As reprinted in Moore, Robert L. and James D. Whitney. Microeconomic Principles in Action. Englewood Cliffs, NJ: Prentice Hal, 1990, pp.21-23. Moonshiners in South Find Sales Are Down as Their Costs Go Up

By JONATHAN KWITNY

My daddy, he made whiskey
My granddaddy did, too
We ain't paid no whiskey tax
Since 1792.
    --from "Copper Kettle" by Albert F. Beddoe HABERSHAM COUNTY, Ga.--When Joan Baez popularized the song "Copper Kettle" in the early 1960s, the verse quoted above described life in these North Georgia hills pretty accurately.

"There probably isn't a family around here that hasn't had at least one member involved with a still," observes Clyde Dixon, executive vice president of the Peoples Bank in Cleveland,Ga. "It hasn't been so long around here since moonshine was the only way to make money. My father made moonshine," Mr. Dixon says.

[A] But two years ago the price of sugar--an essential ingredient in moonshine--tripled, and life in the laurel thickets changed rapidly. It takes at least 10 pounds of sugar to make a gallon of barnyard whiskey. With other inflationary factors added, moonshine that sold a few years ago for $6 a gallon at the still began pushing $15 a gallon.

At that price the moonshine market contracted severely, because for $15 plus retail markup, a customer can buy government whiskey. ("Government whiskey" is the hill country term for legal booze--stuff on which the tax has been paid. Unlike hastily made moonshine, its manufacture relies on slowly drawing natural sugars from the grain being distilled, and therefore its price is unaffected by the sugar market.)

Revenuers Look Elsewhere

The price squeeze on moonshine has forced new occupations on a lot of people who were engaged, one way or another, in what may have been, even as late as the 1950s, the largest industry in such counties as Habersham, Dawson and Gilmer. Not all of those people whose employment depended on illegal booze were moonshiners, themselves, however.

Billy Corbin is a revenue agent with the Treasury Department's Bureau of Alcohol, Tobacco and Firearms (ATF). He chased moonshiners in North Georgia for 10 years and says his team of five agents used to bust up an average of 10 stills a month. Then, in December, he was transferred to a new office with emphasis on nonwhiskey violations. "When I left (the moonshine post) it was down to no more than one still a month," Mr. Corbin says.

Mr. Corbin's boss, Bill Barbary, agent in charge of ATF's Gainesville, Ga., office, says the 108 revenue agents in Georgia used to spend 75% of their time on liquor offenses, the rest on other crimes, mostly the unlicensed sale of firearms. Now, he says, agents spend only about 25% of their time on moonshine patrol. To help fill the slack, the Treasury Department this year reassigned its gambling tax enforcement to ATF from the Internal Revenue Service.

So, for the government, one beneficial by-product of the sugar inflation and moonshine depression is an increase in arrests for firearms violations and illegal wagering. Some 15 or 20 revenue agents from the countryside were reassigned to Atlanta this spring and broke up a big numbers ring there, federal officials say; they promise to follow up with the indictment of 30 or 40 gambling operators.

The Pot Shuttle

On the other hand, with the whiskey business in turmoil, many former moonshine overlords--Mr. Barbary says most of them--have simply reapplied their resourcefulness to trafficking in other illicit goods that are still profitable. They are suspected of being responsible for the recent big increase in the airlifting of drugs, particularly marijuana, from South America to small airstrips in Georgia and neighboring moonshine states.

For example, two long-reputed North Georgia moonshine czars, Garland "Bud" Cochran and Ben Kade "Junior" Tatum, were indicted in federal court in South Carolina last summer for allegedly masterminding a DC-4 pot shuttle from Colombia. Mr. Tatum was convicted and is appealing. Mr. Cochran--who the ATF says was shipping 7,000 gallons of moonshine a month into Atlanta in trailer trucks during the 1960s--has been a fugitive since the smuggling indictment came down. Officials believe he is in South America directing more smuggling operations.

Radical as the change in North Georgia life has been since the price of sugar rose, it actually is the culmination of an evolutionary change that began in the early 1940s.

Revenue agents agree that the old-time, 100% corn liquor made in pure copper stills--the fabled "white lightning"--was as good as or better than bonded whiskey. But when copper became scarce at the start of World War II, moonshiners turned to sheet metal vats, and in more recent times began cooling the liquor in automobile radiators instead of copper coils. The result often is a fatal dose of lead poisoning. In probably the most famous case of this, the late Fats Hardy, a Gainesville moonshine king, was sentenced to life in prison in the late 1950s after many persons died from drinking the moonshine he shipped to Atlanta.

The people who do drink it, authorities say are almost exclusively poor, urban blacks. The biggest retail distribution centers are so-called "shot-houses," operated in private homes or stores in black neighborhoods of Atlanta, Macon and other cities throughout the Southeast. Because the price of a shot has soared to 75 cents, almost the price of safer, stronger legal bar whiskey, the ATF estimates that there are only a few hundred shot-houses in Atlanta now, down from a few thousand before the crunch.

Assistant U.S. Attorney Owen Forrester in Atlanta-who says his grandmother had a still on her land, though she didn't drink--says he doubts that even a new rise in sugar prices could wipe out moonshine entirely. "The revenue agents who work the shot-houses here tell me that there are still a lot of old-timers who like the taste of it," Mr. Forrester says. "There's a certain zang, or sizzle, going down."

