit to produce California wines. Switching to an alternative fruit was a costly venture if Prohibition was repealed. Some grape growers took the plunge and replaced their vines with apple trees and focused on their new orchards to pay their bills and generate profits. Others found creative ways to adapt and stay the course while waiting out the national “dry” spell. A lucky few growers obtained waivers from the government to produce, distribute, and sell sacramental and medicinal wine, but legal wine

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Fig. 2.4 Wine, beer, and spirit consumption, 1850–1919 (Source Hyman et al. [1980]; National Institute on Alcohol Abuse and Alcoholism [2014], graphic by author)

production virtually ceased. Records suggest that many more wineries produced wine during Prohibition than the number of permits allotted, so the illegal wine market was considerable (Adams, 1974), but nothing like the preceding decade. Italian restaurants still served wine (in coffee cups) in places including San Francisco. Their supply was brewed in small, allegedly closed wineries, from grapes that were intended to ship for legal purposes, and at times in restaurant owners’ basements (Adams, 1974). The number of wineries between 1919 and 1933 fell from 2500 to fewer than 100. The lucky few remaining ones produced wine for medicinal, sacramental, or non-beverage purposes. Section 29 of the Volstead Act allowed each household 200 gallons of non-intoxicating cider and fruit juice if it was claimed a natural by-product of preserving fruit. The viticultural industry jumped into the loophole providing juice grapes for home producers, particularly once they received taxpayer money to do so. Many grape growers tore out their more delicate varieties and planted thinker skinned substitutes, such as Alicante Bouschet, which were better suited to traveling long distances by rail for the home wine production market. The Wickersham Commission later questioned

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the reasoning behind Section 29. If fruit juice did not contain alcohol, why was this exception added to the law unless “there is a discrimination between beer of lower alcoholic content, which is certainly not a “fruit juice,” and wine of distinctly higher content” (Wickersham, 1931, p. 105). Additionally, the Commission questioned why home wine-making was considered legal but making it outside of the home was not and why brewing and distilling both in- and outside of the home were viewed as reprehensible and illegal. Excellent questions indeed. The Wickersham Commission concluded it “a source of mischief” (Wickersham, 1931, p. 106). Home wine-making became increasingly popular during Prohibition because of the Volstead allowance. For the first half of the 1920s, many juice grape growers prospered, especially those near Fresno where rail service was directly available. Due to a shortage in refrigerated cars to transport the grapes to the east coast, grape prices soared. The California Grape Car Plan “straightened out” the refrigerated car issue, but in the process busted the juice grape market, clearly an unforeseen and unintended consequence of their market interference.11 No longer were the grapes hard to come by on the east coast. The supply outstripped demand and prices plummeted. Grapes were left unsold in rail cars to rot and returned to the shipper in the form of “red ink.” By 1927, wine production outside of the home had fallen by 97% and wine and juice grape producers were desperate for survival. Aggressive and novel attempts at saving the industry were initiated and were immensely successful. First, the industry decided that they needed a “czar,” which they found in Donald Conn and Fruit Industries Inc. (FI) (Adams, 1974). FI was a California cooperative of legal (by government permit) wine producers started in 1928 by the California Vineyards Association and directed by Donald Conn, allegedly recommended by Herbert Hoover, a former railroad executive, and author of the California Grape Car Plan. Conn became a promoter for the industry and its interests were covered by a five-year contract and starting salary of $25,000 that increased by $5000 each year. The CVA took on marketing, research, lobbying, and production roles, although its focus was marketing grape products and finding alternative outlets for the grapes. A large part of its plan was to leave many grapes unharvested to drive up the price of the few grapes brought to market. 11 The California Grape Car Plan began in 1926 and required that 100% of all refrigerator cars be first allocated to shipping California grapes across the country. The plan was a huge boon to California grape growers and was repeated in subsequent years.

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The grape harvests of 1927 and 1928 were not strong, and the CVA was largely not successful in its venture. The shining light for the CVA was its cooperative, Fruit Industries, which consolidated eight of the oldest and most established grape products manufacturers to gain “substantial control over the distribution of grape by-products, permitting annual expansion of the demand for these commodities” and represented “the 20,000 California grape growers through the ‘California Grape Control Plan’” (“Grape Grower Meeting Set,” 1929, p. 9). At the time of the consolidation, the eight companies controlled 85% of the grape by-product market. Increased revenues and profits through market power were the likely motivations behind the consolidation. Donald Conn announced that “permissions have been given for the manufacture and distribution of additional legal commodities from grapes, such as the distillation of grape spirits for marketing in competition with industrial alcohol” (Adams, 1974, p. 39). One such “legal commodity” produced by Fruit Industries Inc., along with other producers in the fruit by-products market, was the grape brick and its accompanying services. FI’s brick was called Vine Glo, a product some say was first developed by FI’s Paul Garrett. Grape bricks, or “raisin cakes,” were blocks of dried grapes, the sale of which did not violate Prohibition laws since they did not contain alcohol at the time of distribution and sale. To make the bricks, juice was drawn off, the grapes pressed, leaving an ample amount of fermentable sugar in the stems, seeds, and pulp. Each grape brick could be fermented in the home to produce wine, fitting nicely within Section 29 of the Volstead Act. The allowable 200 gallons per year amounted to 2.5 750 ml bottles a day! Now that is temperance. To make it perfectly clear to consumers that Fruit Industries Inc. was not in the business of breaking the law by selling alcohol, a warning was included on each brick: “After dissolving the brick in a gallon of water do not place the liquid in a jug away in the cupboard for twenty days, because then it would turn into wine.” Consumers had their choice of eight varieties including burgundy, sherry, and port. Fruit Industries pushed the envelope with lawmakers by brashly offering complementary services in the home. The services included servicemen setting up kegs for the bricks, checking on its maturity, and bottling the finished product. For these services, consumers had a choice of a 5- or 10-gallon keg at $14.75 or $24.50 a piece, respectively, or $208.92 and $347.01 in 2018 dollars. Given there are about 5-750 ml bottles in a gallon, a 5-gallon keg is about 25 such bottles. In 2018 dollars, this is less than $10 per bottle, a common price for a run-of-

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the-mill bottle in the grocery store, or a spiffy one in Costco. The product was so successful that gangster Al Capone of Chicago allegedly offered to distribute the concentrate at $1 per gallon, although Fruit Industries Inc. declined the offer. “You can’t buy it from peddlers…Not for sale in any store…Never served in any restaurant.” So how did people get their hands on the magical bricks? Most consumers ordered Vine Glo and its competitors from a neighborhood drug store for home delivery. Newspaper advertisements told oenophiles that they would know the exclusive dealers by the “emblem in his window.” Initially the number of total grape acreage allocated to wine grapes during Prohibition dropped. As demand for home production and grape bricks grew, cheaper and faster grapes were planted since the quality of grapes was not of primary concern as it was in previous decades when quality was of crucial importance. Harvesting grapes quickly became a priority and the acreage dedicated to wine grapes exceeded the 1919 value by 1927. The abundance of grapes and their poor quality caused grape prices to tumble. The Napa Valley price per ton (adjusted for inflation and smoothed) fell from $448 in 1921 to less than $59 in 1932 (County of Napa, 1921). Although volatility in weather over the next decade played a role in the price per ton for grapes, the general reduction was due to the glut of grapes and their relatively poor quality (Figs. 2.5 and 2.6). The government aided in production. They offered subsidies and loans which softened the blow from falling grape prices and incentivized continued overproduction. FI’s potential was realized after President Hoover’s Agricultural Marketing Act passed in 1929. As former beat writer, Adams, who covered the CVA during the period, stated in his oral history of the era that when the legislation was passed, “85 Second Street [the CVA address] became the center of everything to be done to save the grape industry” (Adams, 1974). The legislation created the Federal Farm Board which loaned almost $20 million to California grape cooperatives by January 20, 1931, the equivalent of $314 million in 2018 dollars. To put this amount in context, in 1931, the US population was 124 million, so the loan amounted to $0.16 per person ($2.55 per person in 2018 dollars). Comparatively, the 2018 US population is 327.2 million. A loan of $2.55 per person amounts to $834,360,000 total. According to the US Treasury’s 2016 fiscal year report (United States Treasury Department, 2016), is similar to the total amount spent on the Smithsonian Institute in 2016. Of the total loan amount, $2,555,330 (13%) went to Fruit Industries Inc. which was a $30,000,000 corporation at the time, and one whose

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Fig. 2.5 Acreage allocated to wine grapes, 1919–1930 (Source Peninou [2004], graphic by author)

Fig. 2.6 Napa Valley harvested tonnage and price/ton (corrected for inflation, smoothed) (Source Napa Valley Agricultural Crop Reports [1921–1933], graphic by author)

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principal business was the manufacture and sale of grape concentrates to produce Champagne and wine in the home. FI used the Farm Board loans to aggressively promote their fruit concentrate sales: A Prohibition Era vitis vinifera boondoggle. FI’s brick-to-bottle services and marketing became outlandish. The company seemingly thumbed their nose at the intent of the 18th Amendment and Volstead Act with the backing of the US government. Eventually, Vine Glo created so much controversy among “drys” and former producers of products who did not get similar preferential treatment that production was stopped in a “betrayal” by President Hoover. The buildup to the termination of Vine Glo and its associated services and marketing, however, was intoxicating in and of itself. “Drys” and “wets” alike voiced their outrage. Brewers and their supporters rankled at the seemingly hypocritical take by the government. The government provided legal and financial support for home wine makers while it was a violation of law to brew at home. Millard Tydings, a democratic Senator from Maryland and Anti-Prohibitionist, voiced his disgust with the government’s hypocrisy. He publicly stated that the law should be consistent: either it’s all illegal or it’s all legal. Prohibitionists agreed with Tydings, at least partially. They believed that the law should be amended to make home wine production illegal. Prohibition Director Amos W. W. Woodcock publicly stated that he did not believe the sale of grape concentrates in the spirit of the law. Tydings and others believed that Section 29 of the Volstead Act was purposefully included by Wayne B. Wheeler as a “gift” to California grape growers. With the help and influence of Mabel Willebrandt, Wheeler aimed “to rescue for human society the native values of rural life.” Senator Tydings equated Wheeler’s so-called native values to wine and grape profits. “Native values” were indeed expanding during Prohibition. In the five years leading up to Prohibition, wine consumption totaled 229,293,090 gallons. It increased to 678,909,050 gallons during the five years ending with 1929 (“Tydings Claims Drys Put Wine in Volstead Act,” 1931, p. 6), an increase of 300%. The hypocrisy that so angered Tydings and others is summed up in the following way: The government sends a person to jail for manufacturing beer with 2% alcohol but allows another to produce wine at 20% alcohol…and lends them money to do so. After all, where were Al Capone’s government loans and subsidies? During the Washington hullabaloo, Senator Morris Sheppard claimed that Section 29 referred to non-intoxicating liquids and defended his prized

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legislation, ignoring the fact that the concentrates and grape bricks became intoxicating after 60 days of fermenting and contained up to 20% alcohol. Despite the known purpose of Vine Glo, when it was in fact manufactured and distributed by Fruit Industries, Inc, it was not intoxicating. The beverage gained its kick through fermentation in the home, and thus a violation of the Volstead Act would need to be decided separately in each case, something costly and unrealistic to enforce. On the subject, the US Circuit Court of Appeals declared: “The government appears to have acquiesced in that construction by refraining from seeking a final interpretation by the Supreme Court of the United States. As the matter stands, then, when wine is produced in the home for home use, whether the product is intoxicating is a question of fact to be decided by the jury in each case. If this view stands, it becomes impracticable to interfere with home wine-making, and it appears to be the policy of the government to not interfere with it. Indeed, the government has gone further and materials for the purpose of easy home wine making are now manufactured on a large scale, with federal aid.” The Board of Prohibition, Temperance, and Morals of the Methodist Episcopal Church (ME Board) campaigned that the Volstead Act should be amended so that grape juices sold for home use be produced in a way making fermentation impossible. They decried Fruit Industries advertisements which described both the available varietals, such as Riesling and Burgundy, and the home services provided. The ME Board lamented that the continued use of Section 29 to validate the juice product would inevitably result “in cruelty to little children” (“Grape Juice Sale Attacked by Drys,” 1931, p. 2). Whether Vine Glo endangered children is up for debate, but such advertisements made a mockery of the Volstead Act and certainly did not promote temperance nor demonstrate high morals. As the heat on the “juice” market increased throughout 1931, some druggists decided to not carry Vine Glo and its complements to escape the ire of the government. They sensed trouble brewing, or fermenting, in Washington. One of Vine Glo’s competitors, Vino Sano, saw their New York City location raided by Prohibition agents in August 1931. Vino Sano was coupled with Vine Glo in a test case of Prohibition law violations (“Wine Brick and Juice Sale Test Case Planned,” 1931, p. 13). Test cases developed across the nation. In a 1931 federal case in Kansas City, two government witnesses testified that they became intoxicated after drinking the Ukiah Grape Products Company product. One of the witnesses, William E. Boruff, a former salesman for Ukiah, claimed that he became intoxicated

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after drinking juice that had been stored for three weeks. The Government claimed that Ukiah sold the product knowing that the juice would become wine (“Testify That Grape Product Made Them Intoxicated,” 1931, p. 6). The Kansas City case gave the anti-funny juice camp what they needed. The federal court held that the distribution and servicing of grape concentrate capable of fermentation was illegal. This decision changed the Justice Department’s interpretation of Section 29. According to the Adam’s oral history, a call from Washington came in to Fruit Industry headquarters in 1931 shortly after the Kansas City decision. The message was “Stop. Now. As of this minute. Stop the advertising” (Adams, 1974, p. 31). FI could still sell the fruit juice but had to alter its distribution methods and halt the marketing and home services so despised by the ME Board and others. Ever the optimist, Donald Conn announced that “It is to be sold - you understand - exclusively for soft drink purposes, and incidentally it retains all of the dietetic qualities. Fine for the system!” (“Wine Products House Services Discontinued,” 1931, p. 4). While Donald Conn deserves credit for helping the wine industry adapt to the Prohibition marketplace, much credit is also due to Mabel Willebrandt (May 23, 1889–April 6, 1963), lawyer and single mother. Prior to her lucrative private practice, Willebrandt was Los Angeles’s first female public defender. Appointed as a US Assistant Attorney General in 1921, she became known as “First Lady of the Law” and “Prohibition Portia” in her ardent prosecution of Prohibition violators and tax evaders. As a US Assistant Attorney General, she was tasked with handling cases including those regarding violations of the Volstead Act and was the first prosecutor to win a case against bootleggers using charges of tax evasion, a tactic later used to jail Al Capone. After campaigning for Herbert Hoover and subsequently being passed over by his administration for the Attorney General post, she retired from the Justice Department in 1929 and took up private practice. By 1930 she represented various California grape growers, including Fruit Industries Inc. The company benefited mightily from her Washington connections by winning lucrative loans and subsidies from the US government. Over her career Willebrandt made a name for herself, which was no small feat for a female lawyer in that era. She was also no stranger to controversy, particularly for her public about-face with respect to the Volstead Act. In one moment, she was a rigid prosecutor, handling numerous Volstead Act violations, the next she was taking large retainers from Fruit Industry Inc. to counsel and promote the production and consumption of alcohol…with financial backing from the US government, likely through her

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Washington connections. Some speculated that in addition to the financial help she garnered from Washington, she was also able to keep Prohibition agents at bay for a spell with respect to Vine Glo, while competitors, who were raided first, were not so lucky. Prohibition laws were established to moderate Target firms. These laws offered generous opportunities to several outside groups who actively broke the law seeking profits made possible by the 18th Amendment and Volstead Act. Violators, discussed in the next chapter, were creative opportunists who used wit, violence, and stealth to break the law.

References 14 Breweries of Pittsburgh Company to Be Sold; Keep Two. (1921, January 24). Pittsburgh Daily Post, p. 5. Retrieved from newspapers.com. Adams, L. (1974). The California Wine Industry Oral History Project. Berkeley: University of California Press. Alexander, D. (2015, November 23). Inside the Coors Family’s Secretive Ceramics Business Worth Billions. Retrieved March 26, 2019, from Forbes website: https://www.forbes.com/sites/danalexander/2015/11/04/inside-thecoors-familys-secretive-ceramics-business-worth-billions/#37d9a67c71d7. Are You Fond of Pabst-ette? (1930, June 4). Leader-Telegram, p. 5. Retrieved from newspapers.com. Axelrod, K., & Brumberg, B. (n.d.). Anheuser-Busch Factory Tour in St. Louis, MO. Retrieved March 26, 2019, from Watch It Made in the U.S.A.: Your Guide to Factory Tours website: http://www.factorytour.com/tours/anheuser-buschst-louis.cfm. Baptista, R. J. (2009, June 27). Prohibition Brewed Dyes and Drugs. Retrieved March 27, 2019, from Colorants History website: http://www. colorantshistory.org/ProhibitionDyes.html. Baron, S. W. (1962). Brewed in America; A History of Beer and Ale in the United States. Boston: Little Brown. Library of Congress. Brewery Sues Dry Officials; Say Law Is Unconstitutional. (1920, December 5). Brooklyn Daily Eagle, p. 61. Retrieved from newspapers.com. Closing of the 29th Brewing Course at the Wahl-Henius Institute. (1908, January 1). American Brewers’ Review, 22(1), 268–270. Retrieved from Google. Cohen, J. (2018, August 29). Drink Some Whiskey, Call in the Morning: Doctors & Prohibition. Retrieved May 14, 2019, from History Stories website: https://www.history.com/news/drink-some-whiskey-call-in-themorning-doctors-prohibition. County of Napa. (1921). Napa Valley Agricultural Crop Reports. Retrieved from https://www.countyofnapa.org/Archive.aspx?AMID=39.

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Donovan, T. (2014). Fizz: How Soda Shook Up the World. Chicago, IL: Chicago Review Press. Duis, P. R. (1983). The Saloon: Public Drinking in Chicago and Boston 1880–1920. Urbana: University of Illinois Press. Ex-Convict Held for East Side Saloon Murder. (1926, March 15). St. Louis PostDispatch, p. 2. Retrieved from newspapers.com. Franklin, B. (1793). Works of the Late Doctor Benjamin Franklin. Dublin: P. Wogan, P. Byrne, J. Moore, and W. Jones. From the Freezer to Your Plate (Advertisement). (1922, October 4). Reading Times, p. 9. Ginger Ale Is Brewed. (1919, November 26). Ithaca Daily News, p. 5. Retrieved from newspapers.com. Grape Grower Meeting Set. (1929, November 3). The Los Angeles Times, p. 9. Grape Juice Sale Attacked by Drys. (1931, February 16). The Baltimore Sun, p. 2. Hirsch, C. (2014). Forgotten Drinks of Colonial New England. Charleston, SC: American Palate. Hogarth, W. (1751). Beer Street and Gin Lane [Photograph]. Retrieved from https://en.wikipedia.org/wiki/Beer_Street_and_Gin_Lane. Home Brew King in $50,000 Deal for Kidnapped Son. (1932, May 1). Daily News, p. 30. Retrieved from newspapers.com. Hyman, M., Zimmerman, M., Gurioli, C., & Helrich, A. (1980). Drinkers, Drinking and Alcohol-Related Mortality and Hospitalizations: A Statistical Compendium (1980th ed.). New Brunswick, NJ: Rutgers University. It’s so Easy to Serve Ice Cream from This New Yuengling Package (Advertisement). (1931, May 21). The Morning Call, p. 22. “Let’s Compromise” Say Businessmen. (1914, July 24). Stevens Point Journal, p. 1. Retrieved from newspapers.com. Maloney, M. (2015, December 4). What We Made When We Couldn’t Make Beer. Retrieved March 27, 2019, from Miller Coors Blog website: https://www. millercoorsblog.com/history/miller-coors-prohibition/. Minhas Craft Brewery—Family. (2019). Retrieved March 28, 2019, from Minhas Brewery website: http://minhasbrewery.com/our-history. Mr. Ice Cream Dealer! (1922, September 27). Reading Times, p. 5. Nathan, G. R. (2006). Historic Taverns of Boston. New York: iUniverse, Inc. Neal, W. S. (1929, July 22). Medicinal Whiskey Will Cause Fight. The Times, p. 4. Retrieved from newspapers.com. Pabst Brewing Company. (n.d.). Retrieved March 28, 2019, from Pabst Mansion website: https://www.pabstmansion.com/history/pabst-brewing-co. Peninou, E. (2004). A Statistical History of Wine Grape Acreage in California 1856–1992. Santa Rosa, CA: Nomis Press. Porcelain Plant Now Under Way. (1925, December 6). The Los Angeles Times, p. 124.

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Record Arrests by Dry Unit Men. (1930, December 9). Owensboro Messenger, p. 2. Retrieved from newspapers.com. Reefers Shorty Anheuser-Busch Malt Nutrine ACF Builders Photo Pre-1911 [Photograph]. (1911). Retrieved from https://commons.wikimedia.org/wiki/ File:Reefers-shorty-Anheuser-Busch-Malt-Nutrine_ACF_builders_photo_pre1911.jpg. Rossi-Hansberg, E., Sarte, P.-D., & Trachter, N. (2019). Diverging Trends in National and Local Concentration (No. 151). Retrieved from CATO Institute website: https://www.cato.org/publications/research-briefs-economicpolicy/diverging-trends-national-local-concentration. Setback for Brewers in License Contest. (1909, December 14). The Allentown Leader, p. 1. Six Distilleries Will Brush Dust Off Equipment. (1929, September 18). Freeport Journal-Standard, p. 1. Retrieved from newspapers.com. Spiekermann, U. (2013). Marketing Milwaukee: Schlitz and the Making of a National Beer Brand, 1880–1940. Bulletin of the German Historical Institute, 53, 55–67. Stack, M. (2003). A Concise History of America’s Brewing Industry. EH.net Encyclopedia. Retrieved from https://eh.net/encyclopedia/a-concise-historyof-americas-brewing-industry/. State Wine Growers Association Formed. (1908). California Fruit News, 38(1047), 1. Swanson, C. (2017, April 9). Milwaukee Notebook: The Sweet Smell of Disaster. Retrieved March 29, 2019, from Milwaukee Independent website: http:// www.milwaukeeindependent.com/syndicated/milwaukee-notebook-thesweet-smell-of-disaster/. Testify That Grape Product Made Them Intoxicated. (1931, October 11). The Baltimore Sun, p. 6. The Ohio State University. (2019). Medicinal Alcohol. Retrieved May 16, 2019, from Temperance and Prohibition website: https://prohibition.osu. edu/american-prohibition-1920/medicinal-alcohol. To Restock U.S. Liquor Supply. (1927, March 29). News-Democrat, p. 6. Retrieved from newspapers.com. Tydings Claims Drys Put Wine in Volstead Act. (1931, February 7). Chicago Tribune, 6. United States Brewers Association. (1979). 1979 Brewers Almanac. Washington, DC. United States Treasury Department. (2016). Financial Report of the United States Government, Fiscal Year 2016. Retrieved from United States Treasury Department website: https://www.fiscal.treasury.gov/fsreports/rpt/finrep/ fr/16frusg/01112017FR_(Final).pdf.

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Vassal, A., & Phelps, M. (2004, December). Brew Soda at Home. Retrieved March 27, 2019, from Mother Earth News website: https://www.motherearthnews. com/real-food/fermenting/brew-soda-at-home-zmaz04djzsel. Wickersham, G. W. (1931). Report on the Enforcement of the Prohibition Laws of the United States (No. 2). Retrieved from National Commission of Law Observance and Enforcement website: https://www.ncjrs.gov/pdffiles1/ Digitization/44540NCJRS.pdf. Wine Brick and Juice Sale Test Case Planned. (1931, August 7). Chicago Tribune, p. 13. Retrieved from newspapers.com. Wine Institute. (n.d.). History of California Wine. Retrieved from http://www. discovercaliforniawines.com/wp-content/files_mf/ecawinehistory.pdf. Wine Products House Services Discontinued. (1931, November 6). Chicago Tribune, p. 4. Yuengling Co. Buys Plant of Local Concern. (1928, October 2). Shamokin NewsDispatch, p. 1.

