Prohibition - History of Business in the U.S.
The Era: Era during which an amendment to the U.S. Constitution banned the manufacture, sale, and transportation of intoxicating beverages
Date: January 17, 1920-December 5, 1933
Place: United States and its territories
Significance: Industrialists and businessmen who contributed heavily to the temperance movement later became Prohibition’s most important opponents, primarily because of a rise in crime and hostility toward authorities and threats of increased taxation.
By 1920, more than half of the residents of American cities with populations of 100,000 or more were foreign-born, Catholic or Jewish, or children of foreign-born parents. These immigrants were feared by people living in rural Protestant areas, where public hysteria was heightened by the anti- German prejudices of World War I. For immigrants and other workers, saloons, however shabby, offered companionship but, it was feared, might also generate interest in labor unions, socialism, and communism. The Russian Revolution against the czar further increased fear, especially when revolutionary leader Vladimir Ilich Lenin predicted worldwide communism by 1920, at a time when the United States was rocked by labor unrest.
The Anti-Saloon League (ASL) was funded in part by business leaders, including merchants John Wanamaker and Samuel Kresge and industrialists Andrew Carnegie, Pierre Du Pont, Henry Ford, and John D. Rockefeller, junior and senior. They believed abolishing saloons would eliminate the threat of revolution; working men would buy consumer goods with money previously spent on alcohol. Many naively believed that all would obey the law with little need for enforcement. ASL leaderWayne Bidwell Wheeler was the principal architect of both the Eighteenth Amendment to the U.S. Constitution, which simply abolished intoxicating beverages, and the 1919 Volstead Act, which defined these liquors as anything with an alcohol content greater than 0.5 percent, thus banning the beer and wine that were habitually drunk in the lands of origin of many of the immigrants. Enforcement was placed under the Internal Revenue Bureau (later Internal Revenue Service); 1,512 agents were initially appointed to guard 18,700 miles of national boundaries, to police production of industrial alcohol and alcohol produced for medical or religious purposes, and to destroy stills.
The Volstead Act allowed Americans to buy, store, and serve liquor to friends in their home or homes; the well-to-do could afford expensive, smuggled premium liquor. America’s tax loss benefited Canada, Mexico, Cuba, the French Miquelon Islands near Newfoundland, and the Bahamas, as storing and smuggling became major industries; the lines formed by boats off U.S. coastal waters, waiting for liquor to be picked up, were called Rum Row. In the Bahamas alone, liquor imports rose from 27,427 gallons in 1918 to 567,940 gallons in 1921, raising government liquor revenue from $44,462 to $984,732. British liquor exports to Canada increased from 124,546 in the first quarter of 1926, to 560,444 in the first quarter of 1928. Canada’s liquor exports to the United States rose from 8,335 gallons in 1921 to 1,169,002 in 1928; Canada took in millions of dollars in export taxes. Well-to-do Americans, writers, and artists fled abroad; one Prohibitionist urged the government to revoke passports of any Americans seen drinking outside the country. Smuggled liquor supplied speakeasies, which numbered more than 30,000 in New York alone by 1927. Individual smugglers flourished at first, but by mid-decade, the liquor trade was generally gang controlled, as were nightclubs, such as Harlem’s famed Cotton Club. Chicago’s Al Capone considered himself to be a businessman supplying a demonstrated need and providing job opportunities. He claimed to pay $30 billion annually, however, for police and political protection.
Workers, especially immigrants, deeply resented Prohibition, especially because it accompanied other repressive actions directed against the poor, such as U.S. attorney general A. Mitchell Palmer’s 1919 attempted arrest and deportation of thousands of immigrants without due process. Workers lacked money for liquor and homes to store it in. They could not afford overseas travel, imported liquor, or the better speakeasies. They drank moonshine or illegal wine and beer, produced under unsanitary conditions with questionable ingredients that sometimes caused blindness, nerve damage, and death. In Chicago, the Genna brothers (Angelo, Sam, Pete, Tony, Mike, and Jim) obtained a license to deal in industrial alcohol, redistilled it to make it drinkable, and found such demand for their product that they installed stills throughout Little Italy, paying workers $15 a day, then a high wage. Such decentralization of moonshine, beer, and wine production made Prohibition enforcement and quality control virtually impossible.
Opposing Prohibition were organizations such as the American Bar Association, the American Federation of Labor, and the American Legion. Most important was the Association Against the Prohibition Amendment (AAPA). Supporters of the AAPA included industrialists William E. Boeing and Pierre Du Pont, Du Pont’s associate John Jakob Raskob, banker Charles H. Sabin, and merchant Marshall Field. Sabin’s wife, Pauline, formed the influential Women’s Organization for National Prohibition Reform (WONPR), opposing the claim of the Women’s Christian Temperance Union (WCTU) that it spoke for all American women. Lifelong teetotaler John D. Rockefeller, Jr., nowadvocated repeal.
The AAPA methodically compiled its own statistics. Official Prohibition expenditures were $3.5 million in 1920; these were to rise to $44.0 million by 1930. In the AAPA’s widely reported 1929 Cost of Prohibition and Your Income Tax, the association estimated that, without Prohibition, federal liquor taxes would have exceeded $850 million, with cities, states, and counties receiving another $50 million. The AAPA combined lost revenue with growing enforcement costs, and estimated Prohibition to have cost $936 million in 1928 alone. Moreover, the National Commission on Law Observance and Enforcement, appointed by President Herbert Hoover, issued the 1931 Wickersham Report, showing that the working classes had not become compliant consumers and employees but were bitterly resentful.
The Great Depression, which began with the financial crash of October, 1929, created millions of newly unemployed workers while tax revenue fell. Ontaking office in 1933, President Franklin D. Roosevelt urged modification of the Volstead Act to allow the immediate sale of beer and wine, thus defusing some working-class tension while providing some jobs and tax revenue and, above all, hope for the future. Repeal followed, backed by businessmen who otherwise foresaw catastrophically increased personal and business taxes.
Behr, Edward. Prohibition: Thirteen Years That Changed America. 1996. Reprint. New York: Arcade, 2006. Readable, comprehensive history. Bibliography.
Kobler, John. Ardent Spirits: The Rise and Fall of Prohibition. 1973. Reprint. New York: Da Capo Press, 1993. General history. Separate bibliographies cover books and pamphlets, periodical literature, and some fiction, plays, and poetry.
Kyvic, David E. Repealing National Prohibition. 2d ed. Kent, Ohio: Kent State University Press, 2000.Detailed study of repeal movement. Bibliography.
Nishi, Dennis, ed. Prohibition. San Diego, Calif.: Greenhaven Press, 2004. Excerpts from documents, including Wickersham Report and 1991 essay by anti-Prohibition economist Mark Thornton.
Sinclair, Andrew. Era of Excess: A Social History of the Prohibition Movement. New York: Harper & Row, 1962. Detailed history emphasizing excesses of both Prohibitionists and anti-Prohibitionists.
See also: Alcoholic beverage industry; Business crimes; drug trafficking; corporate income tax; organized crime; Racketeer Influenced and Corrupt Organizations Act; United States Department of the Treasury; Whiskey Trust.