The greatest day for organized crime in America was January 16, 1920, the day the Eighteenth Amendment went into effect. Prohibition descended on the land and so did a new criminal influence that was to fester, thrive and corrupt long after Repeal in 1933.
The proponents of Prohibition saw in their legislation the cure for all the social ills in America. Instead it produced new ills without getting rid of the old. Law enforcement agencies, hardly pristine over the preceding 70 or 80 years since they first were established, were seduced by bribes as never before. In the end, Prohibition was the mother of organized crime.
The great street gangs of America—born in the 1820s and 1830s and operated up to World War I— functioned in two chief fields: committing various forms of violent crime; and acting as bully boys or enforcers for the political machines of the big cities.
But by 1914 the gangs were in turmoil. In New York, the 1,500-member Eastman Gang was falling apart, their leader out of action behind bars. The Eastmans' arch rivals, the mostly Italian Five Pointers, were scattering. Their leader, Paul Kelly, reading the new morality of reform correctly, understood that an enlightened public would not much longer tolerate gang violence in elections, and he deserted his cohorts, moving into relatively minor labor racketeering activities.
Even that old reliable, prostitution, a leading gang activity, was hitting hard times. Reformers were everywhere. Then, during World War I, the federal government shuttered many of the country's most infamous vice centers—especially those in Chicago, New Orleans and San Francisco.
Immediately after the close of the Great War it happily appeared that the era of the great gangs was over. But Prohibition in one fervent swoop threw society's natural social development into chaos. Across the country 200,000 speakeasies sprang up and large bootlegging organizations were required to supply their needs.
Gang criminals, having gone straight out of sheer necessity, returned to their organizations. In New York alone, 15,000 saloons were closed by Prohibition, and 32,000 speakeasies came into existence. The owners of every one of these joints was breaking the law and paying bribes to remain in business. New York became a city on the take, the United States a country doing the same.
Bootleggers and rum-runners brought in booze from outside the borders, using brawn and bullets if bribes didn't work. The production of alcohol became a cottage industry in many towns, especially in the Little Italies of major cities, producing foul odors that lay heavy over entire neighborhoods. Since these odors were readily identifiable and the police did nothing to intervene, the police were branded, as never before, as obviously corrupt.
The Jewish Purple Gang of Detroit, till then more dedicated to spectacular robberies and murders, became one of the most important and deadly Prohibition gangs, controlling much of the liquor supply smuggled in from Canada. In Cleveland, the violent Mayfield Road Gang emerged as an extremely potent force, and of course, Chicago's Al Capone gained recognition as the country's most infamous gangster. It was estimated that Capone himself made some $60 million from bootlegging and rum-running.
In New York, the Broadway Mob—controlled by Lucky Luciano, Meyer Lansky, Frank Costello, Joe Adonis and Bugsy Siegel—was taking in about $12 million a year just from booze. In their operation they had about 100 men on the payroll—drivers, bookkeepers, enforcers, guards, messengers and even fingermen (to look for liquor shipments by other gangsters that they could hijack).
In an era when a department store clerk made perhaps $25 a week, most of Luciano's men were drawing a base salary of at least $200 a week. This gave the operation a payroll overhead somewhere over $1 million annually and left $11 million out of which they had to cover all expenses—mainly supplies and graft. "Grease" alone exceeded $100,000 a week.
Ten thousand of this, according to Luciano, went to top police brass, but that represented only a small part of the payoffs. All the precincts had to be taken care of—their captains, lieutenants and sergeants, all the way down to cops on the beat. After all costs, the combination still came out with $4 million or so in pure profits.
These Prohibition criminals had all begun as mere ghetto criminals, fresh from the source of most violent crime in any metropolis. In the 19th century an Irish ghetto criminal might call it a good day if he cracked a citizen's skull and walked off with $10 for his efforts. But these later ghetto criminals struck it rich thanks to the accident of Prohibition.
They were mostly Jews and Italians—those were the ethnic groups that had taken over the ghettos—but their great wealth was to raise them above the level of mindless street marauders as their ghetto predecessors had been and their ghetto successors would be. They had gone beyond organized ghetto crime to organized syndicate crime. Unlike earlier criminals who were bought by the politicians, they accumulated so much wealth that they reversed things and bought the politicians.
Disrespect for law grew as it became fashionable for even the most respectable citizens to serve bootleg liquor in their homes and visit lavish speakeasies. In the White House, President Warren G. Harding paid lip service to the dry movement and turned the nation's first residence into a private saloon. Most Prohibition agents themselves violated the law and took enormous bribes. Many ran their own bootleg operations.
The Treasury Department between 1920 and 1928 fired 706 agents and prosecuted another 257 for taking bribes. Nobody claimed they got all the crooks. Top T-man Elmer L. Irey described the agents as a "most extraordinary collection of political hacks, hangers-on and passing highwaymen." In New York, an angry and frustrated Captain Daniel Chapin ordered a lineup of all agents and declared, "Now everyone of you sons of bitches with a diamond ring is fired." Half were.
Finally, when the Democrats won the White House and the Congress in 1932, Prohibition was doomed. The Twenty-First Amendment killed it off in 1933. It did not kill off the great Prohibition gangs; they and various Mafia crime families rich with loot remained in business. The national crime syndicate was formed. The mobsters, now well connected with the political and police world, were a group that wanted to continue to feed at the trough themselves.
In the end, Prohibition gave birth to and nurtured organized crime and did such a brilliant job that today we still can't get rid of syndicated gangsters.