CHAPTER 3

Violators

Abstract Bootleggers, runners, moonshiners, smugglers, speakeasy proprietors, and gangsters rationally chose to break the law during Prohibition, using the same decision-making calculus as their legitimate peers. This chapter explains their adaptations through example and theory. These rule breakers included the expense of bribes, the probability of getting caught, and the punishment if caught in their decision-making process, along with the potential monetary rewards. Those who fully or partially participated in the illicit markets did so because it was optimal despite the risks and constraints. Keywords Crime · Punishment · Enforcement · Becker · Market power

The five main sources of illicit alcohol during Prohibition were: (1) importation, (2) diversion of industrial alcohol, (3) illicit distilling, (4) illicit brewing, and (5) illicit wine-making. Diversions of medicinal spirits and sacramental wine also contributed to the supply of illicit alcohol, and significantly so in some places and periods. The business environment varied from rural bootlegging to big city organizations. Criminals violated the 18th Amendment and Volstead Act regularly. The decision to commit a crime boils down to the economic principle of scarcity. In this world, there are limited resources and unlimited wants, which necessitate choice. In our personal lives, time and money are limited resources which we must © The Author(s) 2019 A. L. Kassens, Intemperate Spirits, https://doi.org/10.1007/978-3-030-25328-8_3

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allocate across competing wants and needs. Do we spend the next dollar on entertainment or groceries? Our next hour on chatting with friends or mowing the yard? The decision-making process considers the relative cost and benefit of each option. The true cost of something includes the value of the next-best alternative given up for the choice made, or opportunity cost. Selecting the option with the greatest relative benefit is a rational choice. That choice can change with alterations in costs and benefits. This process is used by saints and sinners alike. Criminals and would-be criminals consider all costs and benefits of committing a crime. The first economist to apply the economic approach to criminal activity was Gary Becker.1 He was inspired by his own consideration of the criminal world while teaching at Columbia University, at least the traffic crime world. On his way to an oral exam, he faced a choice: (1) park illegally and have a shorter walk to the appointment or (2) park legally and face a longer trek by foot. Things the future Nobel Prize-winning economist considered were the likelihood of being caught, price of the potential parking ticket, and the lost time (money) from the longer walk. He decided to park illegally, a rational choice, and the economics of crime was born.2 After the passage of the 18th Amendment and the Volstead Act, individuals considering the sale, manufacture, or distribution of alcohol and any other associated illegal activities used the same calculus as Gary Becker on his way to the oral exam. What are the chances of getting caught? What is the punishment if caught? What are other (legal) methods of making money and employment opportunities? Answers to these questions were influenced by local, state, and federal expenditures on enforcement, the efficacy of the court system, and the strength of the legal labor market and economy. The decision to commit a crime is not one reserved for social deviants and the mentally unwell. It is made by all rational thinking individuals, using the same decision-making process that is used to decide whether to go to the movies or mow the lawn. Remember, Gary Becker

1 Gary Becker (University of Chicago) contributed to the field of economics by investigating social issues, like discrimination and crime, that were previously of little interest to economists. An example of his and other’s work relating to crime and law enforcement is (Becker, 1974). 2 Becker asked the student waiting for the oral exam how he would use price theory to address Becker’s morning parking conundrum. Apparently, the student did not do well in the oral exam. Nonetheless, Becker believed it an interesting question to pursue and the rest is history (hopefully the student’s economics career was not).

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committed a crime. Prohibition enforcers also considered the costs and benefits of various choices. Their calculus often favored enabling criminals and making criminal activity more likely and less costly. Here we focus on liquor law violators of the bootlegging, moonshining, and rum-running type and leave the corrupt politicians and law enforcers for later. Isaac Ehrlich advanced Becker’s model of crime, formulated testable hypotheses, and tested them with available data (Ehrlich, 1974). His model included opportunities available to individuals, both legitimate and illegitimate, and predicts a relationship between the incidence of specific crimes and income and level of enforcement. The choice to commit a crime is an occupational choice in which the individual considers the allocation of scarce resources under uncertainty to various activities, both legal and illegal. Ehrlich’s model allows for the mixing of activities, rather than assuming activities are mutually exclusive. For example, his model allows for a person to select a legitimate job, like working on a railroad, and an illegitimate one, such as rum-running. A jack of all trades and opportunities. Ehrlich’s model fits the bill when exploring the behavior of Prohibition Era violators. It allows for the prediction of the direction and relative magnitude of response of persons to changes in opportunities. Specifically, we will use the model to examine the opportunities made available by the prohibition of alcohol given the demand for liquor remained strong. The decision to commit a crime involves potential increases in income and mental well-being and losses in income and life situation due to the nonzero chance of getting caught breaking the law.3 Monetary losses can stem from fines, court costs, lawyer fees, restitution, and lost earnings. Losses may also include loss of reputation and embarrassment save for some groups for which jail time adds to one’s street cred. Another option for the crime-considering individual is a legitimate activity which is also associated with uncertain gains and losses. This decision-making process falls under the economic theory of choice under uncertainty. The optimal choice can include a mix of illegal and legal activity, which may be better for the soul and satisfies both the devil and the angel on opposing shoulders. The individual is searching for the optimal mix of activities to allocate his or her scarce resources like time. Ehrlich notes that allowing for a mix of activities rather than assuming them mutually exclusive permits the consideration of entry and optimal participation in illegitimate activities. 3 In the words of economists, some people get satisfaction or utility from committing a crime. What a rush!

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Let’s specifically consider an individual, “Rotten Pee Hands,” who has two income-generating opportunities: (1) sell liquor and (2) work in the rail yards.4 The two opportunities are not mutually exclusive. How does Rotten decide how to allocate her time? For simplicity, let’s also assume that Rotten does not need any additional training for either job and she can costlessly move from one to the other. While rail yard work pays a set wage, selling illegal liquor offers an uncertain return. The uncertainty stems from the chance that Rotten might get caught, not make any money, and instead pay a fee (maybe several) to courts, lawyers, and others, not to mention the embarrassment. If caught, Rotten also loses money spent on the acquisition or production of the booze that is now confiscated as she goes to lockup. What does Rotten do given her scarce time resource? There are only 24 hours in a day…although dinosaurs allegedly only had about 21…poor T-Rex. Rotten has a goal and uses the details of the two opportunities to find the mix that is best for her. This is a constrained (by time) optimization problem. Rotten wants to maximize her income and satisfaction and will select the combination of rail yard work and liquor running that achieves this. There are three possible outcomes for Rotten assuming she wants employment: (1) a full-time liquor runner, (2) a full-time rail yard worker, or (3) a part-time liquor runner and a part-time rail yard worker. What we observe Rotten doing is that option that is best for her.5 For example, if Rotten runs liquor full-time, it is because despite the risk of getting caught, she gets more income and satisfaction from taking that risk than doing it part-time or committing herself completely to legitimate work in the rail yard. Rotten’s choice of committing a crime is not because she is mentally ill or a social deviant. Rather, it is the best outcome for her of the options available.6 This model applies to real people and not just Ms. R. P. Hands. It might be easy to believe that Al Capone, who made millions of

4 I used several online gangster name generators and sadly this was the best name provided. In fact, it stated that “Alice Kassens” is my “old, busted” name and it now “dubbed” my (fanny) “Rotten Pee Hands.” It should be noted that my husband’s name is “Dances with Bull Dodga” and my sweet mother is “Machete Masta Daddy.” What a motley crew. 5 Also assume Rotten was offered each job and has a choice. 6 Some criminals are mentally ill, and a rational choice model does not necessarily describe

their actions. For a deeper analysis of deviations from traditional rational choice theory, see various works by psychologists and behavioral economists like Daniel Kahneman, Amos Tversky, and Richard Thaler.

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dollars from vices such as gambling and bootlegging, found crime better than legitimate work. But this is also true for the people on the lower levels of the gangs or people across the country running small-time businesses. Alcohol production and consumption data during Prohibition are scarce since participation in the liquor market was a crime. Most data are estimates or indirect measures. A drawback of these numbers is that many participants in the illicit market are not caught and the estimates are likely biased downward. Some also consider the number of deaths by cirrhosis of the liver during Prohibition, but the lethal damage from alcohol may have all come from the days of legal alcohol, rendering it a muddled indicator of Prohibition Era alcohol consumption. There are other acute symptoms of liquor consumption to navigate including arrests for public intoxication. Finally, some consider the markets for the common inputs into various alcoholic beverages, such as grain, to find any substantial changes during Prohibition although other confounding factors can influence the data. We must be cautious about drawing any conclusions. In sum, we need to be satisfied with a slightly blurry Monet painting of the environment rather than a well-defined da Vinci. A 1932 study by Warburton (1932) indicates alcohol consumption fell during the early days of Prohibition, dropping from 2.4 gallons of pure alcohol per capita to 0.3–0.8 gallons per capita between 1915 and 1921, a reduction of 67–83%. The estimates based on input data are likely underestimates as people could stockpile booze leading up to Prohibition. Many, particularly the affluent, were sipping on their prized reserves and not newly produced spirits. The estimates based on the health data may be more representative of the consumption decline, which was smaller, yet significant. The decline was also likely due to the populace’s uncertainty of the zeal behind enforcement of the 18th Amendment and the Volstead Act. Rotten’s calculus might have heavily weighted the chance of getting caught and spent her time in the rail yard. Potential drinkers, particularly social ones rather than addicts, may have come to the same conclusion when considering the purchase of an illegal potable. The moderation did not last long. Enforcement was severely lacking for a variety of reasons in the early years of Prohibition. The laxity was observed, particularly by those on the margin of participating in the illegal liquor market, either as suppliers or demanders. As the wealthy and others depleted their home stashes, they sought replenishment, explaining the reduced gap between the input- and health-based estimates. The reduced concern about being caught breaking the law and the depleted liquor cashes also likely

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Fig. 3.1 Per capita pure alcohol consumption for beverage purposes, 1921–1930 (Source Warburton [1932], graphic by author. Estimates from alcohol input data and death rates from alcoholism and cirrhosis of the liver)

contributed to the increase in Prohibition Era alcohol consumption. People update their calculus as they receive new information, including the vigor of law enforcement. The average per capita pure alcohol consumption between 1921 and 1930 was 1.5 and 1.4 gallons for the input and health data, respectively. The estimated trend of an initial moderation followed by a great unshackling was also found in a 1991 study produced by two economists, Jeffrey Miron and Jeffrey Zwiebel, using mortality, mental health, and crime statistics (Miron & Zwiebel, 1991) (Fig. 3.1). Another way of examining the effect of prohibition is breaking alcohol consumption into four periods: (1) before a prohibition (1911–1914), (2) during a temporary consumption (wartime prohibition, 1918–1919), (3) just after the passage of the 18th Amendment and Volstead Act (1921–1922), and (4) consumption after several years of living with the 18th Amendment and Volstead Act (1927–1930). This provides a baseline (Period 1), a market response to a known, temporary prohibition (Period 2), a market response soon after a believed permanent prohibition (Period 3), and a market response after adjustment to a permanent prohibition (Period 4). The baseline period of 1911–1914 for beer, wine spirits, and

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total pure alcohol shows robust consumption. Consumption fell during the wartime prohibition of 1918–1919. Total pure alcohol consumption fell by 43%, largely due to reductions in beer and spirits markets. Wine consumption fell by relatively less (15%). During the wartime prohibition, Rotten, her peers, and potential customers certainly considered the cost of being caught, but Rotten’s customers also likely added a sense of patriotism to their decision calculus of purchasing booze. Abstaining not only avoided fines, arrest, and other penalties, but also contributed to the boys fighting alongside other Allied forces against the German juggernaut. Not everyone came to this decision as alcohol consumption was far from zero. The wartime prohibition was a temporary situation. Once the 18th Amendment and the Volstead Act were law, many believed that the dry situation was a permanent one although no one knew the rigidity of enforcement. No doubt some held out hope that hell would freeze over, but it likely seemed a stretch. Compared to the baseline (1911–1914) when intoxicating beverages were all federally legal, save the few dry states, the 18th Amendment had a substantial effect on the consumption of pure alcohol, primarily through reductions in beer guzzling. Alcohol consumption fell 93%, from 20.5 to 1.5 gallons per capita. To put this reduction in perspective, each gallon amounts to 128 fluid ounces and each bottle of beer typically holds 12 ounces. The typical American went from drinking just under 219 bottles of beer per year between 1911 and 1914 to only 16!7 The “permanent” ban on alcohol was substantially more effective than the temporary wartime ban. Compared to the 1918–1919 period, beer consumption fell 87%. The Great Beer Moderation surely had prohibition activists squealing with glee. Wine consumption changed little. Consumption of spirits, although down relative to the baseline, was 14% higher than during the temporary ban. The typical American consumed just under one gallon of spirits per year between 1921 and 1922, the equivalent of almost two handles or 80 shots of liquor. Given many Americans were teetotalers, this average was higher for the population of drinkers. Not an inconsequential amount, but child’s play for the Colonial Era imbibers. Drinkers from the century before would drink these compatriots under the table. A potential reason for the relative rise in spirit consumption is their relatively higher concentration of pure alcohol, reducing transportation costs and making the deliveries

7 Remember the Prohibition Era values are estimates which are of course subject to error.

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easier to conceal. Rotten preferred transporting 80 proof liquor over its barley substitute. A gallon of liquor satisfied more thirsty customers than a gallon of beer. The relative potency reduced Rotten’s chances of getting caught and made bootlegging more attractive. Consumption of other non-alcoholic beer substitutes increased after 1920, including coffee, fruit juices, and soft drinks.8 Coffee consumption was about two pounds per capita greater during the Prohibition Era than it was in the decade before 1917 (Warburton, 1932). For those needing the little buzz a bottle of beer might provide, during Prohibition some turned to caffeine for their fix. Coffee may be a lower-grade substitute for liquor and wine drinkers and thus did not benefit from similar consumption reallocations during Prohibition. Enforcement of the 18th Amendment was wanting to say the least. Early on, adequate resources were not allocated to effectively enforce the law. People, particularly those looking for opportunity, noticed. Rotten certainly would have. Mediocre enforcement reduces the chances of getting caught committing a crime. Holding all else constant,9 this increases the attractiveness of allocating time to a criminal activity. For Rotten, rumrunning looked better every day. Remember there is no virtue like necessity (Shakespeare & Dawson, 2011). Alcohol consumption of all alcohol types increased significantly in the later years of Prohibition. Beer consumption increased from 1.5 gallons per capita between 1921 and 1922 to 6.3 gallons between 1927 and 1930, an increase of 321%. The 6.3 gallons consumed per capita was still 70% lower than the baseline, but fear of getting caught selling and buying beer waned. Most striking was the boom in the spirits market. Between 1927 and 1930, consumption jumped 10% from the baseline and 56% above the early years of federal prohibition. Americans each drank an average of 1.6 gallons of liquor per year, almost 140 shots. Remember these averages include all drinking-age adults, even those who do not drink. Thus, the typical American drank much more than 140 shots per year (Fig. 3.2).

8 Perhaps it is not surprising that some of the investors in the soft drink industry were vocally pro-Prohibition, likely anticipating the increase in demand for their fizzy product as the fizz was taken out of the beer (and other intoxicating spirits) industry. 9 In economics, we use the phrase “ceteris paribus.” The usefulness of this notion is that if one variable changes, like perceived enforcement, and we can assume that nothing else in the decision-making process changes (ceteris paribus), we can hypothesize the effect on the

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Fig. 3.2 Four periods of alcohol consumption, by type (Source Warburton [1932], graphic by author)

What about expenditures on alcohol during prohibition? Consumption, as we just saw, was nonzero. An expenditure on a product is the quantity of the product purchased multiplied by its per unit price. For example, if Rotten sells five gallons of beer to Judge Doright for $1.50 per gallon, the Judge’s expenditure on beer for that exchange is 5 gallons of beer * $1.50 per gallon of beer, or $7.50. Alcohol price data during the Prohibition Era are rare. One set of estimates uses the consumer cost of alcohol based upon information from newspaper reports from several cities for both retail sales and home production: $16.00 per gallon for spirits, $2.50 per gallon for wine, and $1.00 per gallon for beer (Warburton, 1932). In comparison, the average weekly earning for a manufacturing worker in 1929 was $25.03. The relatively high prices were beyond the means of lower-income individuals, a change from the pre-Prohibition period when low-income people consumed a large share of the total alcohol consumed. Homemade liquor remained an option, and an increasingly attractive one, since the production costs were relatively low.

chances of committing a crime. Of course, ceteris is not always paribus, and our task becomes more difficult. You know what they say about assumptions.

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Coupled with consumption estimates, approximations of national alcohol expenditures during Prohibition are possible.10 Since the price estimates are only available for 1929 and 1930 and the average of the two years is assumed for each prior year, the trends shown in the graphic are the same as consumption. Consumption is multiplied by a constant price. Figure 3.3 demonstrates how much money the nation likely shelled out for booze while it was illegal. Summing vertically for each year (shown in black) provides an estimate for the total national expenditures on alcohol. The peak year for beer, spirits, and all alcohol was 1929. That year, total national expenditures on alcohol were $4760 million or close to $4.8 billion, while expenditures on all goods and services were $77.4 billion (in 1929 dollars) (Thornton, 1991), making alcohol expenditures 6.2% of total expenditures. In comparison, total expenditures on housing and utilities, a subcategory of consumption, were $12.9 billion. Americans collectively spent only 2.7 times more on housing and utilities than booze when the later was illegal. How does the economic model of crime explain the relative rise in liquor consumption? Violators like Rotten consider the probability of getting caught. It is easier to hide a smaller amount of liquid during transportation, making liquor a safer product due to its higher potency per ounce. Also, transportation is costly. It takes time and money. Liquor was relatively cheaper to move in terms of alcohol content. The lower costs left more in income for Rotten, holding prices constant. The fact that the price for liquor was also higher than beer or wine added yet another bonus and increased the likelihood that Rotten chose the liquor option and committed a large share, if not all, of her time in that income earning opportunity. The model demonstrates the supply-side reasoning behind the increased potency of alcohol during Prohibition. Many estimates suggest that Prohibition Era liquor was at least 150% stronger than the products produced before or after the “noble experiment” (Thornton, 1991). The dangers of the stronger liquor sold and consumed during Prohibition are well documented. When a product is outlawed, there is no longer a systematic method of testing and regulating quality. As we will see in this chapter, amateur producers were known to concoct poisonous, and at times lethal, products. Additionally, some bootleggers added questionable 10 Note that there are two y-axes. The left shows beer and wine, while the right shows spirits and the vertically summed total. Expenditures on spirits were so much more than the other two beverages that using one scale made it difficult to see the trends for beer and wine.

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Fig. 3.3 Estimates of annual national expenditure on alcoholic beverages ($millions), 1921–1930 (Source Data from Warburton [1932], graphic by author)

ingredients, such as denatured alcohol and Lindol to increase the potency, reduce the cost of production, and make the illegal product harder to detect. One such product became known as “Ginger Jake” which caused a rash of paralysis. Drinking men suffered from leg paralysis so frequently, a name for their lame leg was coined: Jake Leg.

Moonshiners, Bootleggers, Runners, and Smugglers Moonshiners produced a specific product, moonshine, in stills that spotted rural locations, particularly in Virginia and North Carolina. Not a new product, moonshine had a long illicit history in these locations. Backwoods chemists distilled their creations long before 1920, typically outside the fingers of the law, avoiding taxes and other government-imposed restrictions. Moonshine was a salvation after returning home to ruined farms at the end of the Civil War. Unlike the big city gangsters, working in the backwoods illicit alcohol markets was frequently low paying, but offered young people exciting opportunities or the poor man a way to put bread on the family table.

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The ban on alcohol was a boon to producers already in operation since they no longer paid a tax on their product. For newcomers, there was no tax to consider. The risk of getting caught added to the cost of production. For old hands in the business, the added scrutiny that came with Prohibition raised the stakes. Additionally, because of the high price consumers were willing to pay for the product, corrupt officials often required an increasing “payment” to turn the other way compared to before Prohibition when demand for distilled mountain dew was considerably lower and sold for a much lower price. The zero tax lowered the cost of production, but was offset by the added risk, which increased the potential costs of such endeavors. A wad of cash or a case of booze often led to a wink and a nod from Prohibition officials, which reduced the chance of getting caught but added to the cost of business. A complicated bit of calculus indeed. Moonshining was particularly popular in the rural south. The primary difference between the legal distiller and the moonshiner is the first pays license fees, taxes, and the like while the moonshiner does not. The Blue Ridge Mountains of Virginia were dotted with stills, particularly in Franklin County, a place still called the “wettest county in the world.” In these areas, moonshining was often a family effort and the turnip still a crucial investment for paying bills and getting by. To make shine, mash barrels are filled with a mixture of a grain, water, barley malt, sugar, and yeast, most found in abundance in the rural farmland. While the concoction ferments, bacteria eat the sugar, an alcohol producing process. In the hot, humid summers, the process takes a few days. In the dead of winter, several weeks. A layer of foam, called a cap, develops during fermentation. When it disappears, the sour remnants register between 6 and 12% alcohol. The distiller pours the sour beer into the turnip still, sets a fire beneath, and patiently stirs the contents. A cap is placed on the pot when the mash temperature reaches the boiling point of alcohol. The next step is distillation. Alcohol vapor passes through the worm submerged in cold water, turning the steam to liquid. The liquid gold trickles out of the end of the worm and into a jar or some other container. This completes the first run, and a product called a singling. The process is often repeated to smooth out the taste and mixed with other rounds to achieve the desired proof (“Moonshine—Blue Ridge Style,” n.d.). This chemistry project is relatively easy and fast. The production of moonshine, then, not only kept the distillers’ pockets full, but also the store owners selling need inputs in the production process.

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Image 3.1 Moonshine production process (Source Kassens, 2019e)

Moonshining, although illegal, was popular in the Blue Ridge. The demand for the product was strong and it offered farmers a way to keep their land when they fell on hard times and an alternative use of their land when agriculture prices plummeted. The mountains of Virginia were typically ignored by the federal government. Railroads, roadways, and other methods of connecting rural areas with cities and easing the wheels of commerce were virtually non-existent in the Blue Ridge. The Midwest farmers got their railroads to send foodstuffs to Chicago and eastern cities. The east coast got subsidies for road and bridge building. Tucked away in the mountains, the people of the Blue Ridge were largely forgotten and left on their own to eke out a living. It is no wonder that the potential benefits of moonshining outweighed the costs for these mountain dwellers, particularly if they did not want to leave their family farm to labor in the nearby dirty and dangerous West Virginia coal mines. The dirt Carolina Road was the main artery for money in tough times, routing shine to Roanoke County and beyond (Image 3.1). Moonshine didn’t earn money sitting in a farmhouse or in the distillers’ belly. It needed to get to a buyer to turn from liquid lightening to liquid gold. This is the role of the bootlegger and other transmitters. Rumrunners and smugglers serve similar functions as bootleggers, but to spread the stories out in this book bootleggers are defined as conveyors of moonshine, rumrunners as transporters of liquor other than moonshine, and smugglers as those moving booze across country borders, namely the Canadian border. These are in no way official definitions, but selfish ones to facilitate and justify sharing more wild and mythical stories.

