“Crime Battens On Prohibition”

Walter Olson

Writing in the New Yorker on the mystique of the Mob, Adam Gopnik makes a point long familiar here at Cato:

The former Mafia prosecutor John Kroger, in his 2008 book, “Convictions,” details his team’s victories against the Mob but admits, with some chagrin, that the Mob was really defeated not by charges but by changes. Crime battens on prohibition. The lotteries stripped the numbers racket of its appeal; Internet porn took a toll on the prostitution and smut business; easily obtained credit cards robbed the loan sharks of their monopoly. A more permissive society—with gambling, sex, and debt regularized—was a less Mafia‐​friendly one.

In explaining the fall of the once‐​mighty numbers racket, the near‐​ubiquity of lawful casino gambling might be added to lotteries. Due credit to Kroger and Gopnik, in any event, for not overlooking the less often heralded connection between the rise of a truly mass credit industry and the decline of loansharking rackets, once a key Mob moneymaker and still a major problem in some advanced countries such as Japan.

On a broader look, the best known example of all is alcohol prohibition, which fueled first the steep rise of organized crime in the 1920s and then, after Repeal, its decline. Another enormous driver of gang activity, both at home and abroad, has been the Drug War, which has not yet seen its day of Repeal.

Which raises the question: how many of these lessons have truly been learned? As Cato scholars have repeatedly observed, punitive taxes and rigid controls have managed to repeat chapters of the Drug War on the tobacco front, making the smuggling and irregular retail sale of cigarettes into a big criminal enterprise, especially in New York, (Will vaping be next?)

Where barriers of prohibition are high enough, people will turn to organized crime in buying or selling almost any article of commerce Thus the colorful history of contraband smuggling associated with everyday items like calico printed fabrics (don’t miss Virginia Postrel’s account), maple syrup, and even butter. Schemes to raise big new barriers to international trade, popular on both the left and right, seldom devote much foresight to the possibilities of criminal evasion.

Ominous, too, are the schemes to suppress large portions of the mass lending business (including, but not limited to, oft‐​reviled “payday lending”). Two years ago Sen. Bernie Sanders (I-VT) and Rep. Alexandria Ocasio‐​Cortez (D-NY) introduced a truly bad bill whose provisions included a cap on national interest rates on credit cards at 15 per cent, a level sure to make much current lending unprofitable. Although couched in the rhetoric of anti‐​loansharking, as Todd Zywicki wrote then, the Sanders‐​AOC bill would invite back into American life the kinds of informal muscle operators against whom generations of racket‐​busters like Thomas Dewey and Robert F. Kennedy crusaded.

Organized crime has subsided as a force in American life, and for that we are lucky. But it seems none of these lessons are ever permanently learned.