Price per Cigarette (Cents Canadian)

Lower American taxes on cigarettes are attractive, but un-taxed prices are even better. Some of the contraband market in tobacco utilizes tax-free products which come from duty-free shops, but most pass through the hands of native peoples who enjoy un-taxed status.

The price-spread for the same carton of 200 Canadian cigarettes can vary as follows (all figures in Canadian funds):

49.00 Ontario, full provincial and federal taxes

25.55 New York, with full state and federal taxes

21.99 Canada, duty free shops

18.28 New York, duty free shops

15.72 Native Reserves

The effect of the tobacco price difference should have been predicted — the contraband flooding across the US border into Canada uses the same routes over which alcohol was often smuggled in the United States during the Prohibition Era. There are a number of other parallels between the Era and the current Canadian situation which bear examination.

The abuse of alcohol in 19^th Century America was widespread and caused a number of social ills. Low production standards led to many health problems as unscrupulous distillers laced their alcohol with strychnine, cayenne pepper or gunpowder to add "kick" to it. Public drunkenness among rural workers on visits to town (cowboys, lumberjacks and sailors for example) was matched by the heavy consumption of factory workers seeking temporary oblivion in grim industrial towns. Alcohol often formed a part of the daily diet. Not surprisingly, teetotaller and temperance movements grew in size as the century passed. As always, there were the social crusaders who, in fighting a particular evil, seek total victory. Vocal temperance preachers or the legendary saloon wrecker Carey Nation, provided colour to the Abolition Movement, but its strength was based in the thousands of educated middle class campaigners who formed a powerful lobby.

The Abolition Movement took advantage of the First World War and its attendant sense of a national effort to push the passage of the Volstead Act. The 18^th Amendment to the US Constitution passed in January 1919 and the Prohibition Era began. This was repealed in late 1933 by the 21^st Amendment. As an exercise in a social-engineering, Prohibition had one success: The worst excesses of alcohol abuse were partly curtailed and public drunkenness has never been as endemic, nor as tolerated as it once was. American Drinking habits did change as a result of Prohibition.

The demand for alcohol continued throughout Prohibition in the United States. Many citizens resented the legislation and defied it by drinking when they felt like it. However, the only sources of alcohol were illegal. Moonshine and "bathtub gin" met some of the demand — albeit at risk to the consumer as some products were hazardous as the cheap "rotgut" spirits of the 19^th Century. Safe or quality alcohol was only available from smugglers (ironically, Canada was a major supply source) or those with the wherewithal to clandestinely produce large volumes inside the United States. As a result, the whole experiment led to the unparalleled growth of organized crime.

The major US criminal elements in 1919 were based on gangs in the Irish, Italian and Jewish communities. They ran extortion rackets and engaged in petty theft while usually preying on their own communities. What would become the Mafia consisted of dozens of gangs under the leadership of the "Mustache Petes". Prohibition provided easy money and opportunities-especially for those who unified to control the market in various cities. Vicious gang wars marked the early part of the era, but conflict in the latter half was decided by efforts to stem the growing political power of some of the gangs. This was largely gained through political corruption and intimidation. The struggle between the Treasury Agent Elliot Ness and mobster Al Capone was the most famous, and the 1955 book The Untouchables is a frightening account of how serious the problem was in Chicago.

The repeal of Prohibition acknowledged the failure of the Volstead Act to curtail American drinking and the growing power of the mobs. The Mafia (which had either eliminated or absorbed its rivals) had evolved during 14 years of the Prohibition Era from a minor problem in Italian neighbourhoods to a powerful collection of criminal families in an uneasy empire across America. The return of legal alcohol was a blow to the gangsters and the easy wealth of the era has never yet been matched. However, Mob control of betting rackets, prostitution, narcotics, Union organizations, gambling and extortion survived the 21^st Amendment.

Colombia witnessed the same dynamics in organized crime with the rise of the Medellin Cocaine Cartel. From the late 1970s onwards, the cocaine barons slowly ceased their own quarrels and loosely unified. Yet, like the American Mafia, cartel members occasionally fought with each other. From 1984 onwards, the Cartel concentrated on destabilizing Colombian authority so they could protest their own interests. In Canada, the situation in the cigarette industry combines some elements of both the Cartel and Prohibition situations. Various Reserves are now in the hands of an indigenous organized criminal group — the Warrior’s Society. However, other criminal elements, including Bike gangs, Asian Triads and the Mafia, are closing in on some of the more lucrative smuggling sites. The issue is already violent and will likely become worse in 1994.

[Page 1] [Page 2] [Page 3] [Page 4] [Page 5] [Page 6] [Page 7] [Page 8] [Page 9] [Page 10] [Page 11] [Page 12] [Page 13]

John Thompson is President of the Mackenzie Institute which studies political instability and terrorism. He can be reached at: mackenzieinstitute@bellnet.ca