How the KKK scammed its members for cash

From the article:

Today, the Ku Klux Klan is one of the most extreme and reviled symbols of American racism. But there was once a time when the fringe hate group verged on “mainstream.” In the 1920s, its members numbered in the millions and made up a significant percentage of the US population. This is the KKK that claimed to control elections and counted U.S. presidents among its members. And it’s the predecessor to the group that, in fiction, threatened Atticus Finch in front of the steps of the Maycomb County courthouse for defending a black man.

But in 2011, Roland G. Fryer and Steven D. Levitt, the economist co-author of Freakonomics, looked into historical statistics about KKK membership and demographic, criminal and political trends at the time. And they found something surprising: a seldom-seen side of the KKK.

“Rather than a terrorist organization,” they wrote, “the 1920s Klan is best described as a social organization with a wildly successful multi-level marketing structure.” According to Fryer and Levitt, in its heyday, the KKK was a giant, perverse pyramid scheme. Instead of perpetrating a racist agenda, the KKK’s leaders exploited pre-existing, popular racism to make money.

They were very, very, very successful. At a time when per capita income in the U.S. was under $700, the Indiana Klan leader pulled in about $200,000 annually. In 2015, that’s the equivalent of more than $2.8 million.
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Kleagles went into untapped markets with the charge to “make salient whatever prejudices – anti-Catholicism, anti-Semitism, racism, and so on – were most acute in the particular areas they were selling Klan memberships.” They did, in exchange for 40% of the sale. But there were more profits to be made off each new recruit.

Today, the U.S. government distinguishes “legitimate” pyramid selling from an illegal pyramid scheme based on whether a company makes most of its profits from its customers, or from its members/employees. While the KKK was, in most respects, a “non-profit” dedicated to championing a political and social “cause” (racism and xenophobia), it exclusively made money off its members. The Klan sold to the Klan, and the Klan alone.

And the Klan sold to the Klan a lot. Once a new member joined, he was not allowed to make his own robes. KKK robes only came from KKK-approved factories. They cost $2.00 to produce, and they were initially sold to members for $6.50 (about $88 in 2015). The KKK also pressured its members to purchase a lot of other racist-branded swag: life insurance, robe dry-cleaning services, helmets, Bibles, swords, and “even specially-wrapped candies with the Klan insignia on it.”

Members also paid an annual membership fee of $5, and KKK leaders collected an “imperial” tax on all officially chartered local chapters (also known as “Klaverns”) of $1.80 per Klansman, paid out in four parts of $0.45 a year. This money went directly into the inner “Imperial” rung of the hierarchy. For a time, the Klan leaders, even at the state level, were among the best paid men in America.

There are modern parallels with fundraising for various right-wing political campaigns.