An excellent article from City Journal examining the sordid history of said city.

An excerpt.

In the summer of 1908, a New York Times story described how the renowned vacation spot Atlantic City had nullified state laws restricting gambling and alcohol. Calling the city’s defiance “one of the most remarkable situations that ever existed in an Eastern state,” the Times quoted local officials saying that even if they tried to enforce the state rules, no jury of local citizens would indict or convict the offenders because most felt that Atlantic City’s mission was to “attend strictly to the entertainment of our visitors”—and that meant offering gambling and booze seven days a week and letting brothels operate openly. That summer wasn’t unusual: over the decades, officials in the New Jersey shore town would regularly tussle with state and federal investigators while operating what newspapers dubbed an “open city”—or, during Prohibition, a “wet city”—where the laws that other municipalities followed simply didn’t apply. Born from a physician’s dream to provide a place for healthy leisure, Atlantic City metamorphosed into a town “dedicated to the fast buck,” governed by dangerous racketeers and corrupt politicians, as Nelson Johnson, author of Boardwalk Empire: The Birth, High Times and Corruption of Atlantic City, puts it.

Today, Atlantic City, with a year-round population of 40,000, teeters on the edge of bankruptcy and economic collapse. A long experiment with legalized gambling, launched in 1976, has failed to reenergize this once-iconic locale, which fell into seedy decline as tourists started turning away in the 1950s. The revival foundered largely because state officials—despite pledges to keep corrupt influences, including the Mafia, out of the casinos—failed to clean up the culture of sleaze, exploitation, and profligate spending that characterized Atlantic City’s government. Run for decades by political machines, the city squandered all the riches brought in by its four-decade near-monopoly on East Coast legal gaming. Now, as competition from other legal gambling locations intensifies, the prospects for another tourism-driven revival seem increasingly remote. Atlantic City wasn’t the first American municipality dragged down by two demons of urban decline—corrupt politicians and a one-industry economy—but it had a better shot at a comeback than many other struggling urban areas, and blew the chance. What’s next doesn’t look pretty.

In the early nineteenth century, South Jersey doctor Jonathan Pitney was captivated by a barrier island just off the coast, known as Further Island, where he’d sometimes row to treat patients. He eventually got the idea to develop the land into a health resort for the wealthy. Though critics derided his plan early on as “Pitney’s folly,” the doctor persuaded investors to finance the construction of a rail connection from Camden, on the banks of the Delaware River across from Philadelphia, to the island, soon known as Atlantic City. Guests could stay in a new 600-room hotel, also financed by Pitney’s backers. The budding resort experienced early woes, including the bankruptcy of the rail line, but its popularity grew during the second half of the nineteenth century. From just 3,000 visitors during the summer of 1858, tourism soared to 100,000 vacationers in 1872 and then exploded to 3 million just after the turn of the twentieth century. At its 1930s apex, Atlantic City welcomed 16 million tourists every summer.

Along the way, Atlantic City transformed into a raucous vacation spot, habituated by everyone from the rich and titled—the Duchess of Marlborough, Consuelo Vanderbilt, took a summer home there in 1903—to working-class families from Philadelphia and Camden. The resort boasted various family entertainments, including its famous boardwalk and a series of amusement piers jutting out into the Atlantic. But as early as the 1890s, Atlantic City—then ruled by political boss Commodore Kuehnle—also harbored “gambling parlors, speakeasies and brothels,” all operating “as if they were legal,” writes Johnson. “The only time the local police clamped down on anyone was if they were late with their payments” to the politicians, he observes.

For decades, when neither the federal government’s investigative arms nor New Jersey’s state government in Trenton had much muscle, Atlantic City officials quashed efforts to force the resort to operate lawfully. Jersey governor Franklin Fort appointed a public prosecutor to clean up the place in 1908, for example, but the push came to a thudding halt when a grand jury refused to indict any of the people brought before it.

Prohibition’s onset in 1920 gave Atlantic City a new opportunity to offer visitors something that they had trouble procuring elsewhere. After the federal government sent prohibition agents to the town in 1923, local officials tossed one of them in jail for three days and refused to let him communicate with Washington, prompting a Justice Department representative to declare Atlantic City “the most corrupt city in the country.” A grand jury later refused to return indictments against city leaders for their roles in the incident. Underscoring Atlantic City’s reputation for lawlessness and racketeering, mobster Lucky Luciano chose the resort for the first national convention of mob bosses. Held in 1929 and hosted by Atlantic City boss Enoch “Nucky” Johnson (the inspiration for “Nucky Thompson,” protagonist of the HBO series Boardwalk Empire), the meeting brought together notorious underworld figures like Al Capone, Frank Costello, and Meyer Lansky. Even when reformers did manage to throw a politician in jail, the convictions did little to diminish corruption. After the federal government convicted Johnson for tax evasion in 1941, the gangster’s political machine, which ran much of South Jersey, passed smoothly to state legislator Frank Farley, who controlled it until the early 1970s.