THE ECONOMIC IMPORTANCE OF THE LIQUOR INDUSTRY

What would be the economic consequences if at one stroke the entire liquor industry of the United States were wiped out? Certain unreasoning minds would welcome it as signifying the end of all evil. But persons with a larger view, both of social and economic conditions, cannot be quite so offhand. When confronted by the momentous issue whether the liquor traffic should be abolished, they cannot simply assume that the abuse of drink and its dire results would cease when the manufacture and sale of intoxicants becomes illegal. No one can demonstrate that this would happen. On the other hand, so far as can be reasoned from experience gathered through generations of experiments backed by all the force there is in law, the abolition of the legalized traffic would mean its replacement by an unregulated manufacture and sale so extensive and of such a character as not only to exclude the possibility of diminishing the actual drink evil but certain to intensify its worst forms. No less surely would there follow a period of lawlessness, a defiance and circumvention of authority, that would undermine the basis of law and order, and thus simply heap new evils upon the old.

This is one side of the picture. The other is one of ruin and waste. Entirely aside from the question of the morality of destroying property values that from time immemorial have been protected by law, and from which governments, local, State and national, have derived a sustenance, there is a question of the economic disturbance that would reach from one end of the country to the other, if the liquor industry suddenly were made to cease. The general factors in this disturbance are easily accounted for. Among them are the enormous capital invested in the industry, the tremendous disbursements for material, taxes, rents, supplies, wages, etc., the proceeds of which enter into the direct support of millions of inhabitants, help bear immense tax burdens, national, State and local, constitute large items in agriculture, general manufacture, transportation, etc. Indeed, so manifold are the economic ramifications of the industry that the consequences of its annihilation would be felt everywhere and by

everyone.

Against all this must not be weighed the cessation of the drink evil. Such is human nature that it would remain despite any na

tional legislation. This being so, the question before the thinking man is how the big thing we call the liquor industry may be so regulated that the evils incident to it shall gradually diminish until at some future time, as one may hope, they will disappear? Meanwhile, those who clamor for its abolition do not realize that its destruction would not bring us nearer their object-the cessation of intemperance-much less that while failing to do away with intemperance an economic calamity of almost incalculable dimensions would be caused. To make the latter clear is the purpose of the following study.

Let us begin with the statement of the totals involved, meaning thereby the sum of the money values which would disappear under the proposed scheme of national prohibition:

Capital Invested in the Liquor Industry...
Annual Disbursements other than for Wages....
Annual Disbursements for Wages...

$1,294,583,426.00

1,121,696,097.36 453,872,553.00

$2,870,152,076.36

The above sums are so large as to defy comprehension by the ordinary mind, but their meaning can be realized to some extent when they are dissolved into their component parts. The capital invested divides itself as follows:

The above figures are taken from the Report of the U. S. Bureau of the Census for the year 1909, the latest available official statement. It is not probable that figures for the present year if they were at hand would disclose very material differences.

2. Capital Invested by Allied Manufactures

and Trades

$41,179,000

To state with absolute exactness the amount of capital tied up in manufactures and trades that stand in more or less immediate relation to the liquor industry, is not possible. The figures given. above have been derived from some hundreds of original returns made by manufactures and trades, but cannot by any means be re

garded as the total which would be affected. In many instances only a part of the output of manufacturers and others goes into the liquor industry, and to calculate the portion of the capital thus affected has not been possible. Meanwhile, it will easily be comprehended that there are numerous industries and trades which are more or less directly dependent upon the liquor traffic. One may instance the manufacturers of special machinery, glassware of all kinds, coopers, and a host of others furnishing supplies of various kinds, too numerous to mention.

3. Capital Invested in the Retail Traffic

(Fixtures and Furnishings)

.......

$421,601,380

Large as the last-mentioned total is, it relates solely to the fixtures and furnishings required in the retail trade. Similar items for the wholesale trade have not been considered. In this case the figures are based upon the original returns for 1913 relating to some 10,000 establishments scattered over the United States, the average from which has been applied to the entire country. There can be no question that the total is considerably under-estimated, as care has been taken to avoid using returns from a large number of the largest and costliest establishments.

Total Annual Disbursements other than

for Service ..

$1,121,696,097.36

There are to be considered (1) the disbursements other than for wages occurring within the different branches of the liquor industry itself. This may be stated as follows:

(1) Annual Disbursements other than for Wages—

In regard to materials it should be observed that the totals given are taken from the Census Report for 1909. The total value of

agricultural products is included. What the value of agricultural products means will be separately considered.

Under "Taxes" are included for the brewing industry the Federal tax, plus local taxes on real estate used in brewing, and the local license fees imposed upon brewers.

So far as the distillers and wine makers are concerned, only the Federal tax paid by them during the last fiscal year has been included; it has not been possible to ascertain the local license fees paid by the distillers and wine makers, nor the amount of local taxes paid upon the property they occupy.

The transportation cost is based upon original returns from a majority of the large brewing concerns and upon estimates for the other industries. In the absence of complete itemized returns from railroads, express companies and others in transportation, it is impossible more than to approximate a total. Even in the brewing in'dustry the item of transportation cost of raw materials is not always definitely known, as this may be paid by the shipper. Then in the distribution of the wares of the liquor industry, only a part of the cost actually occurring can be known. Their ultimate distribution. cannot be followed. Therefore, the total given as the cost of transportation must be considered as an exceedingly conservative estimate. The expenses included under the head "Other" are taken directly from the Reports of the Bureau of the Census.

(2) Disbursements other than for Wages by Allied Manu

The totals given are based upon fragmentary returns and can only be regarded as representing a part of the sums involved. Again effort is made to utilize extremely conservative figures.

(3) Annual Disbursements other than for Wages by the
Retail Trade-

The outlay for rent is based upon original inquiry. The expenditures for supplies have been obtained in the same manner and include such articles as food, ice, cigars, soft drinks, light, etc., but not beers, ales and liquors of any kind. In other words, under the

head of supplies are only counted items of general consumption that would enter into life regardless of the existence of the liquor traffic. As in the matter of fixtures and furnishings, it has been sought to avoid the inclusion of many pretentious establishments which might unduly swell the total of very large outlays for various articles of food and luxuries other than liquors.

The amount spent for insurance has been estimated on the basis of an average obtained for about 10,000 different establishments, and reckoning the insurance premium at the low rate of two dollars per thousand, which is probably less than the actual rate, the total amount of insurance carried by the retail trade alone is reckoned at $226, 772,180.

(4) Annual Disbursements for License Fees

for 1913

$109,254,044

In order to arrive at the total amount of license fees the number of retail establishments has been placed at 115,996. For certain States the actual number is not known, while in the most important it is known, and by applying the proportion of places where official figures were at hand a trustworthy rate could be obtained for the entire country. Naturally, all drug stores, grocery stores and other establishments which distribute liquor at retail are not included. On the other hand, the wholesale license fees have been added, as well as the special license fees for retail traffic in malt liquors alone. Also there has been added the Federal taxes of the wholesale and retail trade.