PROHIBITION – A 20TH CENTURY ECONOMIC EVIL

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Prohibition officers raiding the lunch room of 922 Pa. Ave., Wash., D.C. ( Dewar’s Repeal / Flickr )

From 1920 to 1933, the Eighteenth Amendment of the United States constitution banned alcohol. The Eighteen Amendment, also known as Prohibition, has the honor of being the only constitutional amendment to be repealed with another constitutional amendment.

Although prohibiting alcohol is now seen as absolutely ridiculous, hindsight is 20/20 and Prohibition began with noble intentions. According to the Cato Institute, it was “undertaken to reduce crime and corruption, solve social problems, reduce the tax burden created by prisons and poorhouses, and improve health and hygiene in America.” 

Total Expenditure on Distilled Spirts as a Percentage of Total Alcohol Sales (1890-1960)
Source: Clark Warburton, The Economic Result of Prohibition (New York: Columbia University Press, 1932), pp. 114-15; and Licensed Beverage Industry, Facts about the Licensed Beverage Industry (New York: LBI, 1961), pp. 54-55.

Needless to say, that did not come to pass. Alcohol consumption dipped initially, it increased soon after, and led to the organization of crime. Demand continued, the legality of supply be damned. Prior to Prohibition, crime bosses such as Al Capone were relatively small-time menaces. The “noble experiment” made illegal alcohol a lush business opportunity. It also led to networking opportunities for these mafiosos, as the sourcing and distribution of alcohol often requiring crossing state lines. 

“Mobsters couldn’t work in isolation if they wanted to keep the liquor flowing and maximize profits,” said Dave Roos, a freelance journalist in History. 

 Per Capita Consumption of Alcoholic Beverages (Gallons of Pure Alcohol) 1910-1929
Source: Clark Warburton, The Economic Results of Prohibition (New York: Columbia University Press, 1932), pp. 23-26, 72.

A 2010 Congressional Research Service study found that organized crime in capable of weakening the economy with illegal activities because they can cause state and federal governments to lose tax revenue. Prohibition cost the United States government $11 billion in tax revenue. According to PBS, a long-term consequence of this was that multiple state governments, in addition to the federal government, would on income tax revenue to fund their budgets. 

Enforcing Prohibition also turned out to be a costly endeavor. In 1921, Prohibition enforcement began at $6.3 million. By 1930, it cost $13.4 million to enforce. 

During Prohibition, kingpins could make as much as $1.4 billion in 2018 currency. 

Meanwhile, other industries that were expected to rise as a result of Prohibition actually ended up struggling. Top industries with expected growth were clothing, chewing gum, grape juice, soft drink and theatre producers. Essentially, every non-booze industry that could provide a new way to entertain Americans expected an increase. According to PBS, theatre revenues declined and restaurants failed to turn a profit without legal liquor sales. 

Mug shot of Al Capone in Philadelphia, Pennsylvania, where he had been arrested and charged with carrying a concealed weapon. ( Pennsylvania Department of Corrections / FBI )

PBS found that “the closing of breweries, distillaries, and saloons led to the elimination of thousands of jobs, and in turn thousands more jobs were eliminated for barrel makers, truckers, waiters, and other related trades.

The repeal of Prohibition in 1933 ended gangster’s profitable bootlegging enterprises, and many returned to classic criminal operations like gambling and prostitution. The Great Depression, like Prohibition before it, provided mobsters with a golden opportunity: loan sharking. 

Unlike many Americans during the Great Depression, the gangs had cash in an economy that wanted in. Like with alcohol, the people had the demand and the gangsters had the supply. 

According to Howard Abadinsky, a criminal justice professor at St. John’s University, it became clear to many that if people wanted to do something that required cash, they needed to get in cahoots with the likes of Al Capone, Bugsy Segal and “Lucky” Luciano. The law of the land was irrelevant in many ways, and money-laundering techniques were extremely powerful. 

“If you wanted to set up a legitimate business, [you] have to go to organized crime. Loan Sharking becomes a major industry,” Abadinsky said. 

Sources:

The Economic Impact of Mental Illness

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But first, a quick laugh. A few years ago, a story about one Ohio State student’s honestly went viral. After going through an unexpected break-up halted her productivity, she sent her professor this email. 

When she posted a screenshot of the email on Twitter, it immediately got the attention of the public and received  over 2,000 retweets and 15,000 likes. While the humor is endearing, the attention this post received attests to something else: we’ve all been there. 

Sometimes, life just gets in the way of our responsibilities and unexpected emotional distress makes it feel impossible to focus on school or work. That debilitating feeling, however, is even more intense for those of us with mental health issues.

To put this issue into context, a recent study by the  American College Health Association found that nearly 1 in 4 U.S. college students reported being diagnosed with a mental illness. Additionally, almost 9 out of 10 undergraduate students reported feeling overwhelmed by all they had to do and nearly half of all college students have felt so depressed that it was difficult to function.

Okay Gigi, college students are stressed. What else is new. While these statistics may seem like a non-starter, it is crucial to realize that a degree is not a cure-all for mental health issues. In fact, almost half of U.S. adults will experience a mental illness over the course of their lifetime and depression is the leading cause of disability for adults around the world. These numbers make it clear that we are in the midst of a mental health epidemic and that same sentiment is echoed by the economic impact of these mental health issues.