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Prohibition bootleggers displayed a remarkable level of creativity and entrepreneurship, filling a crucial role in the illicit moonshining business. The bootleggers needed to get from Point A to Point B without being stopped by police and if stopped, have the contraband cleverly hidden. Frequently bootleggers were known to local law enforcement and likely expected to be pulled over for a search and a bribe request. One method to evade capture was to drive fast through the windy, rough country roads, beating out the county law to the county line. Stories abound of bootleggers doing just that through Franklin County, Virginia, flooring it to the neighboring Roanoke County line. Willie Carter Sharpe put her male counterparts to shame with her prowess. Sharpe served as the lead car in her contraband caravans and was a successful mechanic and expert driver. Her trademark maneuver was to slam her car into second gear, causing it to spin 180°, passing Johnny Law in the opposite direction, probably with a smirk and a holler. She was dubbed the rum-running Queen. It is estimated that between 1926 and 1931 Sharpe hauled more than 220,000 gallons of whiskey from Franklin County to as far as New York City. Arrested 13 times for Volstead violations, her moxie was on full display with the diamonds inserted in her front teeth during a highly publicized corruption case. Her cheeky smile sparkled as she relayed her experiences with the liquor syndicate run by local officials. Given the cost of getting caught, bootleggers went to great lengths to hide their actions and cargo during transport. The greater the stash, the more creative the ruse. Moonshiners and bootleggers operating in the woods used cow shoes to disguise their footprints. The bovine booties had wooden hooves attached to the soles, leaving cloven prints behind. Booze was transported in canned fruit, Christmas tree packaging, and pig carcasses (Messy Nessy, 2016). Bootlegger cars were not only modified to outrun Johnny Law, but also to hide liquor if caught. False bottoms were installed in backseats and gas tanks were modified to hide a canister kept separate from the fuel. Some modified suspensions so that the vehicle did not ride low when laden with booze. Slower vehicles such as trucks were also subject to chicanery. Known disguises included a false load of bricks with a hollow compartment (Image 3.2). Bootlegging offered opportunity to women like Willie Carter Sharpe, although not all were as flamboyant. Some female bootleggers used the stereotype of their meekness to their advantage. Often, they were not suspected of moving liquor because of their femininity. Law enforcers were easily convinced that the liquor stash they found with a woman was not

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Image 3.2 Cow shoes (Source Library of Congress)

hers. Unlike their male counterparts, many female bootleggers were not brash and rude, rather fantastically devilish beneath their sweet facade. At times they hid moonshine under their knickers and bloomers. It was illegal to search a woman, rendering their undergarments a cotton, lacy armor. Male bootleggers used female co-conspirators as risk-reducing protection. They assumed that law enforcement would be less likely to suspect them of wrongdoing with a lady in the car. Unlike most industries at the time, bootleggers openly and happily hired women. The ultimate progressives. Famous female moonshiners and bootleggers included Maggie Bailey of Kentucky and Josephine Doody of Montana in addition to the dazzling Willie Carter Sharpe. Bootleggers could be ruthless toward those who aimed to stamp out their business. Instead of wielding Tommy Guns like the gangsters in Chicago, they often resorted to subtler, but no less lethal, means. Harry C. March, a pastor at the Methodist Episcopal Church in Middleburg, Virginia, frequently pontificated about the sins of shiners and bootleggers who

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supplied the area with the hobgoblin hooch. Although used to receiving hate mail, including death threats, the threats turned into attempts on his life in 1923. In April, someone fired upon him in an ambush and shortly thereafter someone attempted to burn his church. In October, a box of chocolates was sent to the pastor. Based on his recent experiences, he suspected the confections came from an evildoer rather than a well-wisher. He was right. It was confirmed that the chocolates were infused with enough rat poison to kill at least twelve people rather than the cream filling noted on the box. A rank mixture indeed. The pastor exclaimed that Divine Province saved his life. It is just as likely that recent letters from bootleggers stating that they would “get him” and attempts on his life made him suspicious of the sweet gesture (“Fourth Attempt Is Made to Kill M.E. Minister,” 1923, p. 5). Gallons upon gallons of liquor produced before Prohibition were stored in warehouses throughout the country. These supplies were depleted via a Volstead loophole for medicinal whiskey, and additional production was permitted eventually in places including Kentucky to keep up with the medicinal demand. Europe continued to produce legal liquor and sought ways to get their libations to American lips and cups. Cocktail parties were not reliant upon doctor prescriptions. Plenty of booze was bought by the case from the rumrunners who enriched themselves at a new, floating market known as Rum Row where the best liquors of Prohibition came right off the boat and garnered the highest prices. Lucky tipplers got sips before the import was cut and cut and cut again to fill and fill and fill again the wallets of Prohibition violators. The Volstead Act specified that intoxicating beverages could not be manufactured, sold, or distributed in the United States. That last preposition is important: in. In 1920, the United States controlled the waters within a three-mile perimeter of the coast. Beyond that line was considered international waters. Rum Row began at that delineation, encircling the country with liquid enticements. Between the Atlantic, Gulf, and Pacific Coasts and the Great Lakes and surrounding river frontage, there are about 19,000 miles of waterfront property, all potential locations for amphibious liquor landings. For each of these miles, the United States employed 1500 Prohibition agents, 3000 Customs agents, and 11,000 Coast Guardsmen, or close to 1500 yards of continuous vigil for each man. This is in many ways a silly bit of mathematics since government agents did not work 24 hours a day, violators often traveled in groups of greater than one as did those seeking to catch them, but it offers a sense of the tremendous task asked

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of those upholding the Volstead Act and the enticement offered to international liquor purveyors. A common deal for a rumrunner was $1000 per month for the captain plus $500 worth of liquor at wholesale prices, called a privilege. The captain was free to sell the privilege if he so chose. The mate earned $500 per month and a $250 privilege, the cook $150 per month and a $150 privilege, and the remaining sailors $100 per month plus a $100 bonus at the end of the trip (Carse, 1959). Compare these cash wages to the gross average monthly earnings in manufacturing, mining, and railroads of $88.32, which in terms of disposable income had less buying power since the United States had recently adopted an income tax (Bowden, 1946). Rumrunners did not pay the income tax. Even the lowest paid sailor earned more in the rumrunning business. Risk was involved, but these were the days before the Occupational Safety and Health Administration, so there was plenty of risk in the factories, mines, and railroads across the country. Entry into the running business from the liquor pickup to the Row was a simple matter as no one could keep up with demand. All that was needed was a seaworthy boat, a captain and crew with some basic skill, and a receptacle for the product. There was room for many suppliers. The business became hard for even the most pious to resist. An Anglican Bishop began running booze on the Messenger of Peace, a schooner previously used to bring bible tracts to the Bahamas. The bishop slipped greedily from delivering the word of God to spreading the wickedness of Demon Rum, exchanging piety for profits. Imported booze was far superior to industrial alcohol infusions, near beer, and other options available since it was produced in locations without legal restrictions, including Great Britain. The two largest obstacles for potential runners were finding a boat and crew that could travel to and from the liquor deposits in the Caribbean or St. Pierre (south of Newfoundland) and the funds to purchase the first load of liquor. Once the first load was sold along the row, the runner made the initial investment back threefold given rare catastrophes such as a sunk ship, mutiny, or pirating were avoided. Pirates were not common early in the rum-running business, although they became a more significant risk as the value of the liquid stores continued to rise in value. The go-through men stalking the Row were particularly brutal. Making off with a boat full of booze was inconvenient. Instead, pirates made off with the cash held by the captain, which could amount to $100,000 or more, and, at times, savagely abused and disposed of the crew’s bodies. In response, the solo rumrunner got out of the area and Rum

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Row boasted a more “professional” set with experience in the underworld adding greater risk to would-be pirates. Al Capone was one such boat owner. Runner William McCoy provides an excellent example of the early years along Rum Row and is a famous character of the era (Carse, 1959). Early in the Prohibition Era, McCoy liquidated his assets from his floundering motorboat service he owned with his brother and bought the Henry S. Marshall for $16,000 in Gloucester, Massachusetts. He invested another $4000 to refit the fishing boat for its new booze transporting purpose, gathered a crew, and headed to Nassau, Bahamas, to find a liquor wholesaler in need of a runner. As soon as he came ashore, wholesaler Bill Hain grabbed him up offering $10 per case for the 1500 cases of liquor he needed moved from Nassau to St. Catherine’s Sound off the coast of Savannah, Georgia, a straight-line distance of 375 miles. The $15,000 return from a successful trip would recover 75% of his initial investment. The transport went smoothly, and McCoy and his crew quickly agreed to another run from Bimini to Atlantic City, McCoy’s first run to Rum Row, bringing 1500 cases of Old Grand Dad for $10 per case. McCoy soon accumulated enough liquidity to purchase a bigger boat, the Arethusa. Paired with his seafaring skills, a highly valued form of human capital at the time, McCoy quickly captured the attention of New York “businessmen” looking to bring in booze for their New York City speakeasies. Alone, McCoy moved less booze and earned a smaller profit since he needed to wait for individual customers to come to his boat along Rum Row. With the gangster distribution networks running to New York City, large quantities of booze could be moved in a short period of time under the care of mobster muscle and Tommy Guns. The gangsters also benefited from the relationship. McCoy had the seafaring skills and boat and knew how to safely go from Nassau to the Row. Each undertook the task for which he had the lowest opportunity cost, or comparative advantage, each specializing in the task for which he was most efficient. McCoy’s comparative advantage was the shipping, the gangs, their inland distribution networks and force. Together they made a lucrative and efficient operation. Working together the joint profits were higher than each working alone. This is the same notion behind why people and countries trade. Here we are simply focusing on individual skills, power, and networks (Image 3.3). Where did the liquor on Rum Row come from? The Bahamas was the initial middleman. Booze had long floated to the island from Scotland,

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Image 3.3 McCoy’s first run, Nassau to St. Catherine’s Island, Georgia (Source Kassens, 2019d)

Jamaica, Ireland, and America on its trading journey, but at a trickle. By 1918, the docks in Nassau could hardly keep up with the offloading and storage required to accommodate the traffic generated by American Prohibition. Both inbound and outbound traffic boomed. The poor nation filled its coffers with export tax receipts from the liquor leaving its shores to quench the American thirst. Much of it went to build a modern port and improve roads. Locals also benefited from the tight labor market enriching many men and women involved. One famed runner of the time was

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Gertrude “Cleo” Lythgoe, so nicknamed allegedly due to her likeness to Queen Cleopatra, but perhaps it also described her powerful hand in a maledominated business. Cleo served as a stenographer for a New York-based British liquor importer in 1918, but quickly realized the opportunity Prohibition offered. She set up a wholesale liquor business in Nassau, Bahamas, and ran her goods to Rum Row. Again, a sign of her keen business sense, Lythgoe got out of the business while on top and alive in 1926. Cleo was much loved by the press, even penning published accounts in outlets such as the Baltimore Sun. She died at the ripe old age of 86 in Los Angeles, the Bahamians lowering their flags to half-mast out of respect for the pistol wielding, witty, and successful Queen of Liquor. Rum Row extended from Maine to Florida with similar versions in the Gulf of Mexico and Pacific. Because of the concentration of population on the east coast, particularly in New York and New England, the congregation of those areas was the thickest and highlighted in Image 3.4. In the early, peaceful days of Rum Row, customers boated out from Cape Cod and the Hamptons to get a tipple and a to-go bag for an evening cocktail with friends. Runners proudly boasted prices, handwritten on pieces of wood, off their bow. Visitors perused, looking for the best deal. Regulars often arranged for a lower price in exchange for bringing out groceries or crew mail to shore. The boats were so thick off the coast of New York City that vessels transporting legal cargo, and the Coast Guard hunting runners, were constantly on the watch for darkened liquor transporters without fog horns or any other warning instruments. They went dark and silent to avoid capture, making boating in the evening hours as dangerous as the iceberg-infested sea was for the Titanic. Other dangers existed along Rum Row, some from Mother Nature and others from Uncle Tommy. In the winter months, runners dealt with ice, cold rain, and blustery winds. These elements challenged people getting to the Row from shore and the dedication of those on the Row to wait for them. Ice coated the decks of Rum Row ships, needing constant attention, while it clogged the routes from the docks out to the Row. Pelting rain and frigid winds further dampened the highest of spirits. A noxious element appeared along Rum Row once the money really started pouring in after 1923. Gangland went to the sea. They participated in two ways. First as go-through men, crews of five to six men in sleek and fast boats that would literally go through anyone in their way. Armed with the Thompson Machine Gun, known as the Tommy Gun, few protested their demands when confronted. Through men’s favorite

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Image 3.4 East coast bootleggers routes and Rum Row (Source Kassens, 2019a)

prey were contact boats headed out to Rum Row at dusk with wads of cash for their purchases. Contact boats were sent out to purchase large quantities of booze from Rum Row for various organizations, including organized crime. They were the connection between the land and the sea in the liquor business. Frequently they left port with a two-man crew, one to drive and the other to man the pump to keep the craft afloat. They took no armaments but carried bundles of cash rolled like a wrap and held together with a rubber band. If caught by the Coast Guard, being unarmed lessened the likelihood of being shot. Some preferred going in groups and spreading out, making the Coast Guards task more challenging. Others preferred to go alone. Contact boats approached the large liquid cargo hauling ships on the Row, tossed out their fenders and a line, and yelled out the brand and quantity of booze they intended to purchase. As the booze was

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gathered on the deck of the Rum Row ship, a man on the contact boat would toss a bundle of money to the captain, who would quickly count it and check for counterfeit under the light of the dwindling sun, rising moon, or dim flashlight. The go-through men wanted to grab up the contact boats before they exchanged money for booze since money was more liquid than liquor and easier to store. The thugs quickly approached a contact boat, Tommy Guns aimed at the men’s chests. There was no question what the go-through men wanted. Rarely were they challenged, for challenges often turned out poorly for the contact boat passengers. The violence of the gangland go-through men raised the price of participating in the liquor market for the small fries, and the seas soon turned to saltier versions of Chicago (Image 3.4). The news outlets made hay of Rum Row and the quantities of booze coming in via the Atlantic highway. The United States placed enormous pressure on Great Britain to reduce the shipments originating in the King George’s land and finding Johnny (and Ginger) America’s lips. Ambassadors and other politicians and leaders banged their fists in America about the liquor coming over, before going to their personal parlors for evening tipples. Great Britain, grateful for America’s help in the war to end all wars, begrudgingly made concessions to slow the blighty liquor leak. The international waters line was moved out to twelve miles, taking most crafts an hour to reach. Once again entrepreneurs adapted. Ships bearing booze from Great Britain began making a short stop at the French port of Le Havre, soon to be occupied by the Nazis and overrun by their pillboxes, batteries, and bunkers, to unload and reload their cargo. They received a French customs document and less attention when entering US waters and avoided laws stemming from new American-British agreements. In 1924, the US government appropriated $13 million to assist the Coast Guard in their battle in Atlantic Alcohol Alley. Within three months, the Coast Guard confiscated $10 million in liquor and boats, and by 1925, the Row moved north and dispersed, still causing issues but nothing like its peak in 1923 (Carse, 1959). Smugglers dealt in liquor moving across national borders of the nonliquid kind. Namely the US-Canada border. The 5525 miles of shared border between the two countries sprung leaks throughout Prohibition creating several maple leaf millionaires. The largest leaks poured booze into Maine and Michigan, and the largest source of the leak was Samuel Bronfman, a Russian-Jewish refugee who immigrated from what is now Moldova to Saskatchewan, Canada, with his parents and siblings in the late

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nineteenth century. Samuel’s father soon realized that tobacco, which made the family money in Russia, was not an ideal crop in Canada. He went from job to job seeking opportunity until, while working in the horse-trading business with his sons, made connections with the hotel industry. The family eventually bought a hotel. Samuel noted that the hotel bar brought in a significant profit and went into the liquor business, eventually founding the Distillers Corporation in Montreal in 1924. The observation and occupational choice resulted in a family fortune when their neighbors to the south went dry while their desires remained dripping wet. It is perhaps fitting that “Bronfman” is Yiddish for liquor man. A few years before America officially went dry, Canada imposed a similar, but weaker, referendum. Until an updated law banning the practice in 1918, individual provinces could not stop inter-provincial sale or distribution of booze as it was a federal issue. Provinces could only stop the trade within its borders. Entrepreneurial spirits noted that if you could make the intoxicants and ship it from a wet province to a dry one, a slick opportunity was to be had. The Bronfman brothers were entrepreneurs on a grand scale and quickly set to work. They bought hotels with liquor licenses in wet provinces. The locales were nothing to write home about, often desolate. The establishment’s only extravagance was plentiful liquor. The hotel, business along with the mail order liquor business, provided a decent income, but nothing compared to the riches brought by American prohibition in 1920. Sam and his three brothers Harry, Abe, and Alan first opened export houses along the Canada and North Dakota border. Initially, their supply of booze came from American distillers offloading what they could at the start of prohibition. The Bronfman business was so successful that they needed an alternative supply. They went into the production business. The Bronfmans bought a Kentucky distillery, dismantled it, and brought it back to Canada to start making their own liquor. The liquor they sold to the eager American customers was often diluted white alcohol mixed with a bit of real whiskey and sugar. Beggars can’t be choosers, but Bronfmans can. A primary conduit for Canadian liquor into Chicago was through the Detroit-based Purple Gang, also called the Sugar House Gang. The members of the Purple Gang sharpened their market power enforcement tools earlier than in some parts of the country since Michigan went dry before the nation but was conveniently located near Canadian whiskey and still wet Ohio. Windsor, Ontario, is across the Detroit River from Detroit and was a popular place to launch Canadian liquor into the United States. Chicago gangster Al Capone traveled to Canada to take part in a business

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meeting with Bronfman. At the end of the visit, they settled on a deal to send barrels of Bronfman whiskey through Minneapolis to Chicago by train, car, and truck via the Purple Gang. Sam Bronfman’s brother-in-law ended up shot and dumped on the side of a road, allegedly by a Chicago gangster. Although it was certainly not by Capone’s own hand, it is suspected that the murder was over a dispute regarding a deal with Capone’s crew (Steinke, 2004). If nothing else, the experience let Bronfman know who he had gotten in bed with, if he didn’t already know it. Smaller time smugglers also got in on the game. A Vermont man named Callano claimed only suckers worked or got married in an interview for the Federal Writers Project (“Only Suckers Work,” 1936). He was no sucker, by either description, rather a man finding his comparative advantage. The “rugged, scar-faced” man had hands that were “very large for a man his size, formidable looking hands” (1936, p. 1). Those hands tried themselves in stonesheds as a “lumper” and as a boxer, but he soon decided that they were not cut out “to work steady.” His older brothers were bootleggers with a fleet of “Packards and Caddies.” He left legal, steady market work for smuggling since “[t]here was dough in that racket all right, and it was fun to bring it in. Times was good then, everybody had money, everybody was spending it.” Running alcohol during Prohibition was a profitable business for those willing to break the law and looking for adventure. For Callano, it offered a greater return than as a lumper or a mediocre pugilist. Callano explained that he and his colleagues ran largely ale, which they bought in Canada for “five bucks a case and sold it here for fifteen or twenty” to everyone from the “poolroom crowd to the town bigshots” (1936, p. 2). If competitors encroached on their territory, they used violence to squash it. They “had a tough crew to fool around with” who “could drive and fight like hell” (1936, p. 2). Callano and company were assisted in knowing the local police and their behavior and a strong arm from Boston known as “Boston Billy.” With “bigshot” Billy’s permission (read protection), Callano’s crew passed through customs into the United States since Billy was “too big for those forty-buck-a-week customs punks to mess with” (1936, p. 2). Even when chased by Customs, the runners persisted. Callano explained their process as follows: “I used to drive the pilot car a lot. I’d hang behind the loaded cars. When the patrol started chasing us I’d hold ‘em up, block the road on ‘em to let the boys with the loads get away. We had a smoke-screen on the pilot car. We’d come hell-roaring down over that line and hit back roads all the way home. We had hideouts in barns and garages along the way. Some of the people we had to pay, some we just had

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to leave a case of beer” (1936, p. 3). Lamenting the halcyon days, Callano said “[w]e had all kinds of money and women, we lived high, the good old days. I ain’t had so much fun since…Now things ain’t so hot. After Repeal we tried running alcohol into Canada, but it wasn’t so good, and if you get caught up there you never get out of the can…I’ve settled down some since but I ain’t married. Only suckers get married” (1936, p. 3).

Speakeasies and Blind Pigs & Tigers Speakeasies, blind pigs, and blind tigers are not meditation rooms or facilities for disabled animals, rather terms for establishments selling alcohol illegally, although the human animal may become disabled after spending too much time in one. Allegedly the term “speakeasy” dates to the late nineteenth century from the habit of speaking quietly about where drinks were illicitly poured or speaking the password softly to gain entry to such an establishment. It seems the background on the term “blind pig” is a bit more up in the air. My favorite reasoning is a drinking establishment advertised as “The Pig” was missing the letter “I” from the sign. People began calling it the “Blind Pig.” As for “Blind Tiger,” Merriam Webster notes that the first known usage occurred in 1857, perhaps making it the oldest of the three terms. It references a curiosity shop or show serving as a cover for a saloon selling illegal alcohol. “Come in and see our Blind Tiger!” This tiger you couldn’t grab by his tail, but it might just get you. The presence of underground saloons occurred whenever alcohol became illegal in the United States, and thus spotted the nation, particularly big cities between 1920 and 1933. Although the drys considered the blind tigers’ dens of depravity, they were well ahead of their time in terms of treating people equally regardless of race or gender. Prior to the 1920s, it was considered unladylike for a woman to be seen drinking outside of her home. Women were not welcome in taverns or saloons. Those present were typically on the job either as a prostitute or a family member working at the family business. They were not there as customers being served an evening tipple. Instead, women sneaked nips at home behind closed doors. During Prohibition, unless in church, drinking outside of the home was risky. This daring attitude grew among women, particularly within the young and single crowd. Women began showing up in speakeasies, making themselves a new source of demand for establishments. Initially, speakeasies differentiated themselves by offering ladies a place to potty. Owners quickly produced small facilities for women’s relief, calling them powder rooms,

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like the Victorian locations for tidying up one’s wig. Soon a speakeasy without a ladies’ room quickly spoke hardly (at all) and went out of business. Prohibition marked the first time that drinking establishments catered to women and encouraged them to toast alongside the men. Speaks were also frequently filled with people of different races and ethnicity. In an era when many places were either still lawfully or socially segregated, most speakeasies opened their doors and accepted money from all interested customers regardless of skin color or background. Often dance floors would include interracial dance partners, something well ahead of the times in legal establishments before and after Prohibition. Speakeasies proliferated across the country. Some estimates claim that New York City boasted over 32,000 of varying quality and reputation. Not only were women welcomed at the door, women were frequently owners. Three women became quite famous for their upscale establishments in New York during Prohibition: Texas Guinan, Helen Morgan, and Belle Livingstone. Texas Guinan, born Mary Louise Cecilia in Waco, Texas, was the first female Western movie star and became the hostess and partner of rumrunner Larry Frey (“Queens of the Speakeasies,” n.d.). Greeting people at her establishments with “hello sucker,” her quips and barbs became known as “Guinanisms.” One of her more famous ones was “big butterand-egg man” which she used to “describe any free-spending rube off on a toot in the big city.” Another fan favorite was “an indiscretion a day keeps the depression away.” When she died in 1933 at the age of 49, 12,000 people lined up to bid the speakeasy queen farewell. Guinan is the subject of several movies. Her role or a character based upon her persona is played by many well-known actresses including Phyllis Diller, Mae West, and Diane Lane (Marvel, 1996, p. 11). Helen Morgan was born in Canada and moved to New York to study and pursue a career in opera. During Prohibition, she became a regular entertainer playing the piano and singing. In 1927, she debuted on Broadway in the musical Show Boat. Morgan’s acclaim increased crowds at New York speakeasies where she continued to entertain. She allegedly began to front speakeasies for various bootleggers, including the Chez Morgan in 1927. That same year she opened her own place, the Fifty-Fourth Street Club, but it fell prey to a padlock injunction (“Queens of the Speakeasies,” n.d.).11 In 11 The padlock injunction was an effective means to enforce the Volstead Act, at least in the short run. According to the Act, the maintenance of a place providing intoxicating beverages was a common nuisance. The person maintaining the establishment committed a

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1929, Morgan stood trial in a federal court for maintaining a common nuisance, a Volstead violation. The jury deliberated for less than five hours and found her not guilty, although not soon enough for the show to go on that evening. When the jury returned the verdict, she had already phoned in to the Show Boat management alerting them that she would not be available that evening. By all accounts, the trial could have entertained an audience as well as her much heralded Broadway show. The Daily News stated “the fate of the nation, the honor of womanhood and the preservation of the jury system - along with misquotations from the Bible and Shakespeare were hurled at twelve men” during the trial. None other than the powerful Mabel Willebrandt sent Leslie E. Salter to lead the prosecution, who dramatically questioned the jury “Did Helen Morgan honor her Maker when she sold her singing talents-her God given birthright-for a mess of pottage to Broadway nightclub owners?” One thing is clear, Helen Morgan helped sell a lot of liquor during Prohibition and likely made as much money from that business as from her successful singing career (O’Donnell, 1929, p. 2). Belle Livingstone was born in Kansas and quickly found herself an orphan. She was adopted and moved shortly thereafter to Chicago with her adopted parents. An independent soul, she fled her parents to New York as a young woman seeking employment in the theater. Her profession took her to Broadway and Europe where she went through three husbands, not counting one she abandoned earlier in Chicago, including an Italian count. At age 52, she went with friends to Texas Guinan’s place and concluded that she should open her own establishment aimed at the upper class, requiring a $200 membership fee. This club and the next one failed, but Livingstone persisted. In October of 1930, she opened a place in a five-story house on 58th Street after getting permission from gangster Owney Madden. The speakeasy became known as the 58th Street Country Club and famed guests on opening night included professed teetotaler John D. Rockefeller and gangster Al Capone. What a spectrum. Livingstone and Guinan were competitors, but friends, each staking their claim in a man’s world while trying to keep a step ahead of the federal agents and Volstead violation charges. Like Morgan but unlike Guinan,

misdemeanor and can be fined, imprisoned, or both. The Volstead Act also stated that the violation empowered the court to close the location for up to a year. A jury trial was not required. Typically, agents placed padlocks on the violating establishments, giving rise to the term “padlock injunction” (“Her Nonchalance Vanishes Beneath Shadow of Prison,” 1931, p. 10)

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Livingstone served some time in a New York jail for operating nuisances but came out undeterred and ready to continue her profitable mischief-making (“Queens of the Speakeasies,” n.d.). Livingstone was sued and arrested for non-Volstead violations including grand larceny (five dresses), passing bad checks, and unpaid debts. She managed to receive light sentences and punishments in these cases “in view of [her] age and in some respects [her] apparent ignorance” (“Her Nonchalance Vanishes Beneath Shadow of Prison,” 1931, p. 10). Given her longevity in the underworld, it is likely that the joke was on the judges meting out the “merciful” punishment. Speakeasies were often involved with big city liquor syndicates, offering bootleggers an excellent customer buying in bulk. A syndicate is like a cartel. A group of people, in this case liquor dealers, come together to sell the product in a way that maximizes their market power and revenue while spreading risk among members. Frequently, an area or territory is divided into known boundaries between syndicate members. As a group, they keep out or minimize competition by price wars, force, or threat of violence or death. The group pools resources, including men and instruments of violence, to enforce contracts and bend sellers into submission. Frequently, the syndicate has a method of communication. If one outlet, like a speakeasy, or a member gets caught by Prohibition agents, word is quickly spread, allowing others to close shop, flee, and avoid apprehension. If a member is picked up or a shop padlocked, the group pools resources to cover the expenses as a form of insurance for syndicate members. A share of the syndicate revenues was skimmed off to pay corrupt officials and law enforcement agents, keeping the wheels of boozy commerce rolling. As with any agreement, the syndicate relies upon either a level of trust between members that no one will cheat on the agreement or a joint level of fear and respect to keep the criminal members “honest.” Eventually, these agreements or contracts are breached as members attempt to gain more territory, power, and money. In the opportunity-rich but risky world of Prohibition America, liquor syndicates were an ideal way to divide large cities like New York and Chicago. Liquor syndicates are not a thing of the past. For example, Indian news outlets are currently abuzz with stories of liquor syndicate quid pro quo. Liquor syndicates popped up in many cities across the nation, including Milwaukee. As early as December 1920, fourteen “businessmen and saloonkeepers” were indicted in federal court for liquor law violations in an early attempt to clean up the Milwaukee liquor syndicate. Joseph A. Budar, caught with thirty cases of whiskey, received additional charges for

