In the last three decades of ebullient enthusiasm about the free market economy, gambling became more popular than ever around the world. Enthusiasm for gambling in casinos ran parallel to enthusiasm for gambling in the equities markets during a period when financial institutions risked other peoples' money - from individual investors' money to retirement funds to charity foundation investments - on derivative securities contracts, which in essence resulted in toxic assets during the tech-housing bubble. Investors were left holding worthless paper and the bursting financial bubble ushered in the worst global recession since the 1930s. When debts came due, government asked taxpayers to bail out the same financial institutions that had gambled on derivatives.
Gambling in stock markets was accompanied by traditional forms of gambling that were very popular not just in affluent countries, but in Ireland and across southern Europe (PIIGS) currently facing serious fiscal and economic problems. In Greece, for example, in December 2010, one billion euros was spent on legalized gambling - approximately half on casinos and the other half on state lottery and betting services. Illegal gambling operations of course are hard to trace and online gambling is not regulated.
The Greek government estimates that illegal gambling generates five billion euros per year, or about the same amount as legalized gambling. Given that the GDP of Greece is roughly 240 billion euros, ten billion euros spent on legal and illegal gambling represents a very high percentage of GDP for a country in a deep recession and under austerity measures. After consulting the IMF and EU, the Greek government plans to introduce legislation to issue gambling licenses for online and other 'gaming operations', so that govt can get its cut.
A similar picture exists in Portugal, Spain and Ireland where gambling has taken off in the past decade along with astonishing GDP growth rates too high to sustain on perpetual borrowing and cooking the books to show much lower than the actual debt. When Ireland established its first land casino in 2001, people spent 1.6 billion euros, an amount that has gone up substantially since then, and that does not include what is spent in sports and illegal betting operations.
In the last ten years gambling has risen even faster in Ireland. The sharp rise in gambling has brought a rise in related problems among them addiction, suicides that are 20 times more likely than in the general population, much higher divorce rates than the general population, alcoholism and drug addiction, and crime, all of which entail high costs to the formal economy, to the public health care and government in general, and of course to families that gambling destroys.
One could argue that gambling has existed throughout history as a part of human nature; that gambling is an exercise of free will of citizens with the privilege to live in a free society and to risk their own money. Beside, gambling per se is a non-violent form of entertainment, no matter how self-punishing it may be as Freud argued.
Gambling has risen sharply in the US as well. In 2007 Americans gambled more than twice what they deposited in their savings accounts. Gambling casino profits are estimated at $30 billion and for state lotteries at $17 billion. Americans spend more on legalized gambling than all other forms of entertainment. The gambling industry has grown ten-fold in the past 30 years and 80% of adults gambled at least once in the past year. Low-income people are far more likely to buy lottery and engage in off track betting than individuals with incomes above $50,000 and college education. There are an estimated 15 million addicts and the cost to society is in several billion ($5 billion ten years ago); a figure that does not take social costs into account.
Whether individual states (all except Utah and Hawaii) in the case of the US, or central governments in other parts of the world, including China that today has a gambling problem, legalized gambling is promoted and indirectly encourages illegal gambling as well. The question is to what degree should government be in the business of promoting self-destructive and addictive behavior without a warning label. Are consumers not entitled to know the consequences of services they are purchasing? Should government have a role in promoting gambling as a method of raising revenue? And what if government is guardian of the 'house' at the gambler's expense?
Gambling is a form of indirect taxation that falls mainly on the middle class and workers. Despite the social costs of gambling to society, it is becoming more popular and 'experts' advise governments to support it, especially online gambling. In some countries like Spain more is spent for online gambling than in casinos. PricewaterhouseCoopers is advising the US and other government that regulating online gambling will generate new revenue and keep direct taxes from rising.
There are those who argue that taxes from gambling helps to fund social programs. Based on this logic, why not put slot machines in every school from primary to college, in every work area lunch room or cafeteria, in every public bathroom, in every street corner? And why stop with horse and dog tracks, why not reintroduce Roman Circuses with live subjects - humans and animals - battling out to the death? As long as the taxes generated, gambling is for a 'good cause'!
Gambling is really an extension of the value system and ideology that has driven society to the current phase of finance capitalism, namely, "Las Vegas, or casino, or horse-track capitalism," as some are calling it. The US and other governments permitted banks and financial institutions to trade trillions in derivative contracts at an extraordinary high risk to the economy but very lucrative for the traders of such contracts. This type of gambling capitalism was responsible for the current crisis. Despite US and EU political commitments to do something about the destructive derivatives market, very little has been done. As soon as world markets rebound to pre-recession levels, there will be a return to higher risk CASINO capitalism that will drive the world economy into the ground in the next contracting cycle.
Wall Street and powerful financial interests globally will not permit government to introduce rigid regulation of swaps and other derivatives from which a few people make very high profits. When a Chicago construction worker plays the horses or a Cleveland auto worker buys a lottery ticket, or a retired Iowa City college professor goes to Vegas to test her luck, they are all gambling with their own money, perhaps because they lacked parental love as children, or because gambling fills the void of their existence.
When a New York banking executive is trading derivative contracts, he is creating toxic assets and gambling with other peoples' money to guarantee a profit for himself and a few other hedge fund investors. If government is to issue warning labels for gambling, how is to warn the public about the type of gambling in which financial institutions engage; and how is it to warn the public about government as protector and guarantor of same financial institutions? If only Fyodor Dostoyevsky were alive to capture this new gambling spirit of markets gambling people's money and bailed out by the state with peoples' money!