A breakdown of mental illnesses facing adults in the U.S.

As it turns out, mental health is one of the costliest forms of sickness for the U.S. economy.  One analysis of data from 2008 to 2014 found that “a single extra poor mental health day in a month was associated with a 1.84 percent drop in the per capita real income growth rate, resulting in $53 billion less total income each year” (ScienceDaily.com). To reiterate, that’s $53 billion lost from adding a single poor mental health day to workers’ normal schedules. And these numbers are only expected to grow. Researchers also noted that “the global economic cost of mental illness is expected to be more than $16 trillion over the next 20 years, which is more than the cost of any other non-communicable disease” (ScienceDaily.com). 

The Human Capital Approach

A study published in Science & Society breaks down these economic figures further, outlining the different approaches in which the economic impact of mental health issues can be evaluated. The approach I will zero in on is the Human Capital approach, which combines the direct, “visible” costs of mental illness and the indirect, “invisible” costs. “Visible costs” are what comes to mind when we think about financing illness; this includes things like medication, therapist visits, and hospitalization costs. The indirect or “invisible” costs account for “income losses due to mortality, disability, and care seeking, including lost production due to work absence or early retirement” (National Center for Biotechnology Information). This study found that the direct and indirect costs of mental disorders were estimated to amount to $2.5 trillion, where “the indirect costs (US$1.7 trillion) are much higher than the direct costs (US$0.8 trillion)” unlike other leading diseases such as heart diseases and cancer, which the graphs below illustrate (National Center for Biotechnology Information). Additionally, both of these numbers are expected to double by 2030. 

How the Costs of Mental Disorders Compares to Other Diseases

The Human Capital approach is just one way of quantifying the economic impact of mental illness, but the message is clear: mental health issues are costing the economy billions and will only continue to do so if nothing is done. This should be motivation for workplaces to implement mental health protocols and resources. If companies discussed mental health issues freely and provided their employees with adequate mental health resources, employees would presumably be happier, more productive, and more engaged with their work. Investing in mental health is key to solving the current epidemic facing the world’s adult population, and as someone who wants to be a therapist in the coming years, I can only hope that others are as serious about making this investment as I am.

The Box Office in the Blockbuster Age

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The economic story that the box office illustrates in a time when mega-blockbusters dominate ticket sales

In 2019, Avengers: Endgame, The Lion King, Toy Story 4, Captain Marvel, and Spider-Man: Far From Home have taken the top five spots for highest gross in the domestic box office (Box Office Mojo). 

What do these successful titles have in common, besides the fact that you could meet all of the films’ characters at a theme park somewhere? 

Well, it’s just that–all of the films are based on existing intellectual property (IP) with established fan bases. Studios are betting on these tentpole films in the box office, because they draw audiences into a theater and away from the social media, streaming services, and video games that have, in recent years, made it much more difficult to attract eyeballs to cinemas.

Beyond garnering attention, mega-blockbuster films bring in multiple sources of revenue for a studio, making its parent company look favorable to Wall Street investors. When a viewer gets hooked on Avengers and its cinematic universe (because how could one not?), that person is likely to be back for the next film, coming out in a year or so. Furthermore, being an Avengers fan will make a $129.00 Disneyland ticket seem much more attractive. Here, one can experience a superhero meet and greet, and soon, the Avengers Campus: a space at the park explicitly dedicated to the Marvel universe. Oh, and of course, you’ve got to buy your child an Iron Man costume for Halloween. 

From just the movie ticket, theme park pass, and merchandise purchases made by one family, Disney is making several hundred dollars in revenue. Conglomerates like Disney seem to be doing all the right things to adapt to the rapidly changing marketplace, taking advantage of revenue streams left and right. However, studios that do not control lucrative IP are being struck hard by the age of mega-blockbusters. 

This year, Warner Brothers has released seven small and mid-tier budgeted films that bombed at the box office, including The Good Liar, Motherless Brooklyn, and Blinded by the Light. About five to ten years ago, the studio could have deployed star power, marketing dollars, and a suitable opening weekend date to mitigate the risk of a box office flop. But nowadays, it is almost impossible to find a weekend not taken by something popular, such as the newest Pixar film, or to beat negative ratings on sites like Rotten Tomatoes before the film has even been released. If there is an excuse not to make the trek out to the theater, people will take it. If it’s not something from the Star Wars franchise or a beloved animated film, is it worth the time and money?

Despite having several of its films bomb at the box office, Warner Brothers is doing alright with the $1 billion in worldwide ticket sales made by The Joker. And moving forward, the studio is not ridding itself of mid-budget films. Instead of having a wide release in theaters, a film such as The Good Liar will likely be released on the WarnerMedia streaming service, HBO Max. 

Box office sales are indicating a shift in consumer habits surrounding entertainment; people are choosing to spend their own scarce resources—their money and attention—in places other than the box office. There is a plethora of content available to society right at home and for a low price via social media, video games, and online streaming platforms. People have always had to choose how to spend their money on entertainment, but now more than ever, it’s also about where consumers choose to spend their time. 

The box office illustrates a landscape where the stakes are much higher for studios; audiences are less likely to spend their time and money on a mid-budget film that may or not be good. They can watch an Oscar-nominated film at home on Netflix instead. 

To adapt to the entertainment landscape in 2019, studios are learning from the box office that it’s now a game of “go big or go home.”