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attempting to bribe a Prohibition Agent upon arrest. Budar was suspected of being a leader in the liquor ring (United Press, 1920, p. 1). The fact that the bribe was not accepted and instead added as a charge was a clear sign that the 18th Amendment was new. Later agents were often not that honest. Budar was released on a $60,000 bond, an amount equal to just under $775,000 in today’s dollars, more than three times the amount O. J. Simpson was held on for burglary in 2007. The fact Budar was released so quickly on that high of a bond suggests he was indeed a successful businessman. There is something ironic about paying a federal court a bail bond using money accrued through the illicit sale of alcohol. But money is fungible. The culling of the Milwaukee booze ring only just began in 1920. By May 1921, bigger fish than Budar were arrested, including “mystery man” Jacob A. Lederer who was referred to as “Mr. Nobody from Nowhere” during Budar’s trial in January. The “entire government ‘whiskey mill’” was “grinding at 100 per cent capacity” (“Liquor Probe Arrests to Be Made During This Week in Milwaukee,” 1921, p. 3). The dragnet included fiftynine arrests. In the end, Budar served a year in jail in addition to a $3500 fine. Many suspected that he was in fact the infamous “Mr. Nobody from Nowhere,” but that was never proven in court. Upon his release in 1921, he moved to Chicago to manage a cafe. There were plenty of cafes in the Windy City, some serving as fronts for speakeasies. Perhaps, it is my cynical economist nature, but I find it hard to believe Budar’s cafe served just coffee and eggs. Speakeasies were a productive conduit for liquor syndicate booze. The Al Capone’s Chicago Outfit made $60 million per year selling beer and liquor to over 1000 speakeasies under his control (“Speakeasies Were Prohibition’s Worst-Kept Secrets,” n.d.). Even under the protection of Al Capone, competition among speakeasies was fierce. Each establishment needed to differentiate themselves from the rest. It was a thrive or die market. Some did so by advertising as high-class establishments, catering to the rich and famous. This was a tactic taken by Livingstone. If a speakeasy could convince patrons that this was the case, the speak could charge exorbitant membership fees. These fees and consumer willingness to pay needed monitoring; otherwise, the local competition could undercut them while offering equally stunning stars and opulent decor and take away crucial business. Others specialized in types of music and entertainment. Choices included jazz, exotic floor shows, and the dancing of Fred Astaire. These fast-paced parties gave rise to the famed bobbed flappers who smoked their

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cigarettes and sipped on cocktails, hamming it up with their male peers, behavior that would make their mothers’ blush and their fathers’ fume. The young ladies enjoyed the nightlife of the Roaring Twenties, turning up their noses and raising their Mary Pickfords to the adage my mother used: “Girls, nothing good happens after midnight.” Not all speaks specialized in fabulousness. Some were spartan with minimal accoutrement behind the peephole, offering cheap drinks to those with only a few coins in their pockets. There was a supplier willing to meet the demand of almost anyone with money in exchange. Owney “The Killer” Madden’s “hooch joints” in Harlem were quite different from his Cotton Club in Manhattan and locations he co-owned with Texas Guinan. The quality of the liquor served in the posh establishments was typically the same stuff served in the dumps. Prices were lower in the dump, but they offered fewer options for mixers, if any at all. Most of the liquor during the period came from industrial alcohol and was nasty stuff regardless of where the tippler sat on their barstool. The few who drank quality booze during Prohibition were not likely in speakeasies, but the wealthy who accumulated massive stores of the good stuff before January 20, 1920. Keeping and sipping it in your mansion were legal. Smaller towns also had speakeasies, they just weren’t as in your face as those in New York City and Chicago. Far away from the crowds of Manhattan was the “Hear No Evil, See No Evil, No Speakeasy” of Binghamton, New York. Never would you read the following words in the Chicago Tribune or Daily News: “Eight Binghamton policemen were almost horrified when the news became known. Not even a breath of suspicion and never the most veiled suggestion of such possibilities ever had come to their ears.” Unless one emphasizes the “almost” and took the rest as tongueand-cheek. In January of 1931, several policemen stated under oath that they had nary a clue of the Horvatt speakeasy on Clinton Street. All of that seems a bit farfetched since the Federal Census of the year before noted several hundred speakeasies in the city. Perhaps these policemen were as clueless as they appeared in court, or they went home with a nice, fat stack of C’s in their wallet after the trial (“Never Breath (of Suspicion) in Clinton St.,” 1931, p. 19).

Gangsters The big city booze business of New York, Chicago, Detroit, Los Angeles, Buffalo, and Seattle (the latter two being strategically located near the

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Canadian border) is the stuff of legend, often intertwined with organized crime. These suppliers served a large demand. Cities such as Chicago were rapidly growing and included populations that enjoyed the liquid lifestyle. The city markets offered a tidal wave of profits, incentivizing bribes, violence, and other nefarious methods of hoarding the market. The potential revenues were exponentially greater than those of remote, rural areas. Although some of the syndicates participated in markets beyond their headquarters, distance brought greater risk. Added miles increased production costs, particularly transportation and protection fees. Gangsters are the most famous of our violators, in part due to their outlandish behavior. They played a vibrant and crucial role in the Prohibition story. Chicago gangland was among the most infamous. The first gangs in Chicago were formed along ethnic lines and grew out of the city volunteer fire departments. They later moved to saloons as the fire departments were professionalized (Diamond, 2005). In general, it is thought that gangs come to being in an environment of disorganization and decay (Thrasher, 1927), by offering a sense of belonging and escape. One of the reasons Prohibitionists pushed for the constitutional amendment was to wipe out many social ills plaguing the rapidly growing and industrialized cities. They saw complete abstinence as the only path to salvation. Chicago was an industrialized Gotham, or Jungle, as described by Upton Sinclair (Sinclair, 1906). By the early twentieth century, Chicago was teeming with factories, railroads, and slaughterhouses and populated by their laborers. It boasted companies including International Harvester and Wrigley, traded products from the meatpacking industry on international markets and was a main rail thoroughfare for rail traffic. According to census numbers, Chicago’s population was just under 30,000 in 1850. By 1900, the population surpassed 1,000,000, an increase of over 3200%! It was the third city to reach this milestone, behind only New York City and Philadelphia despite the horrific fire that destroyed much of the city in 1871. Although the growth rate fell in subsequent years, by 1930 the population exceeded 3.3 million people. The influx of workers and their families came from other US locales and from abroad. Immigrants came from Germany, Ireland, Italy, Poland, and Romania. In 1850, the share of foreign-born Chicagoans was 52.3%. As these immigrants started their own families, the share of foreign born declined, hitting 34.5% in 1900 and 24.9% in 1930 (Skogan, 1976).

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Chicago’s economy grew with the population, although the direction of the causality, if a causal relationship existed, is a challenge to suss out.12 Regardless, manufacturing boomed, growing from 3519 firms in 1880 to 9977 just ten years later. Transportation resources, like water and rail, made Chicago an attractive location for both light manufacturing, including food and soap to petroleum products and steel. The largest nineteenth-century employers were railroading, steel, and meatpacking, although manufacturing was branching into chemicals, paint, metalworking, and machine tools. The manufacturing industry saw periods of struggle during the economic recessions of the nineteenth and early twentieth centuries. At its peak, 20% of the city’s wage workers were employed in manufacturing. As manufacturing waned, services, such as finance and trade rose, or in the case of trade, returned, to prominence. The Chicago Board of Trade was founded in 1848, the Chicago Produce Exchange, later the Chicago Mercantile Exchange, in 1874, and the Chicago Stock Exchange in 1882. The city’s location in the Midwest farming belt coupled with the railroads, made trade a natural match. Typically, gangs are characterized by intimate face-to-face relationships, are spontaneously organized, and meet some type of conflict that binds the group together, possesses traditions and group distinctions, is tied to a local territory, and has an organizational structure defining status. By the 1880s, Irish gangs, such as the “Dukies” and “Shielders,” possessed considerable power around the stockyards and participated in relatively minor crimes including theft and harassing German, Jewish, and Polish immigrants. Eventually, gangs became intertwined with Chicago’s wardbased political machine, trading favors and money for help at the ballot boxes. The enabler–violator relationship was cemented. The Irish gangs were soon outnumbered by Italian and Polish gangs at the turn of the century, with many of the Italians involved with “Black Hand” schemes. One of the first in-depth studies of Chicago’s Gangland was undertaken by Frederic M. Thrasher who concluded that “neighborhoods in transition are breeding grounds for gangs” (Thrasher, 1927). Thrasher’s fieldwork took place at the height of gang violence of the Prohibition Era, while Chicago’s neighborhoods were in transition as the city grew into a twentieth-century economic powerhouse. He detailed 1313 gangs 12 Simultaneity or reverse causality clouds many relationships. Here the question is: “Did the population flood Chicago because of available jobs, or did manufacturing firms move to Chicago because of the large labor supply?” An interesting question.

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in Chicago, which he called Gangland, claiming 25,000 boys and men as members. These counts are likely underestimates, as Thrasher himself pointed out, due to the difficulty in gaining acknowledgment of an enterprise engaging in the criminal underworld. The evolution of gangs from small-time fixers to multi-million-dollar enterprises came from opportunities provided by the 18th Amendment and enabling politicians rather than evolving neighborhoods. Thrasher described gangs as protean manifestations with medieval-like tribal and intertribal relationships. No two are alike. Gangland, encircling Chicago’s central business area known as the Loop, was divided into three large areas or territories: (1) North Side, (2) South Side, and (3) West Side. These gangs were largely blended. Almost 40% of the Chicago gangs were of mixed nationalities. Contrary to popular belief, only 11% were Italian and conflict largely pertained to territory rather than racial or nationality issues (Thrasher, 1927). Prior to Prohibition, many Chicago criminal gangsters made money through other vices such as gambling and prostitution, sometimes complementary services to alcohol. Entrepreneuring gangsters, like Al Capone, saw the liquor market as a gold mine and a smart business diversification, especially with the aid of enabling politicians and law enforcement. He and his boss, John Torrio, participated in an alcohol syndicate, which divided Chicago among gangster businessmen. A monopoly is a market that is dominated by one firm. Requirements to maintain a monopoly include erecting a barrier to entry, such as a prohibitive cost of entry, to keep potential competitors from entering the market and taking a piece of the pie. The desirability of a monopoly stems from control over the price of the product. Control is not absolute in the sense that a monopolist cannot charge an infinite price. It must heed consumer willingness to pay. The monopoly price is typically higher than the price in a more competitive market, which is a frustration for consumers. A monopoly does not guarantee a positive profit, the difference between revenue and cost. If a monopolist’s average cost of production exceeds the price received for selling the product, it earns a negative profit. A market controlled by a few firms is called an oligopoly, which has similar characteristics of a monopoly, save the addition of a few other firms and sometimes intricate strategies executed by the member firms.

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The alcohol market in Prohibition Era Chicago was an oligopoly, with the city divided into agreed-upon territories.13 Within each territory, the ruling gang held a monopoly on the liquor market. The barriers to entry erected by gangsters in Chicago’s illicit alcohol market included the threat of violence. The maintenance of the market structure was facilitated by enabling politicians and law enforcement officials, the topic of a later chapter of this book. Image 3.5 shows the 1920s’ territories of the Chicago gangs. Supply of alcohol was determined by the territory boundary. Selling outside of your territory or an upstart selling in any territory risked a visit from an enforcer with a bulge in his pocket or worse. Gangs are conflict groups that will fight to retain “property” rights, territory, and member safety. Willingness to fight, and to fight brutally, strengthened territory boundaries and market power. Respect among criminals was crucial to power and survival. Police and political protection also came in handy and were well worth the price. Bribes were a smart business investment with a high return. Bloody wars became commonplace in Chicago as the gangs fought for and protected their territories. One of the gorier examples is the St. Valentine’s Day Massacre on February 14, 1929. Although never officially linked to Capone, the execution of seven members of George “Bugs” Moran gang, Capone’s bitter enemy and rival, by Tommy Gun-wielding men disguised as policemen while waiting for their boss in a Chicago garage, was believed the work of the Big Guy. The massacre solidified Capone’s hold on the city of Chicago’s liquor market. The massacre came at a great cost as it was the beginning of the end for Capone. The extreme violence was too much even for Chicagoans. The fascinating stories of Chicago gangs and the liquor market are the stuff of blockbuster movies and TV series. Many excellent books cover the topic, so we will touch on a lesser-known Capone racket as an example of opportunities brought about by the 18th Amendment. The Juice Grape Racket.14 While the IRS poured over four years of bank remittance sheets and bank deposit slips for a known Capone gambling establishment

13 Dividing an area into territories for the purposes of organizing a liquor trade was also used in Franklin County, Virginia, within the moonshining business. 14 Unless otherwise noted, all details of the juice grape racket are from documents posted by the FBI online under the Freedom of Information Act (File number 62-24153).

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Image 3.5 Map of organized crime in 1920s Chicago (Source The Newberry Library [Allsop, 2004])

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in Cicero called the Hawthorne Smoke Shop15 and put together a case for tax evasion,16 several people were making trips to Washington, DC, to put a bug in the FBI’s ear about a racket Capone was running at the Chicago rail yards. As detailed in the section on the wine industry, the Volstead Act gave a large gift to grape growers by permitting individuals to make wine in their home. Making liquor or beer was a crime, but people were permitted to make enough wine per year to keep them permanently sauced. The most important input for wine home production was grapes. California grapes were shipped by refrigerated rail car to Chicago, New York, and Pittsburgh, although over 75% stayed in the Windy City leaving smaller shares for the parched oenophiles farther east. Grape growers did not make the frequent train trips to sell their product. To do so would be time-consuming and inefficient. Instead, they hired representatives in the cities where they wished to sell the grapes. Once the grapes arrived, the representative consigned them to an auctioneer at the railroad station. Potential buyers bid on the grapes, settled on a price, and took the newly purchased product to sell to individuals at stands set up at the railroad. Many times, these grapes were bought again and sold in neighborhood markets. The auctioneer took a cut as did the representative, who also paid the shipping and other fees, before depositing the remainder of the revenues in the grape grower’s bank. As Image 3.6 shows, there was one more Chicagoan step in the juice grape trip from the rail car to the market: Al Capone. Before a buyer could open the car of juice grape, they were “required” to pay a tribute to one of Capone’s men who stalked the northwestern railway terminal. The payment reached $50 per car by 1930, and there was no question of what would happen to a man who refused to pay. Tony Romano was the muscle Capone had monitoring the yards, and he excelled at his job. Along with Manny Schreiber, Romano skimmed tributes from the buyers daily for his boss,

15 Capone made a rare mistake during a raid on the establishment by demanding to be let in since it was his place. By making such a declaration, he stated before several witnesses that he owned the establishment and was thus in charge of its revenues and taxes due from them. 16 Of all the things Al Capone was accused and thought to have done, he was only ever found guilty of tax evasion, making his utterance about owning the Cicero shop such a gaffe. He stood trial in 1931, was found guilty, and was sentenced to ten years in a Federal penitentiary. He was initially held in the Federal Pen in Atlanta but was sent off the famed Alcatraz early in his sentence. By the time Capone was held in Alcatraz, he was suffering from the debilitating effects of syphilis. He retired to Miami after serving his time and died a raving madman. Syphilis did to the Big Guy what no gunner could ever do and brought him to his knees and eventually his grave.

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Image 3.6 Juice grape racket process (Source Kassens, 2019c)

paying careful attention to newcomers and potential undercover agents. The Aiello crew initially ran the racket at the terminal but were run off or killed by Capone in the off-season. Capone wanted the racket for himself due to its value. During the grape season of 1929, 5000 cars of juice grapes were unloaded in Chicago. If Capone extracted a $50 tribute from each, it brought in $250,000 which is over $3.5 million in 2018 dollars. There are mixed reports as to where the grapes caper took place. In one government memo, Capone had control of just the Chicago and northwestern terminal on Clinton Street where only 1100 of the cars were unloaded. Other memos including interviews with people who worked in the juice grape business stated that Capone made sure that all juice grape cars were diverted to the Chicago and northwestern terminal, thus giving Capone a monopoly on the juice grapes of Chicago. Regardless of which account is true, Big Al made a juicy profit on his juice grape racket.

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In 1930, Ralph Merritt of California traveled to Washington, DC, hoping to speak to FBI Director Hoover about Capone’s racket at the Chicago rail terminal. Brave man. Merritt was associated with the Grape Growers Association of California and came to Washington likely at the behest of our old friend David Conn with the eponymous last name. No slouch himself, Merritt served as President of the Sun-Maid Raisin Growers Association and was firmly vested in the Prohibition Era grape product industry. Al Capone was a costly nuisance, although a distant one, which may have emboldened Mr. Merritt to request the government slap the mobster down. Merritt took the angle that the government should be greatly concerned with Capone’s grape graft because the federal government was supporting the grape industry through Federal Farm Board loans and thus Capone’s attack was essentially an attack on a government investment. Memos from Director Hoover suggest that he was not that interested and was highly suspicious of Merritt and Conn’s plea. He suspected that they wanted to use the strong arm of the government to better position Mr. Conn and his interests. Remember Mr. Conn was involved with Vine Glo which was a direct competitor to the juice grapes in the home wine-making business narrowly and the Prohibition intoxicating beverage market broadly. Apparently, Big Al did not appreciate Vine Glo moving in on his liquor and juice grape rackets in Chicago and had made death threats via phone to Mr. Conn stating as much. Specifically, Mr. Conn had been told not to step foot in Chicago or New York and “if he did so he would be killed” (Mills, 1927) Conn sent Merritt. At the same time, Mr. Teague of the Federal Farm Board and Chief Auctioneer of the Chicago Railroad yard was in conference with Mabel Willebrandt about the racket in the Chicago yards. She infuriated Director Hoover by requesting he send federal agents to stake out the rail yard, perhaps because he did not like to be told what to do with his resources, although Hoover did agree that he would be interested in getting Capone “in some way.” Capone would be a huge feather in the Director’s cap. A week later Mr. Conn joined Mr. Merritt in Washington, DC, as they continued to plead their case for government assistance. One of their juice grape competitors, Mr. Irrgang, also arranged meetings with the FBI making similar requests, each suggesting that the other was in cahoots with the gangsters and didn’t deserve federal assistance. Regardless of the Director’s suspicions of Merritt, Conn, and Irrgang’s motives, he agreed to set up an undercover operation at the Chicago Railroad yard to catch Capone’s men demanding a tribute. The tribute was illegal for a variety of reasons,

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including it interfered with interstate commerce. The FBI posed agents as grape buyers at the Chicago rail yard in the fall of 1930. The agents needed training in the juice grape business and wrote in their reports to the Director that they were better agents than grape men as they struggled to sell their cars of grapes. Through the agents’ entire stay at the yard, they received several winks and nods from men that looked like they were from Capone’s crew, but did not witness or receive any tribute requests. It is likely that word got to Capone about the undercover operation and he halted it for the season, forgoing significant monies, but saving himself a more expensive interaction with the FBI. After a fruitless stint in Chicago, Director Hoover demanded his men back to Washington, DC, to work on more productive cases. The juice grape racket was yet another opportunity provided by the combination of the Volstead Act and the nation’s unquenched thirst that Capone seized. A man of little education who initially found employment as a bouncer, Al Capone lacked significant prospects in legitimate work. He did have a big personality, a quit wit, feared little, and had no problem with violence. These traits were greatly valued in the underworld of gangland. John Torrio took Capone under his tutelage. By 1924, Al Capone was the Big Guy of Chicago, offering popular lines to journalists and grabbing up the opportunities presented by Prohibition. Gambling and prostitution brought money to his crew, but the booze business made him a millionaire. Otherwise, Capone would continue to eke out a sleazy existence in his brothels and gambling joints along the outskirts of Chicago. Prior to booze was available at seemingly endless locales, making gang market power difficult and less lucrative. Prohibition also made possible the juice grape racket. Before there was no need to make wine in the household cellars and it was cheaper to go to the local market or restaurant for a glass of red. The 18th Amendment was Capone’s winning lottery ticket. The drys and the federal government enriched Al Capone, offering an opportunity that he snatched without blinking an eye. Where did gangsters like Capone get their booze? Some came from Rum Row. More from Canada. Some gangsters paid families to make booze for them in their homes. However, a massive amount of liquor came from a strange source: industrial alcohol. Major Chester Mills, a Prohibition Agent in New York, called it “America’s new national beverage” (Mills, 1927, p. 8). Another permission provided by the Volstead Act was the production of alcohol for non-beverage purposes including denatured alcohol, alcohol made unfit for human consumption by adding toxic substances.

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The intent behind this exception was to maintain production of the many legal goods requiring alcohol in the production process such as soap, paint, hats, and pencils. Prior to the Volstead Act, producers got their denatured alcohol without paying the federal liquor tax since the alcohol was not fit for consumption. In the Volstead Era, a permit system was put in place to keep the denatured stuff only in the hands of those who needed it for legal purposes. The government allocated permits to individuals who demonstrated a need in exchange for a bond guaranteeing that the withdrawn alcohol was for legal purposes. At this point, it should come as no surprise that leakages occurred, or more accurately floods. Between June 1926 and June 1927, over 400 vehicles were caught illegally transporting industrial alcohol in and around New York City, 99% of which was found to contain poisonous denaturants. The federal government unknowingly provided yet another opportunity for entrepreneurial spirits like Rotten. The racket worked as follows: Denaturing plants received grain alcohol from bonded warehouses and then denatured the product according to an elaborate set of government recipes. Permit holders withdrew the denatured product from the plants and took it to a factory to clean. These factories were often in backwoods cabins or big city cellars to keep away from the prying eyes of the law. The cleaned product then made its way to any number of “cover houses.” Cover houses were phony businesses set up solely to provide receipts to the permit holders in case of an inspection by Prohibition Unit agents. The cover houses were on record as producing hair tonics, soap, and other seemingly reasonable products using alcohol as an input. However, most contained no office fixtures other than a fountain pen to sign for the alcohol (Mills, 1927, p. 30). Major Mills recounted a story of an “inspection” of the Brooklyn Alcohol Company. When he and his fellow agents asked the permit holder for his books and all receipts of transactions involving fifty barrels and five consignees, the businessman readily complied. Everything was in order. The receipts bore the signatures from the Technical Color and Chemical Works, James H. & Ambrose Welsh Inc., Summit Supply Company, Pompadour de Paris Corporation, and Frank Fiducia. All in the toilet liquid business. Major Mills queried “How did the company have the set of receipts when the alcohol was apprehended by authorities just the night before?” Police had intercepted a truck with all fifty barrels in an alley while the drivers were busily scratching off the barrel serial numbers. Each of the receipts was for a cover house. Not a one was an actual business (Mills, 1927).

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Image 3.7 Industrial alcohol to cover house (Source Kassens, 2019b)

Several logical minds of the time wondered why industrial alcohol was not denatured at the initial warehouse under federal supervision. Independent denaturing plants were a phenomenon of Prohibition and did not exist before. Why not cut out the middlemen who seemed so easily corruptible or make it more difficult, and thus costly, for criminals to get their hands on the alcohol? (Image 3.7).

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An unintended consequence of banning intoxicating beverages was a lack of quality control in the wild underground world of Prohibition liquor traffic. Quaestuary bootleggers, whether mob related or in the backwoods of Virginia, cut the industrial alcohol to make it go farther. One gallon of industrial alcohol made up to three gallons of “gin,” “whiskey,” or any number of other trumped-up tipples. Bootleggers became part-time chemists, looking for creative ways to remove the denaturants from the industrial alcohol. An estimated one-third of the 150 million gallons of industrial alcohol produced each year was diverted by bootleggers. Removing the adulterants often resulted in a nasty drink. Consumers needed to do more than pinch their nose to get the drink down. Mixed drinks grew in popularity as people desperately disguised the taste of the poor-quality intoxicant and remain a staple on bar menus. Common mixers included tonic, soda, and juices. Bootleggers also experimented with ingredients to make their product palatable. To mimic bourbon, they added dead rats or other rotten meats to the production process. One can only imagine the taste-testing process for this discovery. Perhaps an accidental rodent drowning produced an appealing taste. To mimic the smoky flavor of scotch, many added wood tar. Nasty taste is one thing. Maiming and lethality is another. It was estimated that between 1930 and 1931 over 50,000 people across the nation succumbed. The symptoms started with pain and numbness in the legs which heightened to paralysis with a noticeable foot drop. The same process took over the arms. Although the disorder resembled several known neurological conditions, it was clearly something new. Eventually, scientists and physicians linked the condition to Jamaican Ginger, or Jake, a patented medicine.17 People with the condition often walked with an awkward high knee gait that became known as the “Jake Walk” or the “Jake Leg.” The condition was so common that between 1929 and 1934 that it inspired several blues songs such as “The Jake Walk Blues,” between 1929 and 1934. Songs painted the sufferers as afflicted by their own sin and poor judgment rather than sympathy for their plight (Morgan & Tulloss, 1976). Initial symptoms usually appeared within two weeks after ingestion. Males were the primary victims. Jake had an alcohol content of 70–80% and was readily available at pharmacies due to the believed curative effects for headaches and as an aid to digestion, something of great concern to people 17 Two Oklahoma doctors, E. Miles and W. H. Goldfain, were allegedly the first to associate the condition with Jamaican Ginger extract (Parascandola, 1994).

