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To make a long story short, during the first decades of this century, opium was made illegal to kick out the Chinese immigrants who had flooded the work-force. Cocaine was made illegal to repress and control the Black community. And, marijuana was made illegal in order to control Mexicans in the Southeast (and Blacks.) All these laws were based mainly on emotional racism, without much else to back them up — you can easily tell this by reading the hearings held in state legislatures. Also at this time, the end of Prohibition left us with a large force of unemployed police officers, who looked for work enforcing the new drug laws. Consequently, these same police officers needed to convince the country that their jobs were important. They did so by scaring parents about the dangers of drugs. All this set the stage for a law passed in the Federal legislature which put a prohibitive tax on marijuana. This is what killed the hemp industry in 1937, since it made business in hemp impossible.
Before the 1937 Marijuana Tax Act, the state of Kentucky was the center of a relatively large American hemp industry which produced cloth and tow (rope for use in shipping.) The industry would have been larger, but hemp had one major disadvantage: processing it required a lot of work. Men had to brake hemp stalks in order to separate the fiber from the woody core. This was done on a small machine called a hand-brake, and it was a job fit for Hercules. It was not until the 1930’s that machines to do this became widely available.
Today we use paper made by a process called chemical pulping. Before this, trees were processed by mechanical pulping instead, which was much more expensive. At about the same time as machines to brake hemp appeared, the idea of using hemp hurds for making paper and plastic was proposed. Hemp hurds were normally considered to be a worthless waste product that was thrown away after it was stripped of fiber. New research showed that these hurds could be used instead of wood in mechanical pulping, and that this would drastically reduce the cost of making paper. Popular Mechanics Magazine predicted that hemp would rise to become the number one crop in America. In fact, the 1937 Marijuana Tax Act was so unexpected that Popular Mechanics had already gone to press with a cover story about hemp, published in 1938 just two months after the Tax Act took effect.