Gambling in a time of crisis

Italy is in a time of crisis. One could expatiate as to the short- or long-term causes of the situation. I’ll leave it to the pundits. How do Italians react to increased economic difficulties – how do they cope? A recent article[1] sheds some light on this matter. 80 billion € are spent annually on legal gambling (lotteries, on-line games, slot machines (one-armed bandits), bingo and the like). This means 1’260 € per head per year – babies included. Add to this 10 billion € in illegal gambling – often controlled or influenced by the numerous mafias of the country. In the period 2006-2011 the take has doubled from 35.2 to 79.9 billion €. Slot machines earn 45 billion, and yield the owners 9 billion. Broadly speaking the gambler only gets 80% of his money back. This is a hefty return for the gambling operator: this investment is essentially riskless. Gambling is the third business activity in the country. On-line gambling is taking off rapidly: in 2011 it represented 10 billion €, double the amount in the previous year. Who gambles on line? Mostly younger (25-44 years) men (86%), from the center-southern (and tendentially poorer) part of the country, where unemployment is rampant. To put matters in perspective: the food bill in Italy is about 130 billion €. Gambling corresponds to 60% of this outlay. Put it another way: 1’260 € pays for a week or two of vacation for two people. Having the choice, it seems that Italians prefer gambling to taking time off from work. Gambling represents roughly 5% of Italy GDP. Italy needs to devote 3.4 % GDP annually to bring down its public debt to 60% of GDP by 2030. Reformed gamblers could take care of it – one might say. Is Italy in a crisis? International speculators are asking for a premium when holding Italian bonds. More worrisome is the loss of 10% of manufacturing jobs in the last 5 years or 675’000 places. These jobs are likely to reflect permanent delocalisations to second and third world counties. These jobs are unlikely to come back. Gambling is a voluntary redistributive tax among the poor (assuming that the rich have more sophisticated way of gambling[2], and that they are better able to take it from the poor than the poor are to take it from the rich). The redistributive tax is a rough and ready vote for fairness, and one that repudiates any state role in a achieving a fairer society. In fact the state’s role is seen strictly as “regulator” – to ensure the proper functioning of the redistributive process. Whether this expectation is fulfilled in practice is another matter. In the US the reaction of the “middle classes” to increasing disparities in income was to go into debt. As the debts accumulated with the banks, and the banks were bailed out by the state, the state took on the “redistributive” role – in a manner far more inefficient than direct and targeted redistribution, or the Italian “self-help” approach.

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