Thursday, July 3, 2008

The Klan was a Pyramid Scheme

01238 magazine has a story on a paper entitled “Hatred and Profits: Getting Under the Hood of the Ku Klux Klan,” by a-list economists Steve Levitt and Ronald Fryer. They find that, in the main, the activity of the clan was more akin to the Elks or Masons than a contemporary terrorist/hate group:
The research sample showed that the average Klan member was better educated and wealthier than the surrounding population. He was also more likely to see the Klan as a fraternity of sorts than as a violent posse. When the two economists uncovered a trove of expense receipts in Pennsylvania, Fryer says, “I thought maybe we’d find something exciting, like rope or guns, but instead they were buying stuff like ice cream.

I haven't read the entire article. I'd take issue with the research as presented in the article if it in any way downplays the incidents of real terrorism and brutality in which the Klan has historically engaged. But the article does highlight some fascinating aspects of how the Klan worked. It appeared that it worked much like modern pyramid schemes:

The Klan was highly effective at one thing, however: making money for its leaders. Rank-and-file members had to pay joining fees, “realm taxes,” and routine costs like robe purchases. Most of this money made its way to the top via an army of “salesmen,” who took their own cut. Levitt and Fryer calculated that in one year, David Curtis Stephenson, the Grand Dragon of Indiana and 22 other states, took home about $2.5 million (in 2006 dollars). “The Klan was able to bundle hatred with fraternity and make a real sell of it,” says Fryer.

Their study reminds us that racial/nativist hatreds can be exploited for both political and economic gain. I wonder if anyone has looked at contemporary nativist groups and examined their organizational and financial structures.

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