Since the birth of the modern ‘democratic’ state, social reformers have attempted to use government to control gambling, prostitution, the use of tobacco, alcohol, and other recreational drugs. More recently they have reached out to control the ‘sin’ of poor diet and its ill-consequence of obesity and associated disease.
Not infrequently, the social reformers have joined forces with those who seek to exploit the anti-sin laws – Baptists linking hands with Bootleggers – and have succeeded in forcing through laws of prohibition that predictably fail in their stated intent. The most notorious such example was Prohibition in the United States that fueled fortunes for moonshine suppliers such as Joe Kennedy, and enforcers such as Al Capone.The wealthy, such as FDR and his upper-class cronies, hoarded alcohol in their cellars – it was no crime to drink, but only to engage in the market for alcohol. The ‘speakeasies boomed, entire police systems were corrupted, machine-gun wars erupted between competing enforcers in the major cities, and ultimately sanity was restored and Prohibition repealed.
This column does not engage in the moral debate over regulating sin – though classical liberals are not much inclined to impose their moral preferences upon others – but focuses attention on the detailed care that must be undertaken by those who seek to regulate popular sins, if the consequences of intervention are not to be dire.
Prohibition is by no means the only example of the disastrous consequences – intended by the bootleggers but not by the Baptists – of thoughtless intervention. Britain’s 1736 Gin Act was designed to price the spirit beyond the reach of working people and to eliminate the promise: ‘drunk for a penny, dead-drunk for tuppence’. It failed lamentably, as a black market in gin evaded taxes and drew working class Britons into dark places. Eventually, government awakened to its error, and through more enlightened legislation, encouraged licensed trade through a judicious system of regulation and low taxation.
Similar disaster has followed the ill-conceived War on Drugs by a succession of incompetent U.S. governments. South American drug lords amass personal fortunes, control virtual states, and undermine the authority and effectiveness of legal states. At the level below, we find many U.S business operators who deploy high-quality business acumen to destroy the lives of those in the city ghettos. The victims make up a majority of the U.S. prison population. The ghetto areas are plagued by high murder rates as the business barons enforce contracts that cannot be enforced through the courts.
Countries that appear to have intervened effectively in the markets for sin, without noticably inducing massive crime – Canada, Holland and Scandinavia most conspicuously – do so not by prohibiting sin but by diverting sin into state-regulated outlets. To do so, of course, such governments must be relatively honest and robust, to be ranked low on indexes of corruption. Unfortunately, the United States does not do well on such indices and is not tempted to forgo the corrupt wages of intervening ineffectively against those who engage in popular and most victimless sin.
Hat Tip: John Kay, ‘On the cusp of creating a shadow drinking industry’, Financial Times, March 20, 2013