How to Make It

Hill folks and revenue agents have described the methods moonshiners use to get that "zang" and "sizzle'' in there.

First, there's a widespread belief, often put into practice, that horse manure added to the corn mash speeds its fermentation. In addition, sanitary conditions aren't always up to FDA standards. Mr. Dixon, the country banker, says. "I've seen a hog get in (the vat) to drink some of that slop and drown. They just take the hog out and go ahead. They can't afford to lose all that money Coy throwing out the contaminated mash). I'll tell you, Jack Daniel's does it a lot cleaner." Mr. Forrester, the prosecutor, recalls a moonshiner who "put in dead possums at the end to flavor it."

Later, still other foreign matter is added. Moonshine usually is 110 proof when it's sold at the still to a "tripper," who usually is either an independent truck driver or an employee of an urban distributor. To stretch the product, the distributors usually water it down as much as 50°7o. Then, to make it look its original strength, they add beading oil, which simulates the swirls that alcohol makes in liquor.

If some parts of the "Copper Kettle" song were accurate once, sources here agree that one verse never was accurate:

"It's damn hard work to make whiskey," Mr. Dixon says. "They have to hide the stills in laurel thickets on a mountain. You have your barrels and boxes of malt--it's corn meal mostly, some barley malt. They'll carry 200 or 300 pounds of sugar up that mountain at a time on their backs. All the time (the mash) is working it has to be stirred. That corn meal has a tendency to lump up. I've seen them get stark naked and get in there and mash it. If you don't think it's hard work, try it."

Much of the hard work, high price and poor quality is caused by the revenue agents, whose presence puts constant pressure on moonshiners to finish their work fast and get out. Moonshiners need costly sugar because they must dash off each batch of their product in about 72 hours. Bonded distillers have controlled conditions and plenty of time, so they can apply even heat as required and wait out the two weeks or so it takes to get sugar out of the natural grains.

Build you a fire with hick'ry
Hick'ry and ash and oak
Don't use no green or rotten wood
They'll get you by the smoke. Byron Davis of Gainesville, who retired in 1968 after 31 years as a revenue agent because "it's a young man's job," says he remembers capturing a lot of moonshiners by cruising the hills looking for smoke. In fact, he attributes the switch in still materials from copper to other metals at least in part to a switch in cooking fuels from wood to butane gas. The butane largely eliminated the telltale smoke trail, he says, but didn't work well with copper equipment.

Keeping tabs on sugar sales also has helped agents to corral a few moonshiners. "One of these little country stores starts selling 500 pounds of sugar a week, you smell a rat," Mr. Corbin says.

Nowadays, however, agents say they make most of their arrests through tips from informants. Moonshiners love to tell on each other, Mr. Corbin says. Certainly the ATF needed informants 18 months ago in order to discover a fabulous 2,000-gallon-a-week underground still, which was entered by opening the trunk of an old Ford sitting in a Habersham County junkyard, and climbing down a ladder. Agents believe that the operator obtained electric power for his still by tapping into nearby underground Tennessee Valley Authority lines.

On the whole, authorities say their problem is less in catching moonshiners than in obtaining justice afterwards.

Judges and juries just "didn't consider whiskey to be a crime," Mr. Forrester recalls of his moonshine trial days. The operator of the underground still beneath the old Ford, for example, pleaded guilty and received a suspended sentence, Mr. Forrester says.

Professional

So relaxed is the atmosphere at moonshine trials that one notorious moonshiner from Adairsville, Ga., used to feel comfortable attending them. Mr. Forrester recalls, "Every term he'd come to court with mash all over his pants and listen to testimony in other cases to learn new techniques."

A typical still operation is financed and overseen by a man with substantial income from legitimate business, such as a farm or store. He hires three to six still hands and one or two women who live with them while the still is in operation, to keep house and to make the group appear to be a normal family. While the still hands sometimes wind up serving a year or two in federal prison, the boss, if convicted, usually gets probation, often impressing the judge and jury with letters of commendation from leaders in the community ....

The Wall Street Journal, July 30, 1975. Reprinted by permission of The Wall Street Journal, © Dow Jones & Company, Inc., 1975. All rights reserved worldwide.

QUESTIONS

    1. Consider passage A: Explain carefully (with the use of a supply and demand diagram) what is occurring in the market for moonshine.

    2. Now indicate in a new diagram how the change in the moonshine market depicted above affects the market for legal whiskey.

    3. The title of the article states: "... Sales Are Down As ... Costs Go Up." If "sales" are defined as the total expenditure on moonshine, what, if anything, can you say about the price elasticity of demand for moonshine? Explain briefly.

    4. Congress is considering raising the federal excise tax on government (legal) whiskey in order to reduce the federal deficit:
    a. Explain and then illustrate in a diagram how such a tax increase would affect the market for legal whiskey. (Hint: at the new equilibrium quantity, the vertical gap between the original demand and supply curves equals the size of the tax.)
    b. Which, if any, of the following would make the price of legal whiskey rise by the full amount of the tax?
    (1) Horizontal demand and upward sloping supply
    (2) Vertical demand and upward sloping supply
    (3) Downward sloping demand and upward sloping supply
    (4) Downward sloping demand and horizontal supply
    (5) Downward sloping demand and vertical supply