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of the early twentieth century. The true cause was likely a lack of fiber in their diets (Parascandola, 1994). Due to its approved medicinal properties, the sale and distribution of Jake were legal during Prohibition. Its alcohol content presented an intoxicating alternative during the dry period. A question for scientists was did the extract cause the condition or was it a bootlegger additive? After several exhaustive scientific studies, two scientists, Smith and Elvove, determined that often Jake was adulterated with tri-ortho-cresyl phosphate (TOCP) which was the actual cause to the motor paralysis, not the Jake. TOCP is a plasticizing compound used in lacquer, varnish, and as a flame retardant in plastic and rubber. It is toxic when consumed by humans. The Treasury Department had hoped that altering the production of Jamaican Ginger, rendering it bitter and unpalatable, would reduce the likelihood of people consuming it beyond its medicinal function. In turn, bootleggers used additives to fool Prohibition inspectors by replacing ginger solids with additives including molasses and TOCP. The result was a palatable intoxicant that passed inspection, but ruined thousands of Americans. Authorities traced the poisoned Jake to Hub Products in Boston, and indictments were issued for Harry Gross and Max Reisman, bother-in-laws and co-owners of the firm. To their credit, there is evidence that Gross and Reisman asked about the toxicity of TOCP on several occasions prior to production and distribution. They went so far as to have their Jake tested in a lab. The lab results stated that it was non-toxic, but some scientists now suspect that the Jake was tested on animals which metabolize it differently than humans (Rothstein, 1972). Violators broke the law, seeking opportunity and profit. The next group, Line Tip-Toers, largely stayed just to the right side of the law in their Prohibition opportunity-seeking actions. Doctors and clergy were more esteemed characters than violators, who actively utilized Volstead loopholes for their own purposes and profit.

References Allsop, J. (2004). Organized Crime in 1920s Chicago [Map]. Retrieved from http://www.encyclopedia.chicagohistory.org/pages/1768.html. Becker, G. (1974). Crime and Punishment: An Economic Approach. In Essays in the Economics of Crime and Punishment (pp. 1–54). Retrieved from http:// www.nber.org/chapters/c3625.pdf.

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Bowden, W. (1946). War and Postwar Wages, Prices, and Hours, 1914–1923 and 1939–44 (No. 852). Retrieved from Bureau of Labor Statistics website: https:// fraser.stlouisfed.org/title/4318. Callano. (1936/1939). Only Suckers Work [Manuscript/Mixed Material]. Retrieved from https://www.loc.gov/item/wpalh002660/. Carse, R. (1959). Rum Row: The Liquor Fleet That Fueled the Roaring Twenties. Mystic, CT: Flat Hammock Press. Cow Shoes [Photograph]. (1924). Retrieved from https://www.loc.gov/item/ 2016849213/. Diamond, A. J. (2005). Gangs. In Encyclopedia of Chicago. Retrieved from http:// www.encyclopedia.chicagohistory.org/pages/497.html. Ehrlich, I. (1974). Participation in Illegitimate Activities: An Economic Analysis. In Essays in the Economics of Crime and Punishment (pp. 68–134). Cambridge: National Bureau of Economic Research. Fourth Attempt Is Made to Kill M.E. Minister. (1923, October 23). The News Leader, p. 5. Her Nonchalance Vanishes Beneath Shadow of Prison. (1931, February 13). The Evening Sun, p. 10. Retrieved from newspapers.com. Kassens, A. (2019a). East Coast Bootleggers Routes and Rum Row [Ink Drawing]. Kassens, A. (2019b). Industrial Alcohol to Cover House [Ink Drawing]. Kassens, A. (2019c). Juice Grape Racket Process [Ink Drawing]. Kassens, A. (2019d). McCoy’s First Run, Nassau to St. Catherine’s Island, Georgia [Ink Drawing]. Kassens, A. (2019e). Moonshine Production Process [Ink Drawing]. Liquor Probe Arrests to Be Made During This Week in Milwaukee. (1921, May 10). The Journal Times, p. 3. Retrieved from newspapers.com. Marvel, B. (1996, January 28). Texas Guinan Will Live Again in Bette Midler Film. Carlsbad Current-Argus, p. 11. Retrieved from newspapers.com. Messy Nessy. (2016, June 7). All the Sneaky Tricks of Prohibition Bootleggers. Retrieved May 28, 2019, from Messy Nessy website: https://www. messynessychic.com/2016/06/07/all-the-sneaky-tricks-of-prohibitionbootleggers/. Mills, C. P. (1927, October 15). Where the Booze Begins. Collier’s, pp. 8–9, 30, 32, 34. Miron, J. A., & Zwiebel, J. (1991). Alcohol Consumption During Prohibition. American Economic Review, 81(2), 242–247. Moonshine—Blue Ridge Style. (n.d.). Retrieved March 30, 2019, from Blue Ridge Institute & Museum website: http://www.ferrum.edu/blueridgeinstitute/ onlineexhibits/moonshine/#1531512301775-a93ca27c-60b7. Morgan, J. P., & Tulloss, T. (1976). The Jake Walk Blues: A Toxicological Tragedy Mirrored in American Popular Music. Annals of Internal Medicine, 85(6), 804–808. Retrieved from PubMed.

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Never Breath (of Suspicion) in Clinton St. (1931, January 16). Press and SunBulletin, p. 19. Binghamton, New York. O’Donnell, J. (1929, April 19). Singer Weeps in Court. Daily News, p. 2. Retrieved from newspapers.com. Parascandola, J. (1994). Pharmacology and Public Health: The Jamaica Ginger Paralysis Episode of the 1930s. Pharmacy in History, 36(3), 123–131. Retrieved from JSTOR. Queens of the Speakeasies [Museum]. (n.d.). Retrieved April 8, 2019, from Prohibition: An Interactive History website: http://prohibition.themobmuseum. org/the-history/the-prohibition-underworld/queens-of-the-speakeasies/. Rothstein, Wi. G. (1972). American Physicians in the Nineteenth Century. Baltimore, Maryland: Johns Hopkins University Press. Shakespeare, W., & Dawson, A. D. (2011). Richard III. New York, NY: Oxford University Press. Sinclair, U. (1906). The Jungle. New York, NY: Doubleday, Jabber & Company. Skogan, W. G. (1976). Chicago Since 1840: A Time-Series Data Handbook. Retrieved from the Institute of Government and Public Affairs website: https:// archive.org/details/chicagosince184000skog. Speakeasies Were Prohibition’s Worst-Kept Secrets [Museum]. (n.d.). Retrieved April 9, 2019, from Prohibition: An Interactive History website: http:// prohibition.themobmuseum.org/the-history/the-prohibition-underworld/ the-speakeasies-of-the-1920s/. Steinke, G. (2004). Mobsters and Rumrunners of Canada. Auburn, WA: Lone Pine Publishing. Thornton, M. (1991). Prohibition Was a Failure. Policy Analysis, 157, 1–12. Thrasher, F. M. (1927). The Gang: A Study of 1,313 Gangs in Chicago. Chicago, IL: University of Chicago Press. United Press. (1920, December 30). Fourteen Arrests Are Made in Liquor Cases. The Sheboygan Press, p. 1. Retrieved from newspapers.com. Warburton, C. (1932). Prohibition and Economic Welfare. The Annals of the American Academy of Political and Social Science, 163(1), 89–97.

CHAPTER 4

Line Tip-Toers

Abstract Some priests, rabbis, and physicians tiptoed along the boundary of legality during Prohibition, utilizing legal loopholes to their economic advantage. Medicinal and sacramental Volstead allowances provided opportunities to clergy and physicians that many accepted. Some loophole leapers were facilitated by vague definitions, lose organization, and lack of law enforcement to generate profits. Their actions and those of their outraged peers are detailed in this chapter along with the public stance taken by organized groups such as the American Medical Association. Keywords Market power · Licensure · Medicinal alcohol · Sacramental wine

Targets of the 18th Amendment adapted to the new legal environment or shut down. Some, including producers of wine and distilled spirits, used generous loopholes to assist their economic adaptation. Others also took advantage of the Volstead loopholes to fill their bank accounts. Unlike gangsters and other violators, line tip-toers tread the boundary of legality, creatively taking advantage of profitable opportunities provided by the modified legal environment. Before the Volstead restrictions, consumers went to a local store, restaurant, or saloon for booze. Afterward, those craving a libation with more the 0.5% alcohol but did not want to break

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the law, needed a source other than a speakeasy. Enter the drug store, church, and synagogue. Doctors and clergy were provided monopolies on medicinal alcohol and sacramental wine, respectively, two of the few legal ways to purchase and distribute intoxicating beverages during Prohibition. Each loophole was exploited and abused by the monopolists. The stories also demonstrate the professions’ distaste of and efforts to combat government interference in their practices. Physicians fought the interference all the way to the US Supreme Court while some religious leaders viewed the legislation as bullying by Protestants, fitting with what they viewed as an aggressive attempt to “purify” America and marginalize immigrants, racial minorities, Catholics, and Jews.

Doctors Physicians, midwives, and other healers have used alcohol in remedies and pain relievers for centuries. “Beverage alcohol” was a commonly prescribed medicinal agent in the nineteenth century. It was readily available and low cost (Rothstein, 1972). Concurrently, many physicians were ardent temperance and Prohibition supporters. They made a distinction between using alcohol for healing and social purposes. The former was a sound medical practice, recommended by years of experience and observation. The later was unnecessary and detrimental to health and society. The threefold government interjection, the 18th Amendment, Volstead Act, and Willis–Campbell Act, was the first federal intrusion of physician autonomy not supported by most physicians. For example, the 1906 Pure Food and Drug Act placed quality controls on food, beverages, medicines, and drugs after public outrage over the unsanitary conditions in manufacturing plants and was supported by the physician community. The 1906 legislation safeguarded patients from toxins out of the physician’s control, while the 1920s alcohol regulations encroached on physician autonomy and threatened the socialization of medicine. Physicians also generally supported state laws including those regarding medical licensure. Licensure laws require licensees meet specific qualitybased criteria such as passing a certification exam, paying a fee, and participating in an apprenticeship. Licensure is common in many occupations today including those for barbers, doctors, teachers, and cosmetologists. Theoretically these laws protect consumers from charlatans. While this may be true, licensure also protects current license-holders’ market power and

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turf. Once someone holds a license, they are incentivized to support maintaining and strengthening the process, making it difficult for market entrant hopefuls. Licensure and the organization overseeing it serve as gatekeepers to the profession, limiting supply and keeping prices high. It should come as no surprise that physicians were supportive of state medical licensure policies. The Volstead Act made the following allowances for medicinal alcohol: 1. Medicinal preparations manufactured in accordance with formulas prescribed by the United States Pharmacopeia, National Formulary, or the American Institute of Homeopathy that are unfit for use for beverage purposes. 2. Patented, patent, and proprietary medicines that are unfit for use for beverage purposes. 3. Toilet, medicinal, and antiseptic preparations and solutions that are unfit for use for beverage purposes. The federal government issued prescription pads for physicians to use in accordance with the Willis–Campbell Act. Initially, this seems generous not only for the producers of medicinal alcohol, but also its conduits: druggists and physicians. Indeed, these loopholes were abused by both, but some adamantly opposed the legislation as it assumed the politician better knew how to treat patients than physicians. The intent of the legislation was fundamentally different from previous government interventions in the physician market. A Dare County, North Carolina physician stated that he was a “teetotaler, and did not prescribe whiskey more than three to six times a year before the days of prohibition amendment” but he did not “believe that physicians should be restricted to the use of any remedy that is indicative in the relief of suffering or the preservation of life” (American Medical Association, 1922, p. 221). Not all believed in the healing powers of alcohol, rather “the physician who likes his toddy likes to give it” and ones that don’t partake “can treat effectively without it” (American Medical Association, 1922, p. 222) (Image 4.1). A valuable, albeit potentially biased, peephole into physician opinion on the Volstead and Willis–Campbell Acts is a 1921 survey conducted and published by the American Medical Association (1921). The survey response rate was 60% for the 53,900 surveys mailed, a sample accounting for almost 40% of the US physician population. Eighty-three percent of

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Image 4.1 Prescription forms and stubs for medicinal alcohol, 1933 (Source Cassie Nespor, Curator Mednick Medical Museum [Nespor, 2010])

the respondents were general practitioners (American Medical Association, 1922). Over half of responding physicians viewed whiskey as a therapeutic agent in the practice of medicine, particularly those practicing in cities. Comparatively, 26 and 32% viewed beer and wine, respectively, as such. Whiskey was believed particularly useful in the treatment of pneumonia and influenza, beer and wine for lactation, anemia, and old age. Forty-four percent of physicians reported prescribing whiskey at least once a month and half believed that the prescription count should be unrestricted. Furthermore, some physicians cited examples of prohibition laws causing pain and suffering in their practice. Additionally, some believed that the law “was a handicap to an honest physician” since “a large number of patients will go to the physician whose conscience is elastic” although one Boston doctor reported that his patients were able to “procure alcohol at [a] nominal price, and liquors of all kinds at all times” (American Medical Association, 1922, p. 220). The behavior of the AMA begot much suspicion from cynics. The organization publicly supported Prohibition, but by 1922 the AMA amended its view of alcohol via the Referendum on the Use of Alcohol in the Medical Profession. Five years after the national pronouncement regarding the lack of scientifically proven medicinal uses for alcohol, the doctors’ organization

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claimed it an effective solution for both acute issues including snake bites to longer term health ailments such as diabetes. What led to the AMA’s flipflop on medicinal alcohol? No one knows for sure, but a good economist simply considers potential costs and benefits. In the early twentieth century, health insurance was uncommon. People paid physicians per visit in cash, including those to get a medicinal alcohol prescription. With the physician being one of the few locales providing the pathway to legal booze, there was money to be earned. One Tennessee physician observed “physicians who prescribe whiskey will give their friends a prescription when asked to. Another class will give to anyone for the almighty dollar. I have been informed by a government official in charge that 97 percent of the prescriptions are for general disability. This alone tells the tale” (American Medical Association, 1922, p. 226). A reported 15,000 physicians from the nine states in which it was legal under state law applied for permits to prescribe medicinal alcohol within the first six months of Prohibition (Okrent, 2010). The 1921 AMA survey indicated that 39% of physicians held permits, some even practicing in states that forbade the use of medicinal alcohol (American Medical Association, 1922). The market for medicinal alcohol prescriptions was bustling before 1920. Before national prohibition, states with local option laws that permitted medicinal alcohol experienced abuses of the loophole. One report from Pontiac, Michigan entitled “Prohibition Does Not Prohibit” detailed the abuses over a one-week period in 1908 in Decatur in Van Buren County of two drug stores using required weekly sales reports. During the week of February 11, the establishments filled prescriptions for 351 different customers, averaging 11 ounces of liquor each. Decatur’s population was 1404 at the time. Assuming a household size of four, the elixir was sold to each of the 351 households that week, the entire town seeking the same cure. Even if many of the sales were to those living outside of the town, business was good for Decatur pharmacists and the physicians writing the prescriptions. In a second analysis of one Decatur store during the week of August 19–24, 1908, the story was the same. Apparently, consumers were thirstier in the summer, as the establishment sold 312 prescriptions that week. A close examination of the records shows several repeat customers such as Orlando Brewer who purchased a pint of whiskey on August 20 and a half pint each of whiskey and “alcohol” on August 24 and James Tweedy who purchased a half pint of whiskey on August 22, a half pint of whiskey on August 23, and a half pint of brandy on August 24. Men were not the

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only customers. Elvira Barnum picked up a half pint of whiskey and gin on August 22 and a half pint of “alcohol” on the 24th. The story was the same in other counties and states with liquor restrictions and medicinal alcohol allowances, one ignored by national policy makers (or greedily noticed by physician and drug store interests with connections in Washington). Assuming the prescriptions were legitimate, patients and perhaps pharmacists and doctors were in violation of the Willis–Campbell Act (Paterson & Moulton, 1908). In 1920, Rubey Cowen and Billy Joyce penned the tune “Oh! Doctor” summing up the views of the public (Cowen & Joyce, 1920): Most ev’rybody you meet now a days seems to be feeling so blue. They say it is an imposition to enforce this prohibition and I think so too. But Congress has given doctors the power to hand out brandy and rye and now in their office at most any hour you’re bound to hear somebody cry Oh! Doctor Oh! Doctor, I’m feeling blue. Oh! Doctor Oh! Doctor, it’s up to you. The drug stores on the corners are filled with liquor mourners. I told a drug clerk my condition, he said “Go see your physician.” Oh! Doctor, Oh! Doctor, don’t feel my pulse. That’s not what I need for results. Write the prescription, and please make it say “Take with your meals,” I eat ten times a day. Oh! Doctor, Oh! Doctor, help me pull thro’ for I’ll never get well ‘til you do.

Given the comments by physicians in the AMA survey and the public sentiment presented in the Cowen and Joyce tune, it is likely that physicians both resented government interference in their practice autonomy and reveled in the monetary gains driven by the Prohibition demands for legal alcohol.

Priests and Rabbis Dry legislators created the sacramental loophole to aid passage of the 18th Amendment and perhaps skirt lawsuits concerning First Amendment violations. Several religions, including Catholicism and Judaism, incorporate wine in rituals and customs. Banning wine encroached on the right of freedom of religion and concerned Catholic and Jewish leaders about a Protestant cleansing of America. Historian John Higham believes Protestants grew concerned as they saw people of different origins and beliefs rising in economic and social stature. In response, they “mounted a cultural counteroffensive through the prohibition movement, immigration restrictions, and a sharpened racism” (Higham, 1984, p. 48). The sacramental

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loophole was perhaps a concession to Catholics and Jews or a smokescreen masking their true intentions. Section 3 of the Volstead Act states “[l]iquor for nonbeverage purposes and wine for sacramental purposes may be manufactured, purchased, sold, bartered, transported, imported, exported, delivered, furnished and possessed” (Volstead Act, 1919, p. 308). Wineries licensed to produce sacramental wine were prohibited from selling to someone not a “rabbi, minister of the gospel, priest, or an officer duly authorized for the purpose by any church or congregation” (Volstead Act, 1919, p. 311). Anyone purchasing the wine needed a permit and Volstead violations were punishable as any other. The temptation to violate the Volstead Act for profit was hard to ignore. Lawbreaking priests and rabbis were not martexts, but rational individuals. Even men of the cloth used Becker’s calculus when considering a crime. Their cost-benefit variables and weights are likely different than an economics professor considering illegally parking on the way to an oral examination, but the method is the same. Catholics use wine to celebrate the Eucharist. Often drunk from a chalice, it is consumed after taking a portion of consecrated bread. The two represent the body and blood of Christ. During Prohibition, priests had a monopoly on the distribution of sacramental wine, which was only for use in religious and sacramental functions. The clergy were permitted to use lay people to deliver the wine. The Treasury Department hoped to remove the middleman with this system and the opportunity for graft, but they underestimated the profit incentive and the desire for booze. Catholics parishioners were not permitted to buy wine for sacramental purposes. The rituals and ceremony using wine were performed in the church and not the home. Nonetheless, opportunities for forging permits or distributing wine for nonsacramental purposes existed and were potentially profitable and thus tempting. After all, priests were already bootlegging liquor from the Bahamas using bible-bearing boats. Wine also plays an important role in the Jewish faith. It is blessed and consumed on Friday night and Saturday morning as part of the Sabbath meal, holy days, and rites of passage. During Prohibition, each Jewish adult was permitted 10 gallons of wine per year for sacramental purposes. Prohibition laws prevented sacramental wine producers to sell directly to the consumer. Instead permitted rabbis served as middlemen, buying wine from the producers. They then distributed the wine to their congregation without compensation. Congregants were asked to contribute to the synagogue or the rabbi for general purposes rather than as an exchange for

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the wine. In other cases, like in New York City, rabbis signed written orders for families who took them to approved wine merchants for purchase. Jewish congregations grew rapidly during Prohibition. One in Los Angeles increased from 180 to over 1000 families in one year. The largest congregation on file in New York City was that of Rabbi Rosen of the First Romanian Congregation. He claimed 2500 families on his application for sacramental wine in 1921 (“Seized Wines for Church Use, Says Firm on Bowery,” 1921, p. 20). The “rapid growth of Judaism” was not all for Yahweh. The incentive to join a synagogue for non-religious reasons was much greater than to join a Catholic church. Only Catholic priests got wine permits, not the congregation. Since Jews perform some ceremonies and rituals in the home, congregants received wine orders from rabbis. The quantity of sacramental wine delivered by rabbis approached 3 million gallons by 1924 (Hines, 2017). Oy vey. Jews, such as Bronfman, already played a prominent role in bootlegging, but during Prohibition, American rabbis took the occupation by storm. The American rabbinate was loosely organized, making it difficult to officially separate the real rabbis from the fake. Many trained and learned on their own or with a teacher, rather than through a recognized school, and submitted for an examination with a local rabbi. If the student passed, the overseeing rabbi wrote a letter stating such. Validating credentials and creating a national register were difficult, particularly for those who submitted for their exam before immigrating to the United States. Another challenge enforcing Volstead laws within the Jewish community was that many of the rituals involving wine take place in the home (in private) without a rabbi present, rather than in public. There is no one present to assure that the wine was being used for sacramental purposes. Abuses of the loophole began almost immediately. In March of 1921, $250,000 of wine was seized at the Menorah Wine Company in Manhattan, an amount equal to almost $3.3 million in 2018 dollars. The founder of the Menorah Wine Company, Nathan Musher, was a shrewd businessman. The olive merchant purchased and imported 750,000 gallons of wine from Spain in 1920. He sensed an opportunity coming and he was efficient. The wine he imported from Spain was 24% alcohol, about twice that of the wine available from other sellers in the United States. The allowed ten gallons per year went a lot further at double the punch. Balked by powerful New York rabbis for a permit, Musher obtained one from a G. Wolf Margolis. Although his name sounded like the well-known Rabbi Z. Margolis,

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G.’s office was in a backroom of a tenement building. Rabbi G. was legitimate.1 His reputation took a plunge during the scandal, although he was eventually eulogized in the New York Times in 1935 as “the greatest rabbinical scholar, bar none, ever to have settled in America” (Sprecher, 1991, p. 150). Prohibition agents suspected that family sacramental wine orders were forged by “fake” rabbis, some as young as eighteen years of age. Forging orders was an easy task, as records of individual wine purchases were not required. The law only stipulated that rabbis file the number of families in the congregation with the Prohibition Unit. Each family was permitted ten gallons of wine per year, but the family names were not required for the application. The bust in New York made news not only for the size of the seizure, but also for the famous, flamboyant, and beloved agent who assisted, Agent Izzy Einstein. Oddly, officials in Washington, DC halted the seizure via telephone. Less than a year later the Menorah Wine Company again appeared on the front pages of newspapers due to continued abuses of prohibition laws. Agent Izzy Einstein, known for his disguises, rode along on a Menorah Wine Company delivery. The first stop on the sacramental wine delivery route was the home of a Scotch Presbyterian. Agent Einstein, catching the Prohibition violators red (or wine) handed, seized that and one other delivery truck (Sprecher, 1991). This time there was no interference from Washington. Prohibition administrator for Philadelphia Samuel Wynne successfully revoked three sacramental permits from area rabbis in 1928 including that of Rabbi Wolfe Wertheimer. He ran a sacramental winery but could not account for 3000 gallons of wine (“Wynne Is Upheld in 3 Alcohol Cases,” 1928, p. 8). The absurdity of Prohibition laws was highlighted in 1931 when a federal judge confirmed rabbis could distribute sacramental wine permits to anyone they saw fit, even if the individual was not a part of their congregation. This decision came after a patrolman testified that he purchased wine in a store after a rabbi there gave him a permit. He returned to the store shortly thereafter and bought two more gallons of wine after the store’s proprietor called the same rabbi and got permission. The patrolman never met the rabbi before the exchange in the store. The judge defended his ruling saying “the regulation was intended to include more than members of a rabbi’s own congregation. It did not, I believe, intend to include every orthodox Jew, but unless the worshipers can be identified I do not

1 Sprecher [1991] provides an excellent and thorough explanation of the entire scandal. It was quite complicated and dramatic.

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think a rabbi’s order unlawful” (“Rabbis to Judge of Sacramental Wine Legality,” 1931). Godly bootleggers came in all denominations. A 1925 report stated that the withdrawal from bonded warehouses by permit was 2,139,000 in 1922. Withdrawals increased to 2,503,500 in 1923 and 2,944,700 in 1924, an increase of 38% over two years. “There is no way of knowing what the legitimate consumption of fermented sacramental wine is but it is clear that the legitimate demand does not increase 800,000 gallons in two years” (Dobyns, 1940, p. 297). Outpacing the growth in congregations, the wine was going elsewhere. Perhaps spiritual cocktail parties were a fine Prohibition pastime. Certainly, knowing a man with a wine permit was divine. Priests and rabbis were not the only individuals taking advantage of the sacramental loophole. As early as 1922, a large booze ring was caught running out of a Chicago hotel. Members manipulated government certificates. One Kentucky distillery shipped 177 barrels of whiskey for sacramental purposes to the ring, another 3000 cases. Members of the gang altered orders from rabbis, diverting the sacramental sauce for their profit. One rabbi provided an order for 600 gallons of wine and another 700 gallons. The ring adjusted those orders to 6000 and 7000 gallons, respectively, and sold in Chicago. Unlicensed druggists assisted in the racket, taking delivery at storefronts boasting a few cotton swabs and other items suggesting legitimacy. Instead, the stores were fronts for diverted alcohol (“Dry Agents Find a Big Booze Ring,” 1922, p. 1). Now we turn to our last group of characters, the Enablers and Hypocrites, including the enabling politicians who made Violators and Line Tip-Toers possible.

