Earlier this year the Goa government decided not to give licenses to new floating casinos on the Mandovi river, potentially foregoing millions of rupees in revenue for the exchequer. Goa currently rakes up Rs 100 crores in taxes per year from the gambling industry, and accounts for 95 percent of all legal gambling in the country. Sikkim and Daman make up for the rest. India’s high rollers will once again swarm Colombo and Macau in thousands, far away from the disapproving mommy state of India.
The public debate on casinos here inevitably takes a moral turn: a socially conservative population frowns on the idea of gambling and excess. Rarely is there debate on the economic efficacy of casinos and gambling. Much less, if ever, do we debate if more open gambling can spark entrepreneurial spirits in a risk-averse country. Even as India frustratingly hedges its bet on the free market, can a dose of casino capitalism really hurt?
The Nobel laureate economist Paul Samuelson spelled out the central economic argument against gambling. “It involves simply sterile transfers of money or goods between individuals, creating no new money or goods,” he said. “When pursued beyond the limits of recreation, where the main purpose after all is to kill time, gambling subtracts from the national income.”
But proponents of gambling argue that the same logic can apply to movies or Disneyland. They also say that the infrastructure, tourism and jobs created around casinos benefit the resident community. Since it’s true that the casino always wins, then it follows that the people living off the casino are winning too. Yes, they win much less than the casino owner, but then that’s true for any industry.
Since gambling “transfers” wealth as Samuelson pointed out, then does it not make sense to build casinos in economically deprived areas of the country, so rich suckers can come and spend their money, benefiting the local economy? Isn’t that a more sustainable, honorable re-distributive measure than government subsidies and doles? Nevada, Atlantic City and the American Indian lands of Minnesota were all economic swamps that were converted into buzzing hubs by the American gambling industry.
According to an American Gaming Association report, the industry generated $125 billion in direct and indirect revenues in 2010, almost 1 percent of the country’s GDP. According to the report, 566 casinos in 22 states supported nearly 820,000 U.S. jobs.
Inspired by Singapore’s two phenomenally successful casinos that opened in 2010, Asian countries like South Korea, Philippines and Sri Lanka moved fast towards legal gaming. Chinese capitalism is at its most flamboyant display in Macau, whose casinos attract millions of mainlanders, and have transformed the economic fortune of its residents.
But what prevents this in India is the perceived social cost of gambling, which is difficult to quantify: casinos allegedly aggravate crime, prostitution, compulsive gambling behavior, family strife and alcoholism. All this sounds very similar to puritanical objections against bars and nightclubs. Yet when this puritanism is taken far, it leads to much greater social strife and corruption.
Is puritanical Peshawar really a safer place to live than Las Vegas, the city of “vices”? Gujarat’s alcohol prohibition is among the biggest, open scams in India: politicians, policemen and bootleggers make millions of rupees every year in the black market, while consumers suffer. Teetotalers suffer too, as the taxes the government could forego would have been spent on improving their lives. The Bengal government curfewed Calcutta’s nightclubs at 11.30pm after the Park street rape: yet some stay open, but only after paying large sums to the authorities. The ones who cannot pay up are being forced out of business.
The basis for the mommy state’s moral puritanism is a vile assumption of human behavior: that we cannot control our own bestial greed and libido, therefore the state must do that for us by banning alcohol and gambling. On the economic front, the mommy state stifles citizens’ entrepreneurial and risk-taking abilities through moral objections. The state’s sense of moral superiority then becomes the cloak for very immoral activities: the licence raj and cronyism. On the social front, it leads to a hypocritical, vigilante society.
Some of India’s gaming laws have not been updated since the 1800’s. Illegal betting on cricket runs into billions of dollars; online betting with foreign agencies is rampant; over the coming festive season millions across the country will be gaming at home with family and friends.
According to KPMG some $60 billion was wagered in the country in 2010. That is about Rs 250,000 crores at 2010 exchange rates. Only one-fifth of that is spent in legal casinos today. Even more striking: Indians spent 2.5 percent of GDP in gambling, compared to only 1 percent by Americans.Macau’s official statistics show that from 29,000 Indian visitors in 2006, the number increased to 150,000 in 2012.
Since the mommy state cannot stop increasingly rich Indians from gambling, wouldn’t it make more sense to just cash in?