References American Medical Association. (1921). The Referendum on the Use of Alcohol in the Practice of Medicine. Journal of the American Medical Association, 77 (26), 2075–2078. American Medical Association. (1922). The Referendum on the Use of Alcohol in the Practice of Medicine: Final Report. Journal of the American Medical Association, 78(3), 210–231. Cowen, R., & Joyce, B. (1920). Oh! Doctor. Retrieved from https:// digitalcommons.library.umaine.edu/cgi/viewcontent.cgi?article=2285& context=mmb-vp. Dobyns, F. (1940). The Amazing Story of Repeal: An Expose of the Power of Propaganda. Chicago, IL: Willet, Clark and Company.

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Dry Agents Find a Big Booze Ring. (1922, September 6). Sioux City Journal, p. 1. Retrieved from newspapers.com. Higham, J. (1984). Send These to Me: Immigrants in Urban America. Baltimore, MD: Johns Hopkins University Press. Hines, N. (2017, January 5). How Jewish Bootleggers Saved the Day During Prohibition. Retrieved May 23, 2019, from Vinepair website: https://vinepair.com/ articles/jewish-prohibition-bootlegging/. Nespor, C. (2010). Prescription Forms and Stubs for Medicinal Alcohol, 1933 [Photograph]. Retrieved from https://melnickmedicalmuseum.com/2010/ 04/07/medicinal-alcohol-and-prohibition/. Okrent, D. (2010). Last Call. New York: Scribner. Paterson, E. S., & Moulton, A. N. (1908, April 4). Prohibition Does Not Prohibit. Belvidere Daily Republican, p. 3. Retrieved from newspapers.com. Rabbis to Judge of Sacramental Wine Legality. (1931, June 20). Chicago Tribune, p. 9. Retrieved from newspapers.com. Rothstein, Wi. G. (1972). American Physicians in the Nineteenth Century. Baltimore, MD: Johns Hopkins University Press. Seized Wines for Church Use, Says Firm on Bowery. (1921, March 30). New York Herald, p. 20. Retrieved from newspapers.com. Sprecher, H. (1991). “Let Them Drink and Forget Our Poverty”: Orthodox Rabbis React to Prohibition. American Jewish Archives, 43(2), 135–179. Volstead Act. (1919). Wynne Is Upheld in 3 Alcohol Cases. (1928, June 21). The Philadelphia Inquirer, p. 8. Retrieved from newspapers.com.

CHAPTER 5

Enablers and Hypocrites

Abstract Costs of breaking the law were reduced through actions of Prohibition Era enablers and hypocrites. Politicians and law enforcement officials took bribes and overlooked abuses of the law for self-enrichment. Others actively participated in liquor syndicates. Stories of corrupt politicians and law enforcement officials enabling violators and line tip-toers are provided in this chapter as are tales of wealthy hypocrites speaking publicly about the outrages of Demon Rum while sipping cocktails with friends in their private parlors. Keywords Corruption · Bribery · Law enforcement · Becker · Stigler

In previous chapters, we discussed the targets of the 18th Amendment and the violators and line tip-toers who found opportunities made available by the law. Throughout those chapters, much was made of the role of enforcement on their choice to participate in illegal opportunity or treding the boundary of legitimacy. This chapter explicitly examines federal and state level enforcement and the economic incentives provided to those involved. Malversation and hypocrisy abounded, enabling the rise of the criminals and grafters drunk on power in the Roaring, or more accurately Pouring, Twenties. Many of the vocal dry supporters quenched their parched throats with the finest of wines and liquors in their mansion parlors, including that in the large white one on Pennsylvania Avenue. Report #2 of the Wick© The Author(s) 2019 A. L. Kassens, Intemperate Spirits, https://doi.org/10.1007/978-3-030-25328-8_5

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ersham Committee put it best: “As to the prevailing corruption, it has its foundation in the profit involved in violations of the National Prohibition Act” (Wickersham, 1931, p. 106). Profits can be the meanest of incentives. An enforcement mechanism is needed for laws altering individual behavior, particularly when both parties do not voluntarily enter into the agreement. Enforcement mechanisms include enforcement officials, fines, and incarceration. How can we use the notion of rational choice to determine the optimal amount of law enforcement? Luckily, economists like George Stigler1 drew a blueprint for us. If the goal of enforcement is a level of compliance with the law in question, but complete enforcement is not possible or desirable because it is too expensive, particularly when we consider opportunity costs, what is the optimal level? Every dollar put toward enforcement of one law is a dollar that is not put toward something that society or individuals’ value. Enforcement requires funding. Government funding comes from tax dollars. There is a maximum willingness to pay in taxes before voting politicians out of office. Assuming we are not at 100%, a higher level of enforcement is possible, but it comes at a cost in terms of dollars and liberty. The optimal structure of enforcement activities has several properties (Stigler, 1974). First, penalties, or at least the expected penalties, should increase with the potential gains from the commission of the crime. For example, the penalty for stealing a tricycle should be less than stealing a Porsche since the monetary gains to the criminal from the later are likely greater than the former. Second, the level of expenditures on enforcement should be successful and efficient. Greater expenditures should result in improved prevention and enforcement. Specifically, the next dollar spent on enforcement should reduce offenses. That next dollar spent should also be at least equal to the benefit of spending that same dollar somewhere else. In other words, even if the next dollar spent on enforcement reduced criminal activity, but it would bring greater benefit if spent on public education, it

1 George Stigler was awarded the Nobel Memorial Prize in Economic Sciences in 1982 and was a part of the University of Chicago’s powerhouse of economics. He wrote prolifically on many topics, particularly regarding the economics of regulation and information.

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is not optimal to spend that dollar on law enforcement.2 The dollar should go to enforcement if it yields the greatest benefit relative to other options. The job of enforcement falls upon the agency empowered to do so. Taxpayer dollars are appropriated to fund the agency and it is expected to carefully follow its mandate. What are the incentives? People, including law enforcement agents, respond to incentives. Training is typically required before gaining employment as an agency officer followed by testing and interviews to ascertain the qualifications of the potential agent. At any period, the agency has a set number of positions to fill at a given level of compensation, each with qualified and interested applicants. A simplified version of this labor market is illustrated in Fig. 5.1. The price of labor, shown on the y-axis, is the compensation package while the quantity is the number of laborers. For simplicity, the demand for agents is fixed at quantity L* defined by a government mandate. Demand is shown as a vertical line up to the appropriated level because the number of positions does not depend upon the compensation offered.3 The supply of workers describes the people searching for an agency job which increases as the compensation offered for the jobs increases. Assume that there is a constant flow of people who qualify for the positions. Under a perfectly working market, eventually all agencies looking for agents will find all that they need at a compensation level of C* and all the people willing to work for the agency at a compensation level of C* find a job. Within this context, we will return to the 1920s and soon meet our enforcement characters, Agent Fuzzy Law and Mayor William Barathrum. The Volstead Act was the teeth behind the 18th Amendment, although it quickly became clear that without adequate resources those teeth resembled dulled bony protrusions rather than fangs. As with any government activity, funds were appropriated by the government to put enforcement into action. Since states and the federal government were to enforce the law in tandem, both needed to set aside funds. This raises the issue of opportunity cost. Any dollars put toward Volstead work were not available for other programs or

2 Another issue with enforcement is that society is harmed by overenforcement as a significant number of innocent parties will be charged and forced to spend scarce resources defending themselves. Some of the innocents may also be convicted and wrongly punished which is also a loss to society. 3 Technically, demand is determined by appropriated government funds shown by the area of the rectangle C*L*. The agency can pay various wages to various numbers of people, but the total expenditure cannot exceed the appropriated dollar amount.

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Fig. 5.1 Example labor market (Source Author generated graphic)

activities. Additionally, considering the world of politics, politicians think about maximizing their likelihood of being reelected, particularly as the end of their term nears. Politician calculus concerning the allocation of the scarce resource “taxpayer money” includes the popularity of a program among their electorate. Government officials had a year to prepare for the age of Prohibition if one only considers the day that the 18th Amendment was ratified, longer if one suspects politicians of forward-thinking behavior and adept strategy. Several groups were initially tasked with the enforcement of the 18th Amendment and National Prohibition Act including the newly formed Bureau of Prohibition, known as the Prohibition Unit, created by the Bureau of Internal Revenue (today the Internal Revenue Service [IRS]), Customs Service, and the Coast Guard. The Secretary of the Treasury Glass and Commissioner Roper voiced concern about the resources available for the enforcement of such a colossal program, particularly since their employees were trained in the enforcement of tax laws, an activity that kept them quite busy. Collecting liquor taxes is quite different than chasing bootleggers. They lamented that prohibition enforcement was beyond their skill set and would become overly burdensome on their resources. The agency voiced its concerns before the passage of the Volstead Act, but

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was ignored due concerns that creating a new bureau to enforce the law would risk its passage. Congress indicated that it believed the policing of liquor laws similar enough to that of internal revenue agents. It is also likely that the Bureau of Internal Revenue was selected as the leader in Volstead enforcement because Customs and the Coast Guard were also a part of the Treasury Department facilitating cooperation of the three departments. All were under the supervision of the Assistant Secretary of the Treasury in charge of Prohibition (Webbink, 1929). The Secretary of the Treasury created the new branch of the Bureau of Internal Revenue with John Kramer as the first Commissioner of the Prohibition Unit. The Unit was not created by law and appropriations were never laid out specifically for it. Under Kramer’s charge were twelve supervising agents, each in charge of one of the regional departments across the country, each with a crew of agents. States were provided a director and assisting agents. Liquor licensing was largely controlled by Washington. Along with the duties of liquor law and tax enforcement, the Bureau of Internal Revenue also supervised narcotics and industrial alcohol. The Prohibition agents were not required to take the Civil Service Exam and thus were not subject to its laws and requirements. Penalties for Volstead violations varied. For example, the first offense for illegal manufacture or sale of intoxicating liquors was up to a $1000 fine (over $13,000 in 2018 dollars) or a maximum of six months in jail. Second violation fines ranged from $200 to $2000 (around $2600–$26,000 in 2018 dollars) and imprisonment of one month to five years. Enforcement commenced immediately after the law went into effect. The first liquor law violation arrest was made by Prohibition agents in Peoria, Illinois, two hours into the dry spell when they captured two truckloads of whiskey that were apparently stolen by distillery employees. In addition to labor and monetary resources, enforcement of the law required support from the populace. Voters did not pass the 18th Amendment and the Volstead Act, politicians did. Effectiveness of the law required support of the people. The government didn’t need or want citizen soldiers, but enough of the population needed to believe in the cause and obey the law to avoid it becoming a laughing stock and a sham. How did people feel about it? Fig. 5.2 shows the results of two national surveys conducted in 1922 and 1926. The Literary Digest (1922) and National Enterprise Association (1926) surveys included over 922,000 and 1.7 million, respectively, so sample size is not an issue for interpretation of the results. A few years after America became the land of the dry, the Literary

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Fig. 5.2 Popularity of the 18th Amendment in 1922 and 1926 (Source Boeckel [1926], author generated graphic)

Digest,4 a weekly magazine, reported that only 39% of respondents were in favor of enforcement. The remainder wanted modification to the law or outright repeal. By 1926, the National Enterprise Association, a newspaper syndicate, published a poll showing that 81 percent of respondents favored repeal or modification. Only 19% of the nation, as represented by the poll, favored enforcement. That ranks with the biggest losers in Presidential approval ratings: Franklin Pierce and Millard Fillmore (17% each). However, not even the law was as dry as President John Tyler’s approval rating of 9% (“Presidential Favorables,” n.d.). Most of the public found issues with the law. Support, although never strong, waned significantly less than a decade after Prohibition began. Law enforcement officials including police officers and prohibition agents were sent into the field to enforce liquor laws. Our example official, as briefly introduced earlier, is Agent Fuzzy Law. As with Rotten, no judgment is passed upon Agent Law. Rather we seek to view opportunities available to him through an economic lens. Fuzzy is employed in a 4 Unfortunately for the Literary Digest, its political polls were quite successful at selecting the winner of the Presidential election. It did so correctly in 1916, 1920, 1924, 1928, and 1932. Its 1936 polls predicted that Governor Landon (R-Kansas) would overwhelmingly win the election. Instead, he earned one of the lowest electoral vote counts in Presidential election history, carrying only Vermont and Maine.

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potentially dangerous job with a low salary, but he and his fellow agents clamor for the position. Why is that? Riskier jobs, ceteris paribus, require a higher wage than a safe job, a difference called a compensating differential. Consider two labor markets. One is a “safe” job while the other is a “risky” job. If wages are the same in each, most people would prefer the safe job. If we need people to take the “risky” job, we must pay more to incentivize people to accept the risk. By all reports, the supply of people applying for agency positions, particularly when the Civil Service Exam was not required, was strong. If the number of spots on the agency roster was fixed, the generous supply placed downward pressure on the agent wage. Why was the supply so robust despite the low compensation? There are several possibilities. First, Fuzzy may supply his services to the Bureau of Prohibition because he strongly believed in the mission behind the 18th Amendment. His dry spirit and pride in upholding the law covered the compensating differential. In the 1920s, the government did not offer benefits like insurance and retirement. Other non-market benefits, such as pride added to the market wage, might provide Fuzzy adequate compensation for the inherent risks of the job. Another reason is less puritanical. Bribes and graft were all too common. As time wore on and word got out, Fuzzy viewed the total compensation as the market wage paid by the government plus any bribes and favors he mustered. Particularly, if Fuzzy was not afraid of being highly persuasive and he finds people with a lot to lose for a liquor violation, the greasy bonus may well push his total compensation above any job he could imagine. An agency job is the best option for Fuzzy. Turning to politicians, we meet Mayor William Barathrum, also known as Pit, like the bottomless pit of greed that he is. One way to model politician behavior is to consider what they seek to maximize in their actions, just as we did with Rotten the potential criminal and Fuzzy the potential agent. A politicians’ planning horizon is the duration of their elected term. Assuming they desire to be reelected, their constrained optimization problem is to maximize the probability of being elected given the constraints that they face, including budgetary ones. Winning an election typically requires winning a plurality of votes cast. A key is keeping constituents happy, especially in the year leading into the election. Running for office is expensive, thus keeping the coffers full is also crucial for surviving the election juggernaut. If Mayor Barathrum wants to maximize his chances of staying Mayor and avoid becoming Citizen Barathrum, he needs to do things to keep voters happy and keep money coming into the campaign fund. Both motivations

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breed corruption within the voting market where voters supply their votes and politicians demand them. Corruption comes in several forms, but we focus on that in which a private individual or organization bribes an official, like Mayor Barathrum, for influence over the distribution of public benefits or costs (Rose-Ackerman, 1996). Barathrum’s greasy pals want public benefits, such as licenses, and avoid public costs, such as fines. The level of corruption in a given city, state, or country directly depends upon the honesty and integrity of both private citizens and public officials, level of benefits available, riskiness of participation, and relative power between the official and the bribe peddler. Ceteris paribus, the lower the integrity of parties involved and riskiness of participation in the agreement, and the greater the benefits available and relative power of Pit, the greater the chance that he participates in a corrupt activity. The potential gains from low integrity are straightforward. However, the other factors are perhaps less so and thus deserving of a touch more detail. First consider risk. When the chances of getting caught are high, the corrupt opportunity seems less attractive since the chances of getting away with corruption are not strong. Pitt is quite likely to be risk adverse. What about relative power? The more muscle or bargaining power Mayor Pit can flex, the greater the share of the pie he can expect to extract from the corrupt activity. If he can push Rotten around and anticipates a big piece of the double-dealing delight, Pit is more likely to participate in the activity. The relationship between booze and politics, including healthy smatterings of corruption, was nothing new to the Prohibition Era. George Washington famously lost an election in Virginia early in his career allegedly because he did not bring enough booze for voters. He astutely flooded voters with spirituous incentives in his next election and won. As the fight for Prohibition ramped up, politicians like Teddy Roosevelt vocalized his disgust in several Irish Democratic politicians who were not only “course and low” but owned saloons (Okrent, 2010, p. 46). These locales were, just as their Colonial tavern predecessors, not only places to get mail and cash a check, but hubs of socializing and gossip. As immigrants flooded the big cities, often saloons were places where men could unwind after a long day of work within a familiar environment. Increasingly, the saloons became central to political machines in places like New York, Boston, Detroit, and Chicago. For example, Michael “Hinky Dink” Kenna lorded over Chicago’s First Ward through his headquarters at “Workingman’s Exchange” saloon. Even America’s Camelot started in Boston booze.

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The connection between politics and liquor law enforcement was a dank and murky one, generously providing rich examples for this book. However, for those who truly believed in the 18th Amendment and wanted to see it enforced, it created a quagmire. The Wickersham Commission included a recommendation to separate enforcement from politics for just this reason, although offered no specific suggestions on how to do so (Wickersham, 1931, p. 123). The challenges faced by legitimate enforcers and the entrenchment of alcohol in the lives of Americans are epitomized by President Hoover and George Wickersham, the lead on the Wickersham Commission, who were members of the Century Association where Senator Brookhart reported “real gin cocktails” were served. Wickersham thus recommended divorcing politics from enforcement but not the alcohol from his lips.

Politicians and Law Enforcement “It is a truism that no laws are absolutely observed or enforced” (Wickersham, 1931, p. 107). The authors of the Wickersham Commission Reports channeled Nobel Prize-winning economist Gary Becker and his work regarding the economics of crime discussed in earlier chapters of this book. Here, the focus is on the economics of law enforcement. Enforcement is expensive and, in contrast to the additional gains from that last percentage of enforcement, is a net loss to tax payers and irrational. Once again, we use the principle of opportunity cost. This premise applies to law enforcement just as it does to individuals. Enforcement of laws and individual adaptation to them use scarce resources such as tax payer money, the court system, and the time of government employees. Choices must be made regarding which laws are enforced, how violations are detected, adjudication of violations, and punishments meted in addition to a system of decision rules for enforcers and potential violators. Becker and Stigler examined how the degree of honesty of enforcers, incentives for honesty in enforcer compensation, the impact of repeated crimes, and the lack of a “victim” in a crime influence the effectiveness of law enforcement (Becker & Stigler, 1974). The first depends upon the supply of honesty of members of a population and the thoroughness that employers and voters examine their history and personality. The second depends upon the relative value of the job compensation versus the gains from bribes and power. When a crime is repeated regularly, like liquor violations, it is easier to develop a relationship between violator and enforcer. Finally, victimless

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crimes, like liquor violations, are easier for the public to ignore compared to those with obvious victims, like a rape or murder. These issues are crucial to understanding why and when politicians and law enforcement officials effectively participated in Prohibition law violations via graft, corruption, and bribes. Today Wyoming is known for its beautiful National Parks and its wideopen beauty. During the Prohibition Era, some of its small towns boasted big corruption, vice, and graft. The cost of violating prohibition laws in towns like Casper, WY, was low due to protection rings that ran through the Mayor’s and Sheriff’s Offices. Prohibition was enforced by two agencies in Wyoming: a federal prohibition agency and the Wyoming Department of Law Enforcement, known as the bootleg squad. Half of the department’s heads resigned due to suspicion or conviction of corruption or gross incompetence. Lawlessness also abounded at the county- and city-level enforcement. Wyoming did not go dry until 1919, on the eve of National Prohibition, while its Rocky Mountain neighbors adopted abstinence much earlier. The fourteen-year experiment with prohibition in the Cowboy State was largely a failure due to an inability, or unwillingness, at the state and county level to enforce the law. Several stories exist to support this view, but we will cover the most flagrant here. The scandal surrounding the Wyoming Department of Law Enforcement began in the year of its inception. On September 7, 1919, Reverend Delo noticed a car off to the side of the Lincoln Highway, a road paralleling the Union Pacific Railroad a few miles outside of Laramie. A knee was peeking above the dashboard. Upon further examination, the Reverend found 32-year-old Frank Jennings slumped, bloody, and dead inside the car, with two gruesome bullet wounds to the head. Jennings was the son of Isaac Jennings, a former state legislator, and a local rancher. An investigation brought officials to three Prohibition agents, John Cordillo, Peter Cordillo, and Walter Newell, whose stories did not match up. The murder case took several twists that included retracted confessions, threats of lynching, a father, Isaac Jennings, paying for evidence of who killed his son, a mother dying of heartbreak, and a jailhouse snitch. After being tried separately, John, Peter, and Walter were convicted and jailed. Peter received the longest sentence, 30–40 years, despite his “jaunty” bearing and “coming debonairly before the court” (“Attitude Adds Years to Term Peter Cordillo,” 1920, p. 5). John and Walter were found guilty of manslaughter. According to courtroom testimony, Frank Jennings lit a cigar and left his sweetheart, Miss Viola Boughton, at 9:05 p.m. to head home. The

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three agents were prowling along the Lincoln Highway in a car allegedly borrowed from known bootlegger Buck Crandall, complete with an extra gasoline tank for hauling illicit booze. They allegedly believed Jennings a bootlegger and aimed to rob him of his haul, rather than arrest him for it as they were hired by the state of Wyoming to do. Another theory is that the agents believed Jennings had a considerable amount of money from a recent cattle sale in Omaha and planned to rob him. In fact, Jennings had deposited the money in his bank account earlier and had less than $2.00 on his person at the time of the incident. The agents passed Jennings truck going in the opposite direction on the Lincoln Highway, made a U-turn, and began following him. The trio of agents pulled Jennings over. Two of them, no one is sure which, shot Jennings after finding out that he had no alcohol or cash in his truck. Jennings suffered two gunshot wounds to the head from a.30-30 caliber rifle and a.38 caliber revolver, guns carried by the three suspects. Prior to being shot, Jennings was also badly beaten. The cigar lit as Jennings left Boughton’s home was found, half-smoked, in his lap. Understandably, the new agency’s reputation was forever tainted and Frank Crabbe, the first State Prohibition Enforcement Commissioner and person who hired the Cordillo brothers despite their dubious past which included involvement in an earlier murder, was replaced after less than a year on the job (“Frank Jennings, Laramie Man, Is Shot by Slayer,” 1919; Rea, 2016; Roberts, 1998, 2012). The Jennings murder was just one of a host of crimes in Wyoming during the Prohibition Era linked to local politicians and law enforcement officials. Casper, WY, the county seat of Natrona County, was known as the center of vice in the Rocky Mountains (Rea, 2016). The discovery of the Salt Creek Oil Field brought young, single men who worked the fields and sought entertainment in their free time. Mining, ranching, and railroad industries also employing Casper men attracted a similar demography which added to the demand for vices as a respite from their hard labors. Gambling was found in local cafes and bars. Alcohol and prostitutes, common complements, were easily procured. Bettors, imbibers, and johns needn’t go to blind pigs and speakeasies to quench their thirst, as many saloons and brothels operated in the open. The completion of the Pathfinder Reservoir in 1909 abated flooding from the North Platte River and opened sandy lowlands for expansion and habitation, an area that became known as the Sand Bar. Because of the oil boom and rapid influx of new residents, many lived in tents along unpaved roads in the Sand Bar. “The district also became

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well known as a haven for thieves, burglars, footpads,5 automobile thieves, and safe crackers” and a stronghold for prostitution with an estimated 35 houses of ill repute in the area alone (Jones, 1981). The Salt Creek Oil Field may have been the world’s largest producer of oil, but it was dry, of alcohol at least. It was a company town and that was how the investors wanted it. That didn’t quash the desires and demands of young men, however, so small towns popped up nearby to complete the market by setting up supply. Edgerton was one such town, today considered a part of the Casper Metropolitan Statistical Area.6 In 1928, an anonymous tipster started writing letters to Prohibition agents, including Lon Davis, in Seattle, Washington. Lon Davis was in charge of enforcing Prohibition in Wyoming and other western states. The letters detailed the payoffs and corruption in Edgerton, including the open production of whiskey and involvement of the Justice of the Peace. Around the same time, Governor Emerson (WY) began an investigation of State Prohibition Enforcement Director, William Irving, and requested Lon Davis’ help. Emerson had received a call from Sylvester Taylor on November 15, 1928, requesting Irving to go to Thermopolis to see Taylor. Emerson sent his assistant George Smith instead. Taylor, apparently under the impression that the Governor and his officials were crooked, asked if he could pay protection money to operate a still and stop the importation of whiskey from Kemmerer that was interfering in his business. When Smith declined Taylor’s requests, Taylor said that he might have to go over his head and that he had “done business with other officers” (“Disappearance of Confiscated Liquor Told,” 1930, p. 1). Smith relayed this information to Emerson who promptly contacted Davis to aid in an investigation of Commissioner Irving. The investigation resulted in a conspiracy case of substantial proportions which epitomized the enablers of the era. Soon after the investigation into Director Irving began, he abruptly resigned (December 1928) claiming health concerns. The resignation did not quash the rumors of corruption. State Senator Leslie Miller introduced a bill in 1929 to investigate the rumors and produce a report by the end of the legislative session. The report concluded that although there was no tangible evidence to bring forth formal corruption charges against Irving,

5 A footpad is an old term for a thief who primarily preys on pedestrians. 6 Edgerton also claims the first lighted football game, but the state historical society disputes

this.

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the agency was corrupt all the way to the top, with only two honest Directors in its ten-year history. The embarrassment didn’t stop there. On May 17, 1929, a federal indictment was returned against twenty-nine people including Irving and his assistant James Ader, whose whereabouts were unknown when the bench warrants were issued. All were charged with conspiracy to traffic alcohol, whiskey, gin, wine, and beer. Irving was also charged with running a protection ring, charging bootleggers to avoid arrest and speakeasies for permits. Irving remained on the lam for two months, finally turning himself into California officials and proclaimed his innocence of all charges. The feds decided to try all 26 men at once (Ader and one other man were still at large, and one man was not formally charged), starting on January 28, 1930. Testimony indicates that Irving charged speakeasies $50 per month to operate and additional fees for tips regarding visits by federal agents. Additionally, Irving charged bootleggers $100 per gallon of alcohol manufactured as protection money. James Ader collected the monies from several locations across the state including speakeasies in Thermopolis, Rawlins, Cody, and Kirby and stills in the mountains. Mrs. Jessie Schmitt, a known bootlegger, testified that she and her husband paid Ader each month by check which she understood as protection money for their Thermopolis speakeasy. One of her checks was introduced as evidence. Mrs. Schmitt assured the court that the money was intended for Irving as she and her husband had a dispute as to how to spell “Irving.” In exchange for Mrs. Schmitt’s testimony, charges against her husband were dropped. Irene Taylor, ex-wife of Sylvester Taylor, declared Irving collected $100 per month from her through A. E. Schmitt (husband of Jessie Schmitt) so that she could run a boarding house and a pool hall with whiskey embellishments. Ms. Taylor witnessed Schmitt give money to collector Ader and others. Ader also contacted Taylor and Schmitt about obtaining a monopoly on whiskey in the area in exchange for the tidy sum of $1 per gallon and $100 per month in protection money, a deal the two accepted. Thermopolis Sheriff J. A. Parker testified that Irving had whiskey delivered to his office. A letter including such a request was introduced as evidence as was testimony by express agents who handled the whiskey along the way. The whiskey was apparently from a bust by Irving’s Prohibition agents, including Agent Denny. They found more than 1015 gallons of liquor at one Red Canyon still. Ten gallons of the haul, saved for evidence in Commissioner Irving’s safe, disappeared after his resignation. Prior to the resignation, some bootleggers had ceased payments citing it as a bad

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investment. Agent Denny stated that several violators he arrested complained that they had paid the protection money but had been doublecrossed. In an additional twist, the defense cross-examined Agent Denny about his canoodling with Mrs. Schmitt, but he clarified the interactions did not begin until after the Schmitt divorce. Ultimately, only five men were found guilty in the federal case. W. C. Irving received the harshest penalty of the five and was the highest ranking official ever found guilty of Prohibition graft. He was sentenced to eighteen months in the federal penitentiary at Leavenworth and assessed a $1000 fine, equivalent to just under $15,000 in 2018 (Editorial, 1930, p. 9). The Irving case was considered a part of a larger group of conspiracies across the western states of Oklahoma, Wyoming, Idaho, and Texas referred to as the “Rum Rebellions” netting over 400 indictments in 1930. In Oklahoma, a federal case including 102 indictments began February 1, 1930, just as testimony ended in the Irving case in Wyoming. The conspiracy ring in Oklahoma made that in Wyoming look like child’s play due to its reach and the number of high-level officials involved, including one who was recommended to his position by a lady’s aid society. Oil was found in Seminole County in 1924, including the Betsy Foster Number One, the Cromwell pool, and the Fixico Number One, collectively known as the Greater Seminole Field. The field spanned into neighboring counties, including Pottawatomie. The gushers brought thousands of people, and like the Salt Creek Field in Wyoming, many craved booze, women, and gambling in their free time. The town of Cromwell became known as the “wickedest town in the United States,” which is quite a statement given the goings on in Chicago and New York at the time. The federal case in Oklahoma showed the country how enmeshed officials can become in illegal activity and enable its rapid growth despite the law. The first to take the stand in the 1930 Oklahoma case was Roy “Skinny” Grace, a self-confessed fixer and collector for the alleged booze ring on trial who was paid $25 a week to carry a gun, make collections on over 200 bootleggers, and be “tough with stubborn customers” (“Woman Tells U.S. Court of Seeing Bribes,” 1930, p. 1). He provided details of the ring and testified that he saw the Sherriff, Frank Fox receive money for illegal activities. Details of the testimony suggest Grace a challenging witness for the prosecution as he dodged questions and often gave vague or illusive answers. Grace’s testimony was followed by Ruth Morgan May, who had much to say about the nefarious officials and was more forthcoming than Grace. Miss May was the common law wife of the recently deceased Deputy

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Sheriff Motley and assisted him in organizing the booze ring and record collections and debits.7 In that role, she was present when Motley and Duce Barron, a Special Deputy Sheriff, first discussed the enterprise in November 1926. They wanted to take advantage of the young workers from the local oil fields and saw it as a lucrative opportunity for them and other officers. Barron was the man for the job as he had prior experience with liquor lines at other oil fields and was familiar with the green generated by the laborers’ thirst. After getting the OK from Sheriff Fox, nephew of Barron, the game was on. May also testified that once she took $10 from her purse to complete the $150 owed to Randall Pitman, County Attorney, and stated for the record that she saw both Fox and Pitman accept the weekly dues money from the liquor ring on many occasions. Trouble between the city and the county altered plans of the liquor ring. Members of each wanted a piece of the action. Modifications to the payment system were made to satisfy all parties demanding a cut. As oil fields dried and others were discovered, the ring reallocated its resources and operations to meet the greatest demand. The operation, or line, continued to grow. Eventually the Earlsboro Chief of Police Clarence Burdette became the “field general of liquor operations covering oil field towns and the city of Shawnee” and a star witness in the federal case, testifying February 3, 1930 (“18 Months and Fine of $1000 Fixed by Court,” 1930, p. 1). Despite the charges against him, he received praise in the local paper as “a young man of slender build, is well groomed and handsome even to the point of being unusually attractive as he strolls about the corridors of the federal building” (“U.S. Testimony in Whiskey Case Is Soon to End,” 1930, p. 1). Not everyone was enamored with Burdette. The prosecution received numerous letters from the public during the trial praising their efforts and denouncing Burdette and the Pottawatomie rum ring. One such letter came from the Men’s Bible Class at the Earlsboro Baptist Church, stating “[w]e want to encourage you in your efforts to convict law violators. We pledge you our support” (“Lawyers in Rum Trial Win Praise,” 1930, p. 4). Although newspapers claimed Burdette’s chivalrously testified to protect his wife, he was likely induced to confess and testify due to a nifty Oklahoman alteration in the traditional Prisoner’s Dilemma. The Prisoner’s Dilemma is a well-known strategy game in which two hypothetical prison-

7 Grace indicated that Motley died while he was in jail and that the death was suspicious.

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Fig. 5.3 Traditional prisoner’s dilemma (Source Author. The years used are selected by the author for illustration purposes)

ers are held separately, each accused of involvement in the same crime. As Fig. 5.3 illustrates, if both confess, each gets ten years of prison time, if both stay mum, each gets five years of prison time. If one confesses and the other stays mum, the rat gets zero years and the silent partner gets twenty years. Under this setup, it is optimal for each prisoner to confess regardless of what they know or think the other will do. However, Oklahoma law looked favorably upon protomartyrs, which potentially altered the traditional game. The first to come forward gets zero punishment (or close to zero) regardless of what others do later. Assuming one feels safe being a confessor, there is a rush to confess in the altered game8 where only one prisoner getting the gift of freedom. Chief Burdette became a protomartyr, much to the prosecution’s delight. After serving for several years as a line9 “fixer” for the liquor ring, Chief Burdette bought the county liquor rights from Sheriff Fox after his term in office expired, paying Fox a residual of $1500 per month, just under $22,000 per month in 2018 dollars, in protection money. Yes, an illegal operation had a price. Burdette shared the profits with Sam Hunnicutt, L. F. Massey, and Barney Lovette and hired Albert “Curley” Barrette, D. W. Denham, and Vavour Sherill as bootleggers. He also set up a still on his 8 There may be other costs associated with confessing which may outweigh the benefits of being first, such as a hit put out on you, or other subtler punishments. These are known as “enforcement mechanisms” in the game theory world. 9 If an establishment stayed “on the line” they would be clear of interference from local law enforcement regarding liquor law violations.

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Uncle Homer Knapperberger’s Earlsboro farm, who was none other than the mayor of Earlsboro. One of Burdette’s chief confidants and assistants was his wife who, among other things, assisted in the payments to Fox. Protecting his wife is the reason Burdette gave for cooperating in the federal case: “If my wife had been kept out of this mess I would have played the game to the last ditch. I knew what chances I was taking and I am willing to take my medicine. I have always played the liquor game that way” (“U.S. Testimony in Whiskey Case Is Soon to End,” 1930, p. 1). Burdette claimed that he became the “liquor king” in the county by 1929, with his operations averaging $7000–$8000, or $102,000–$116,500 in 2018 dollars, in wholesale liquor sales per month. Additionally, his operation claimed four cars, one truck, two stills, and many men in its employment. King Burdette indeed! The quantity of sales also indicates the Sooner thirst for liquor, which sold for $10 per gallon, or $146 in 2018. Burdette dated his entry into the liquor business in March 16, 1927, when he drove from Chickasha to Earlsboro and sold 4000 gallons of whiskey after getting permission from Fox and Knapperberger. Eventually, he got protection money from over 200 establishments selling whiskey, including drug stores, cafes, boarding houses, filling stations, and dance halls. His reign as king ended, whether as a gallant husband or a protomartyr, when warrants were issued for 65 Pottawatomie County residents in August of 1927. He and his wife fled to California but were caught several days later. Burdette lamented both the $1500 he spent on the trip to California and not heeding his inner urge to get out of the racket stating that “[t]hings were getting too warm and I knew we had about reached the end of our rope” (“U.S. Testimony in Whiskey Case Is Soon to End,” 1930, p. 1). Once the defense took over, it started its case attempting to exonerate its own Attorney Pittman who they described as an honorable man who served the county honorably for years, convicting 250 people of liquor law violations. Pitman’s name was drug into the mud by bootleggers and other dregs of society over the duration of the case. The defense took issue with testimony of the prosecution’s first two witnesses Roy “Skinny” Grace and Ruth Morgan May expounding that Pitman never dealt with either individual in any capacity. Pitman claimed he was out of the state on the date Grace testified he met with him and that May was never seen in the courthouse, as she said, and was a “low woman.” In contrast, the defense offered jurors the “highest type of citizens…to tell the character” of Pitman (“Defense Will Try to Prove Record Good,” 1930, p. 1). In the end, thirty-

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six people were sentenced, two died during the trial, twenty-two were freed, and forty-two ran away. The Daily Oklahoman cheered that the “[a]rms of the octopus have been severed. A vital thrust into the heart of this hideous creature - the liquor racket of the great Seminole-Pottawatomie oil district has left it in its death throes” (“A Jolt for the Booze Racket,” 1930, p. 54). When the oil dried up in the Greater Seminole Field, it greatly diminished the market for vice and the graft that accompanied it.

Wealthy “It is evident that, taking the country as a whole, people of wealth, business men and professional men, and their families, and, perhaps, the higher paid working men and their families, are drinking in large numbers in quite frank disregard of the declared policy of the National Prohibition Act” (Wickersham, 1931, p. 36). Many of the wealthy violators were the same ones who screamed “dry” as they ran for office or condescended to others from 5th Avenue. Some had their legal cake and ate it too by voting and promoting the country dry while hoarding booze in their mansions for consumption in the desert. It was legal to keep and drink alcohol gathered in one’s home before the 18th Amendment went into effect. Not everyone could afford to purchase years’ worth of booze and even if they could, where would they store it? The wealthy had the funds to invest in boozy future consumption and had places to store it all in their enormous homes. Some even built storage, such as a large wine cellar, just for the occasion. Prohibition certainly witnessed inequality of the spirits. The wealthy had the resources to purchase large quantities of alcohol prior to prohibition and drink it legally in their home. While this might seem “unfair” to poorer folks who also wanted a stash to get them through the dry times, it was a perfectly legal way for the wealthy to choose to allocate their wealth. The issue is that some of these potent nest eggs were owned by some of the most outspoken prohibitionists. Being a hypocrite is also not illegal, but it is troubling since individual actions are at odds with professed morality. Being of wealth also provided political influence to impact the passage of the 18th Amendment that many of lesser means did not support. The relatively poor however had little political influence. While the poor either abstained or found booze through illicit means, the wealthy drys sat in their parlors toasting themselves with an evening tipple for saving society from Demon Rum.

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What was the incentive to demand one way of life for the public, but live another? To declare that the masses should not have alcohol, but continue to imbibe in private? There were a great number of dry-drys or teetotalers who supported Prohibition. The wet-drys were the hypocrites who were primarily driven by profit. Many held investments in entities which they believed would prosper under an alcohol ban. Lee Shubert was a wealthy theater owner in New York who viewed bars and theaters as substitutable services. Under Prohibition, the price of going to a bar (speakeasies) increased dramatically, and he anticipated customers turning to his relatively cheaper establishments for entertainment. Lee and his brothers Sam and J. J. started their entertainment business from scratch in Syracuse, building up $20,000, enough to move the business to New York City. In a 1925 interview, Shubert explained his success: “It is Prohibition that has helped the theater in the United States become a mighty force.” In between sips of his Bronx cocktail, he gleefully explained that there was nothing else for people to do with the closure of bars and the lack of “pleasing beverages” (Dale, 1925). President Woodrow Wilson amassed a substantial wine collection during his tenure. He did not move the assemblage until after leaving office, when it was illegal to do so. Using his Presidential connections, Wilson received special permission to transport his wine to his Washington home in March of 1921. Allegedly he wanted the collection quickly moved out of fear that President Harding would consume it all. Many other members of Congress voted dry but were drenched in private. Congress even had a go-to bootlegger to keep them wet, George Cassiday. Cassiday had his own office in the Cannon Office Building, simplifying the Congressional ordering process. Not shy, Cassiday, known as the “Man in the Green Hat,” penned a series of articles for The Washington Post in 1930 detailing his business and customers (Roller, 2014). Vice President Curtis became so disgusted that he installed an undercover Prohibition agent in the Senate offices to catch Cassiday and clientele in an exchange. The agent worked for three months collecting evidence including the bootlegger’s client list, which Commission Doran described as “extensive.” Cassiday and his “pinkcheeked youth” employee, who earned $1800 per year, were eventually booted from their congressional office. None of the Congressmen were charged (“Dry Spies Spot Captiol Drinkers: Move Bootlegger,” 1930, p. 1; “Would Halt Bootleg Sale to Senators,” 1930, p. 1). So ends our account of Prohibition Era characters, a wild, creative, outrageous group. There were winners and losers, risk-taking, graft, injury,

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death, and murder. Some lost fortunes while others made them, all because of a constitutional amendment aimed to make America a better place. The next and final chapter examines if indeed America achieved the utopian ideal promised by the ASL, WCTU, and others.

References 18 Months and Fine of $1000 Fixed by Court. (1930, February 3). Casper StarTribune, p. 1. Retrieved from newspapers.com. A Jolt for the Booze Racket. (1930, February 23). The Daily Oklahoman, p. 53. Retrieved from newspapers.com. Attitude Adds Years to Term Peter Cordillo. (1920, July 29). Casper Star-Tribune, p. 5. Retrieved from newspapers.com. Becker, G., & Stigler, G. J. (1974). Law Enforcement, Malfeasance, and Compensation of Enforcers. The Journal of Legal Studies, 3(1), 1–18. Boeckel, R. (1926). Prohibition in the United States. Retrieved from http://library. cqpress.com/cqresearcher/cqresrre1926060500. Dale, A. (1925, July 7). Shubert Lauds U.S. Prohibition. The San Francisco Examiner, p. 15. Retrieved from newspapers.com. Defense Will Try to Prove Record Good. (1930, February 8). The Daily Oklahoman, p. 1. Retrieved from newspapers.com. Disappearance of Confiscated Liquor Told. (1930, January 29). Casper StarTribune, p. 1. Retrieved from newspapers.com. Dry Spies Spot Captiol Drinkers: Move Bootlegger. (1930, November 1). The Evening Times, p. 1. Retrieved from newspapers.com. Editorial. (1930, February 7). The Irving Case. Wyoming Eagle, p. 9. Frank Jennings, Laramie Man, Is Shot by Slayer. (1919, September 10). Casper Star-Tribune, p. 1. Retrieved from newspapers.com. Jones, W. (1981). History of the Sand Bar (1888–1977). Casper, WY: Baso Inc. Lawyers in Rum Trial Win Praise. (1930, February 5). The Daily Oklahoman, p. 4. Retrieved from newspapers.com. Okrent, D. (2010). Last Call. New York: Scribner. Presidential Favorables. (n.d.). Retrieved from Rasmussen Reports website: http://www.rasmussenreports.com/public_content/politics/favorables/ presidential_favorables. Rea, T. (2016, July 16). Booze, Cops, and Bootleggers: Enforcing Prohibition in Central Wyoming. Retrieved February 24, 2019, from WyoHistory.org website: https://www.wyohistory.org/encyclopedia/booze-cops-and-bootleggersenforcing-prohibition-central-wyoming. Roberts, P. (1998). The Prohibition Agency’s First Case: Official Zeal, Mistaken Identity, and Murder in Wyoming, 1919. Western Legal History, 145(11), 145–161.

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Roberts, P. (2012). Regulating Liquor: Prohibition Enforcement, Official Corruption, and State Efforts to Control Alcohol After Prohibition Repeal. Wyoming Law Review, 12(2), 389–451. Roller, E. (2014, April 11). How Congress Stayed Wet in the Dry Years of Prohibition. The Atlantic. Retrieved from https://www.theatlantic.com/politics/ archive/2014/04/how-congress-stayed-wet-in-the-dry-years-of-prohibition/ 360546/. Rose-Ackerman, S. (1996). The Political Economy of Corruption—Causes and Consequences (No. 74). Retrieved from World Bank website: https:// openknowledge.worldbank.org/bitstream/handle/10986/11629/multi_ page.pdf?sequence=1&isAllowed=y. Stigler, G. J. (1974). Optimum Enforcement of Laws. In Essays in the Economics of Crime and Punishment (pp. 55–67). Retrieved from http://www.nber.org/ chapters/c3626. U.S. Testimony in Whiskey Case Is Soon to End. (1930, February 5). The Daily Oklahoman, p. 1. Retrieved from newspapers.com. Webbink, P. (1929). Reorganization of Prohibition Enforcement. Retrieved from http://library.cqpress.com/cqresearcher/cqresrre1929090200. Wickersham, G. W. (1931). Report on the Enforcement of the Prohibition Laws of the United States (No. 2). Retrieved from National Commission of Law Observance and Enforcement website: https://www.ncjrs.gov/pdffiles1/ Digitization/44540NCJRS.pdf. Woman Tells U.S. Court of Seeing Bribes. (1930, February 1). The Daily Oklahoman, p. 1. Retrieved from newspapers.com. Would Halt Bootleg Sale to Senators. (1930, October 31). Oshkosh Northwestern, p. 1. Retrieved from newspapers.com.

CHAPTER 6

Conclusion

Abstract This final chapter reviews the 18th Amendment’s scorecard, providing an analysis of the promised outcomes. Did the constitutional amendment solve the social and economic ills wrought by alcohol? Or did it fail to produce the assured utopia? A review of the unintended consequences of the legislation is provided and a discussion of the unlikely advocates of repeal. The chapter concludes with a description of the end of the “noble experiment” under President Franklin D. Roosevelt and the passage of the 21st Amendment. Keywords Consumption · Productivity · Gross domestic product

Much of history, including that of public policy, includes stories of lessons not learned (or remembered) and repeated actions with significant unintended and unfortunate consequences. Alcohol prohibitions appeared throughout US history and successfully applied through a constitutional amendment in 1920. Staunch Prohibition advocates sought a complete banishment of alcohol from American society but relinquished several loopholes in the final legislation. A primary impetus for Prohibition was to solve the social ills many believed were caused by Demon Rum, including abuse of women and children, delinquent husbands and workers, and gluttonous incivility. Additionally, proponents thought that a teetotaling nation would be more productive and prosperous. © The Author(s) 2019 A. L. Kassens, Intemperate Spirits, https://doi.org/10.1007/978-3-030-25328-8_6

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How did the legislation’s scorecard read? Was it a panacea? Not well and no. People did drink moderately less, but violent criminal syndicates ran the streets of cities like Chicago and New York, people were maimed or killed after drinking poisonous liquor, political graft and corruption skyrocketed, police demanded and accepted bribes to supplement their income rather than enforce the new law, and thousands lost their jobs. Politicians failed to consider the consequences of the 18th Amendment and how rational economic agents adapt to change. The same story appeared earlier in states adopting prohibition before the national referendum, but it was ignored. Prohibition was the first of many government massive intrusions on the lives of Americans. Samuel Mobley of Blackstock, South Carolina, recollected spending the Great Depression in Winnsboro, South Carolina. As a retired cotton trader, he witnessed and experienced the changing role of the government in the marketplace. Mobley observed the acquiescence of Americans to federal government involvement in such things as highway building, health care, and the criminal justice system. Gone were the days of “frantic assertions and demonstrative ebullitions in regard to State’s rights…Andrew Jackson has become a fixed star of the first magnitude of luminosity, and John C. Calhoun an asteroid fading and disappearing into the realm of innocuous desuetude” (Mobley, 1936, p. 2). Between 1918 and 1938, the federal government shifted from a “servant of big business to something like guardian ad litem in a court proceeding” acting for a ward who is unable to act in their best interest. About Prohibition specifically, Mobley quipped that “[w]hiskey caused some trouble for Papa Noah’s family and resulted in some confusion in Uncle Lot’s household. But religion and morals should be taught and inculcated in the church and home, and self-control and temperance should be read and studied from the Bible rather than the Statutory Code” (Mobley, 1936, p. 5). Some saw Prohibition as a waste of time and money particularly for a law that accomplished so little. Mr. MacCurrie of Connecticut in 1938 criticized the waste he observed during Prohibition: “Look at the money that was poured out in the gutter, you might say, tryin’ to enforce prohibition. Nobody will ever know how much. The money spent on enforcement, and the money lost in license fees and the money taken in and never accounted for by the bootleggers. Mon, it’s a cryin’ shame…That was the way of it…It was a horrible mistake. Accomplished nothin’ and did a lot of harm” (Mac-

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Currie, 1938, p. 4). Mr. MacCurrie astutely channeled Henry Hazlitt1 and Frederic Bastiat.2 The money the government spent on enforcement could have gone to help the suffering of the Great Depression, the money businessmen and women spent on license fees could have gone to wages for employees, the booze poured down the gutters could have generated revenue for a proprietor (and utility for the imbiber) which in turn could have gone to wages of employees or to another person in exchange for some good or service. But, as Mr. MacCurrie so aptly stated, “[t]hat was the way of it.” Entrepreneurs abounded during Prohibition, some as small timers and others on a tremendous scale. As the cold, mean grips of the Great Depression strangled the nation, many poor turned to selling liquor to put food on their table. This was the age before subsidized housing, Medicaid, unemployment insurance, and other social safety nets. Losing a job was potentially catastrophic. Cotton picker Essie Watts of Huntersville, North Carolina, described her trials of getting by during Prohibition: “I was scared all the time. I didn’t dare keep none in my house but I was worried every time I heard a car motor” (Watts, 1939, p. 2). For many, the benefits of selling liquor outweighed the costs. Another proselytized consequence of vanquishing liquor from America was an economic boom. As imbibing workers were wrung dry, their productivity was expected to skyrocket. Not only would they get more done with each hour, but Blue Mondays would disappear. Blue Mondays are not the memes of today with people sadly leaving their glorious weekend of Netflix binges, Law and Order reruns, or sport marathons to return to paid work. Blue Mondays were more severe. Men, cashing their paycheck at the local saloon, spent much of it on a weekend bender, leaving their family with little for food and other necessities and often needing to call in sick come Monday morning. The absenteeism was costly to employers since an absent worker produced nothing. Those that showed up were often so hung over that they produced well under their normal level, a cir-

1 Henry Hazlitt (1894–1993) was a journalist with a keen understanding of the work by French economist Fredric Bastiat (1801–1850). His book Economics in One Lesson is a classic that examines the waste generated by government regulation. 2 Fredric Bastiat was a French economist and member of the French Liberal School.

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Fig. 6.1 Productivity and alcohol consumption (Source The data for the figure is taken directly from Warburton [1932]. The per capita alcohol and beer indexes were not available for 1920, so the author estimated them as the average of 1919 and 1921 and calculated the correlation coefficients using the completed set of data)

cumstance called “presenteeism.” Taking liquor away from these rudesbies would result in an economic roar.3 Figure 6.1 shows alcohol and beer consumption paired with an estimate of productivity (output per worker in manufacturing) (Warburton, 1932). It is tempting to pair alcohol consumption and productivity data and look for a relationship. While this allows for estimating a correlation, it does not measure causation. Many other factors influence productivity which is not revealed through summary statistics. This is not to say that Fig. 6.1 is useless, but one should take care in conclusion-making.

3 Some also claimed that taking away liquor would increase economic wellbeing as people spent their money on goods and services other than liquor. This is mathematically incorrect. Spending was simply redistributed across markets. The industries receiving the new spending were better off, while the liquor producers were worse off. Unless the new recipients use the new money in more efficient ways or spend a greater share of it, the redistribution is a zero-sum game.

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The correlation coefficient is a helpful tool for gaging relationships. Its value is between −1 and 1. What does this range imply? If the coefficient is equal to −1, there is a perfect, negative, linear relationship between the variables, if it is equal to 1, there is a perfect, positive, linear relationship between the variables, and if it is equal to 0, there is no linear relationship between the variables, or they are independent. The correlation between worker productivity and alcohol consumption between 1899 and 1927 was −0.30, indicating a negative, although not large, relationship: As alcohol consumption declined over the period, productivity increased. The correlation coefficient between productivity and beer consumption specifically over the same period was −0.62, twice that of per capita alcohol consumption in general. These statistics support the drys’ claim that alcohol reduced national productivity. The stronger relationship between beer consumption and productivity is likely because the productivity measure comes from manufacturing workers, the same men who would leave work, cash their check at the saloon, and wash their earnings down their throat with beer, the working man’s beverage. There is a dramatic break in the data around 1917. Productivity rose above the 1911–1914 average and alcohol and beer consumption fall well off before partially rebounding. By dividing the sample at the break and calculating the correlation coefficients on either side, we can statistically determine if the relationship is different before 1917 and after. This is a crude way of controlling for time effects. Between 1899 and 1917, the coefficients between productivity of alcohol and beer are 0.39 and 0.44, respectively, indicating that prior to Prohibition (wartime or the 18th Amendment) alcohol and beer consumption increased with worker productivity. A likely explanation for the positive relationship is not that imbibing made workers more productive, but that productivity increased despite the increased alcohol and beer consumption. Remember, the correlation coefficient does not account for, and thus can be confounded by, other contributing factors. The manufacturing worker productivity index ranged between 87 and 108 between 1899 and 1917 indicating modest volatility relative to the 1911–1914 baseline, but an upward trend. The same is generally observed with respect to alcohol and beer consumption. The productivity trends could be due to improved technology and management in manufacturing and various market forces in the manufacturing and alcohol markets rather than a causal relationship between each other. More information is required for a more rigorous statistical, but we will leave that to academic journals for now.

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What about the big change in 1917? Productivity increased after 1921 and drinkers moderated between 1917 and 1922. The 1918–1927 correlation coefficients are 0.70 and −0.42 for alcohol and beer, respectively. The productivity index increased by 40 units from 95 to 135. The 18th Amendment decreased alcohol consumption, particularly before 1922. In the years leading into the Great Depression, economic growth was substantial. Construction of roads and electrical utility lines scrambled to keep up with the increased number of automobiles and demand for electricity in American homes and businesses from urban centers to rural communities. Productivity-related advances in business organization and manufacturing technology also promoted growth. In total, Real Gross National Product (RGNP), a measure of overall production that nets out the effect of prices,4 increased at an average rate of 4.2% per year between 1920 and 1929 (Smiley, 2004), a healthy growth rate indeed. This implies that productivity growth rates were likely related to factors other than the drying out of workers. The greatest leaps in productivity occurred when people began to cast off the chains of Prohibition and lining Rotten & Company’s pockets. While we do not have additional data to overcome issues related to sample size, we can dig in a bit more by (1) modifying the functional form, (2) adding time effects, and (3) using regression analysis. What? No, you do not need a pint of beer to get through the upcoming sentences. All this jargon means that we can use some mildly fancy math to better account for the data volatility, complex relationships between variables, and break in 1917 while using the entire sample. The best estimates indicate that the largest factor influencing worker productivity is the productivity level of the year before.5 Specifically, for each one percentage point increase in

4 Gross Domestic Product (GDP) is a measure of aggregate production, calculated by multiplying the sum of all expenditures (price * quantity) in the economy. Movement in the measure can come from changes in price and/or quantities. If we want the metric to describe production (quantity), we need to remove the effect of prices. We do this by using a fixed year price in the expenditure calculation. Only the quantity changes over time. 5 The author used the adjusted R2 and experienced opinion to select the “best” model. Others might pick a different one. The model is a time series regression of the natural log of the productivity index regressed on a one period (year) lag of the dependent variable, the natural log of the beer consumption index, and a dummy variable for the break at 1917. Prior to the regression, the author tested the hypothesis that there is no statistical break at 1917, and it was rejected at the 99th percentile. The two regression coefficients shown in the graphic are those that are significant at the 90th percentile or more.

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Fig. 6.2 Regression plot, productivity, and beer consumption (1899–1927) (Source Data from Warburton [1932], regression analysis, and graphic by author. The blue dots are the coefficient estimates. The blue lines are the 95% confidence intervals. The red line at zero is simply a dividing line between positive and negative values for clarifying purposes only)

productivity, there is 0.85 percentage point increase in the following year. Improvements in one year carry forward into the next. What about booze? For each percentage point reduction in the per capita beer index, productivity rises by 0.05 percentage point between 1899 and 1927. While a significant contributor, prior year productivity is 17 times more important. The same model using alcohol consumption does not find a relationship between productivity and per capita alcohol consumption. Again, the stronger relationship with beer is likely from manufacturing workers proclivity for suds. The major takeaway is that the economic boom of the 1920s was likely not due to Prohibition, rather from improved productivity from technology and business organization and demands for new services like roads and electricity (Fig. 6.2).

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In the end, some of the most vocal proponents of the 18th Amendment became its greatest critics. John D. Rockefeller Jr., a lifelong teetotaler and generous supporter of the ASL, eventually supported repeal of the 18th Amendment because of its collateral damage. While influential elites like Rockefeller and the Du Ponts garnered a lot of attention, some of the more symbolic repeal advocates were women. In 1929, Pauline Sabin founded the Women’s Organization for National Prohibition Reform (WONPR) which boasted many prohibitionists on its rolls. Their primary issue with the 18th Amendment was its role in the rise of criminals like Al Capone and Rotten Hands. The WONPR also took issue with government involvement in the personal lives of Americans, the same argument made by Colonists many years before. Their final platform, focusing on the wellbeing of the home, was wildly popular. By 1933, they boasted over 1.5 million members, outnumbering their WCTU opponents, and supported branches in over 40 states. Prohibition officially came to an end with the passage of the 21st Amendment, which was ratified in December 1933, the only amendment repealing another. President Franklin Delano Roosevelt (FDR) signed the CullenHarrison Act on March 22, 1933, authorizing the immediate sale of intoxicating beverages with up to 3.2% alcohol by effectively relaxing the Volstead Act. Drinkers needn’t wait for the 21st Amendment to get through the state legislatures. They could raise a pint without fear before FDR’s signature was dry. Not only was the liquor ban unpopular and largely disregarded by 1933, but the United States was in the depths of the Great Depression and badly in need of tax revenues (and a drink). Between 1929 and 1933, US GDP fell 36% 6 and unemployment peaked at 25%. Lower income and spending meant lower tax revenues at a time when money was badly needed by the federal and state governments to aid the growing ranks of the poor and impoverished and stimulate the economy. Like President Washington, President Roosevelt knew the alleviation alcohol tax revenues would bring. He promised a repeal of the 18th Amendment during his 1932 presidential campaign and after signing the Cullen-Harrison Act exclaimed “I think this would be a good time for a beer.” The following day, Anheuser-Busch sent Budweiser via a Clydesdale-drawn wagon to the White House. 6 Data from Table 1.1.3 of the Bureau of Economic Analysis National Income and Product Accounts, calculation by author (percentage change in the quantity index between 1929 and 1933) (Bureau of Economic Analysis, various years).

6

CONCLUSION

159

What was the main impetus for the swift change in the constitution? Why in a matter of fourteen years did an issue go from being so pressing that the Constitution required change for only the 18th time to legislative banishment? Economists Munger and Schaller critically and mathematically analyzed these questions, hypothesizing that it was not a matter of changing consumer preferences. Rather the 18th Amendment passed due to a lack of producer mobilization against the encroachment and later repealed because of the deterioration in the moral and economic arguments (1997). Citizens sipped cocktails in private but put on a dry public face to appear “moral” believing that the 18th Amendment would not pass, giving power to organized special interests like the ASL (Brennan & Lomasky, 1993). Over the next fourteen years, the promises did not materialize, and the organized dry groups fell apart, leaving room for improved booze interest groups to press for repeal. What lessons does the fourteen-year alcohol prohibition offer the marijuana legalization issue of today? Thornton concludes that all prohibitions hurt consumers since the increased price of the product reduces their satisfaction and pushes them to purchase goods and services that are of lesser value. Producers are harmed by the increased production costs and risks and switching to a less profitable or gratifying occupation. Market forces no longer encourage product standardization and illegal producers are incentivized to adjust their production process and quality resulting in more dangerous products. Noxious alcohol caused death and maiming, and many people switched from beer to liquor during Prohibition. The potency of cocaine, heroin, and marijuana increased after their illegalization. Thornton estimated that between 1973 and 1984 for each one million dollars (1972 dollars) in law enforcement expenditures, marijuana potency increased by 0.01 of 1% and that the expenditures explain over 90% of the variation in drug potency (1991). Finally, prohibitions incentivize corruption. In Human Action, Ludwig von Mises wrote, “Corruption is a regular effect of interventionism” (von Mises, 1999, p. 737). Al Capone’s power and riches were only possible due to the ban on booze. He did not compete against legitimate and competitive market forces, rather he and the rest of the syndicate decided among themselves how to divide the city and allocate market power. Violence is a powerful barrier to entry, particularly with help from local politicians. Crime typically increases during prohibitions. Chicago assault and assault with a weapon arrests per thousand in the population increased 81 and 62%,

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respectively, between 1920 and 1930.7 The Prohibition Unit was filled with corruption and inept officers. The bountiful bribes and extortion payments more than made up for the low salary and are common corrupting effects of prohibitions. It is logical to conclude that removing a ban will decrease some crimes, criminal activity, and corruption. It is also fair to say that drug legalization leads to (other) crime. A sound policy should consider all costs and benefits and consider the incentives created. History abounds with lessons which should be included in any policy consideration. Until then, intemperate spirits will provide bountiful and colorful stories for us all.

References Brennan, G., & Lomasky, L. (1993). Democracy and Decision: The Pure Theory of Electoral Preference. New York, NY: Cambridge University Press. Bureau of Economic Analysis. (Various Years). National Income and Product Accounts (Table 1.1.3). Retrieved from https://apps.bea.gov/iTable/iTable. cfm?reqid=19&step=2#reqid=19&step=2&isuri=1&1921=survey. MacCurrie. (1938). I See Our Friend George [PDF]. Retrieved from www.loc.gov/ item/wpalh000216/. Mobley, S. (1936/1939). Chester County [PDF]. Retrieved from https://www. loc.gov/item/wpalh002037/. Munger, M., & Schaller, T. (1997). The Prohibition-Repeal Amendments: A Natural Experiment in Interest Group Influence. Public Choice, 90(1), 139–163. Report of the General Superintendent of Police of the City of Chicago to the City Council. (1920–1930). Smiley, G. (2004). The U.S. Economy in the 1920s. EH.net Encyclopedia. Retrieved from http://eh.net/encyclopedia/the-u-s-economy-in-the-1920s/. Thornton, M. (1991). The Economics of Prohibition. Salt Lake City: University of Utah Press. von Mises, L. (1999). Human Action: A Treatise on Economics. Auburn, AL: Mises Institute. Warburton, C. (1932). Prohibition and Economic Welfare. The Annals of the American Academy of Political and Social Science, 163(1), 89–97. Watts, E. (1939, October 11). Essie Watts [Interview]. Retrieved from https:// cdn.loc.gov/service/gdc/dcmsiabooks/dr/ag/on/in/po/li/ti/cs/00/ro/ se/dragoninpolitics00rose/dragoninpolitics00rose.pdf. 7 Arrests can increase due to increased enforcement, a change in corruption, lower penalties, and other factors. The causality here is unknown, but the assault numbers are so substantial they are worth reporting. Data retrieved by author from Report of the General Superintendent of Police of the City of Chicago to the City Council (1920–1930).

Index

A Ader, James, 141 alcohol, 2, 4, 5, 7–9, 11–13, 16–18, 20–23, 30, 33, 34, 37, 40, 41, 53–61, 64–66, 71–73, 75–82, 87, 92–95, 99, 100, 103, 104, 109–113, 117–122, 124, 126, 133, 137, 139–141, 146, 147, 151, 154–159 18th Amendment (Eighteenth Amendment), 1, 2, 4, 7, 9, 11–13, 15, 17, 22, 39, 43, 47, 49, 52, 55, 64, 67, 71, 72, 75–78, 99, 103, 104, 109, 117, 118, 122, 129, 131–135, 137, 146, 152, 155, 156, 158, 159 21st Amendment (Twenty-first Amendment), 11, 40, 55, 158 American Medical Association (AMA), 54, 55, 119–122 Anti-Saloon League (ASL), 9, 16, 21, 22, 148, 158, 159

B Bahamas, 87, 88, 90, 123 barriers to entry, 104 Bastiat, Frederic, 153 Becker, Gary, 72, 73, 123, 137 beer, 4, 6, 13, 18, 20, 27–41, 44, 45, 47–53, 55, 57–60, 64, 76–80, 82, 95, 99, 106, 120, 141, 154–159 benefit, 2, 4, 5, 13, 37, 43, 45, 72, 73, 78, 83, 121, 123, 130, 131, 135, 136, 153, 160 Binghamton, 100 Blind Pig, 95, 139 Blind Tiger, 95 Blue Ridge, 82, 83 bootlegger (bootlegging), 13, 23, 50, 66, 71, 73, 75, 78, 80, 83–86, 94, 96, 98, 112, 113, 123, 124, 126, 132, 139, 141, 142, 144, 145, 147, 152 Boston, 29, 36, 53, 94, 113, 120, 136 brewer, 30, 33, 35–41, 44, 45, 47, 49, 51, 52, 64

© The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG, part of Springer Nature 2019 A. L. Kassens, Intemperate Spirits, https://doi.org/10.1007/978-3-030-25328-8

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162

INDEX

brewery, 28, 33, 36, 39, 41, 45, 46, 48, 50, 51 bribe(s), 84, 99, 101, 104, 135–138, 152, 160 Bronfman, Samuel (Sam), 92–94, 124 Budar, Joseph A., 98, 99 Burdette, Clarence, 143–145

C California, 29, 47, 49, 56–58, 60–62, 64, 66, 106, 108, 141, 145 California Vineyard Association (CVA), 60–62 Canada, 92–96, 109 candy, 40, 49, 51, 52 Capone, Al, 1, 24, 62, 64, 66, 74, 88, 93, 94, 97, 99, 103, 106, 108, 109, 158, 159 Casper, 138–140 Cassiday, George, 147 ceramics, 40, 47, 48, 52 cheese, 40, 48–50, 52 Chicago, 20, 24, 29, 35, 37, 51, 52, 62, 72, 83, 85, 92–94, 97–109, 126, 130, 136, 142, 152, 159 cider, 4, 11, 23, 29, 32, 52, 59 Civil War, 4, 7, 11, 18, 20, 22, 28, 29, 35, 54, 81 clergy, 113, 118, 123 Coast Guard (Coast Guardsmen), 86, 90–92, 132, 133 Colonial, 4, 5, 7, 29, 30, 35, 37, 38, 42, 52, 53, 77, 136 colonists, 4, 5, 27, 28, 52, 158 colony(ies), 4, 35, 36, 53 Conn, Donald, 60, 61, 66 Cordillo, John, 138 Cordillo, Peter, 138 corrupt (corruption), 9, 24, 73, 82, 84, 98, 130, 136, 138, 140, 141, 152, 159, 160

cost, 2, 12, 28, 30, 33, 34, 38, 41, 42, 72, 73, 77, 79–84, 88, 101, 103, 104, 118, 121, 123, 130, 131, 136–138, 144, 153, 159, 160 cover house, 110, 111 crime, 71–76, 78–80, 91, 101, 102, 106, 123, 130, 137, 139, 144, 159, 160 economics of, 2, 13

D demand, 11, 15, 30–34, 37, 40, 43, 46, 49, 51, 56, 60–62, 73, 78, 82, 83, 86, 87, 90, 95, 100, 101, 122, 126, 131, 136, 139, 140, 143, 147, 156, 157 denature (denaturing), 110, 111 distilled spirits, 4, 5, 27–29, 55, 117 doctor (physician), 5, 23, 42, 43, 54, 55, 86, 112, 113, 118–122 dry(s), 4, 8, 9, 11–13, 15, 17–22, 28–30, 39, 40, 42, 44–47, 50, 51, 53–55, 58, 64, 77, 93, 95, 109, 113, 122, 129, 133–135, 138, 140, 146, 147, 153, 155, 158, 159

E Ehrlich, Isaac, 73 elasticity, 34 entrepreneur (entrepreneurial), 1, 22, 23, 30, 36, 40, 42, 46, 92, 93, 110, 153 expenditure(s), 72, 79, 80, 130, 131, 156, 159 externality, 12

F Federal Bureau of Investigation (FBI), 104, 106, 108, 109

INDEX

Florida, 90 Fox, Frank, 41, 142–145 Franklin, Benjamin, 4, 5, 29 Franklin County, 82, 84, 104 Fruit Industries (FI), 60–62, 64–66

G Georgia, 4, 29, 43, 88, 89 German, 19, 20, 22, 37, 41, 42, 44, 46, 51, 77, 102 Gross Domestic Product (GDP), 156 Guinan, Texas, 96, 100

H Hamilton, Alexander, 5, 7, 34 Hazlitt, Henry, 153 Hoover, Herbert, 17, 60, 62, 64, 66, 108, 109, 137

I ice cream, 40, 45, 46, 48–50, 52 Idaho, 142 income, 7, 21, 22, 31, 32, 73, 74, 79, 80, 87, 93, 152, 158 inflation, 62, 63 input, 6, 9, 33, 46, 75, 76, 82, 106, 110 Internal Revenue Service (IRS), 104, 132 intoxicating (intoxicant), 6, 13, 20–23, 33, 35, 43, 58, 64, 65, 77, 78, 86, 93, 96, 108, 112, 113, 118, 133, 158 Irish, 19, 20, 102, 136 Irving, William, 140

J Jake (Jamaican Jake, Jake Leg, Jake Walk), 81, 112, 113

163

Jamaica, 89 Jennings, Frank, 138 juice grape, 59, 60, 104, 106–109

K Kansas, 20, 21, 65, 66, 97 Kentucky, 6, 54, 55, 85, 86, 93, 126

L labor, 13, 15, 22, 33, 40, 41, 45, 51, 52, 72, 83, 89, 102, 131–133, 135, 139 Laramie, 138 law enforcement (enforcement), 2, 18, 20, 22, 30, 42, 50, 54, 72, 73, 75–78, 84, 85, 93, 98, 103, 104, 129–134, 137–139, 144, 152, 153, 159, 160 liquor, 6–9, 11, 15, 17–22, 29, 36, 39, 40, 43, 52–55, 57, 58, 73–75, 77–80, 83, 84, 86–93, 97–100, 103, 104, 106, 108–110, 112, 120–123, 129, 132–135, 137, 141, 143–146, 152–154, 158, 159 Livingstone, Belle, 96–99 loophole, 22, 23, 29, 40, 54, 55, 59, 86, 113, 117–119, 121–124, 126, 151 Lythgoe, Gertrude (Cleo), 90

M Madden, Owen, 97, 100 Maine, 18, 19, 90, 92, 134 Maine Law, 18, 19 malt, 23, 36, 40, 47, 49, 51, 55, 82 marginal, 118 market, 2, 5, 7, 8, 15, 17, 23, 27, 28, 30, 31, 33, 34, 37–41, 43, 44, 48–52, 54, 58–61, 65, 72, 75–78,

164

INDEX

81, 86, 89, 92–94, 98, 99, 101, 103, 104, 106, 108, 109, 118, 119, 121, 131, 132, 135, 136, 140, 146, 154, 155, 159 Massachusetts, 4, 36, 53, 88 May, Ruth Morgan, 142, 145 McCoy, William, 88, 89 Merritt, Ralph, 108 Mills, Major, 110 Milwaukee, 48, 51, 52, 98, 99 Mises, Ludwig von, 159 monopoly, 8, 103, 104, 107, 123, 141 moonshine (moonshining), 73, 81–85 Morgan, Helen, 96, 97

N near beer, 40, 41, 44, 47, 50–52, 87 New England, 4, 7, 35, 52, 90 New York, 15, 20, 36, 37, 44, 46, 49, 65, 88, 90, 96–98, 100, 101, 106, 108–110, 124, 125, 136, 142, 147, 152 North Carolina, 29, 81, 119, 153

O Ohio, 3, 6, 10, 14, 21, 93 Oklahoma, 112, 142, 144 oligopoly, 103, 104

P pasteurization, 27, 35, 38 Pennsylvania, 7, 42, 45, 46, 49, 54, 129 Philadelphia, 42, 101, 125 Pittsburgh, 7, 106 Pottawatomie County, 145 price(s), 6, 8, 9, 30, 32–34, 37, 38, 43, 46, 54, 60–63, 72, 79, 80, 82, 83, 86, 87, 90, 92, 98, 100, 103, 104,

106, 119, 120, 131, 144, 147, 156, 159 priest, 123, 124, 126 Prisoner’s dilemma, 143, 144 production, 6, 12, 22, 27–30, 33–35, 38–41, 44–52, 54–60, 62, 64, 66, 74, 75, 79, 81–83, 86, 93, 101, 103, 106, 109, 110, 112, 113, 140, 156, 159 productivity, 4, 13, 17, 29, 153–157 Prohibition, 1, 2, 6–9, 11–13, 15–22, 24, 27–30, 35, 39–45, 47–51, 54–62, 64–67, 71, 73, 75–80, 82, 84, 86, 89, 90, 92–94, 96–104, 108, 109, 111, 113, 118–126, 132–136, 138–142, 146, 147, 151–153, 155–160 Prohibition Unit, 110, 125, 132, 133, 160

R rabbi, 123–126 rail car, 27, 35, 38, 39, 60, 106 railroad, 38, 51, 60, 73, 83, 87, 101, 102, 106, 108, 138, 139 rational, 2, 23, 45, 72, 74, 123, 130, 137, 152 regression, 34, 156, 157 repeal, 19, 49, 95, 134, 158, 159 Revolutionary War, 5, 36 Rockefeller, John D., 97, 158 Roosevelt, Franklin Delano, 158 Roser, Henry H., 8, 9 rum, 4, 6, 9, 11, 23, 28, 35, 52, 53, 73, 78, 84, 87, 143 Rum Row, 86, 88, 90–92, 109 runner (rum runner), 74, 83, 86–90, 94, 96

INDEX

S saloon, 8, 11, 12, 15, 17, 21, 22, 29, 30, 35, 37, 39, 40, 42–45, 51, 57, 58, 95, 101, 117, 136, 139, 153, 155 Salt Creek Oil Field, 139, 140 Schmitt, Jessie, 141, 142 Sharpe, Willie Carter, 84, 85 Sheppard, Morris, 64 Shubert, Lee, 147 smuggler (smuggling), 83, 92, 94 South Carolina, 8, 152 speakeasy(ies), 13, 23, 88, 95–100, 118, 139, 141, 147 Stigler, George, 130, 137 St. Pierre, 87 supply, 22, 30–34, 43, 47, 51, 54, 59, 60, 71, 80, 93, 104, 110, 119, 131, 135–137, 140 T tavern, 4, 29, 36, 37, 53, 95, 136 tax (taxes, six tax), 2, 5–9, 20–22, 28, 34, 66, 81, 82, 87, 89, 106, 110, 130, 132, 133, 137, 158 temperance, 2, 4, 5, 7, 9, 11, 13, 18, 21, 28, 37, 43, 45, 53, 57, 58, 61, 65, 118, 152 temperance movement, 6–9, 11–13, 22, 56 Texas, 41, 96, 142 Thornton, Mark, 2, 4, 7, 18, 80, 159 Thrasher, Frederic, 101–103 tied house, 37, 48, 51 Tommy Gun, 85, 88, 90, 92, 104 Treasury Department, 55, 113, 123, 133 U unemployment, 12, 153, 158 U.S. Customs Service, 132

165

V Vermont, 19, 94, 134 Vine Glo, 61, 62, 64, 65, 67, 108 vineyard, 56, 58 Virginia, 4, 7, 20, 35, 55, 81–85, 104, 112, 136 viticulture (viticultural), 56–59 Volstead Act, 1, 22, 40, 45, 55, 59, 61, 64–67, 71, 72, 75–77, 86, 87, 96, 97, 106, 109, 118, 119, 123, 131–133, 158 W Warburton, Clark, 75, 76, 78, 79, 81, 154, 157 Washington, George (President), 5, 7, 34, 136, 147, 158 wet(s), 8, 11, 15, 18, 19, 22, 48, 64, 93, 147 whiskey, 4–7, 11, 20, 28, 29, 54, 55, 58, 84, 86, 93, 94, 98, 112, 119–122, 126, 133, 140, 141, 145 Whiskey Act, 5, 7 Whiskey Rebellion, 7, 8 Wickersham Commission, 59, 60, 137 Willebrandt, Mabel, 64, 66, 97, 108 Willis–Campbell Act, 55, 118, 119, 122 Wilson, Woodrow, 9, 147 wine, 4–6, 13, 18, 22, 23, 27, 29, 38, 40, 49, 55–66, 71, 76, 78–80, 106, 108, 109, 117, 118, 120, 122–126, 141, 146, 147 Women’s Christian Temperance Movement (WCTU), 9, 12, 13, 21, 148, 158 Women’s Organization for National Prohibition Reform (WONPR), 158 World War I, 12, 21, 22, 51 Wyoming, 138–140, 142