The problem with gambling is that it is a personality trait. People who are gamblers gamble, it is what they do. They are always looking for a way to game the system. Any system, any time, anywhere.
Which is fine if they want to play their games with each other, but unfortunately that’s not where it ends, they want to play with anything and everything. They want to play with the rest of us and if they can game and manipulate us then they couldn’t be happier.
Quite frankly, we can’t afford to let them, we need to ring-fence off that sort of behaviour from the rest of society and the economy. Gambling isn’t going away, so get used to it, get wise to it and learn how to deal with it effectively. There needs to be some fairly serious changes.
As I said in my post “Surplus” our modern societies have enormous surpluses, and yet we have still managed to make a pigs ear of it all. And it is because we have let the lunatics run the asylum. Or more specifically, we have let the gamblers free rein to gamble with our economies and with our money.
It is like giving crack to an addict, they will snort it up until it kills them. Ohh – and us at the same time, in case you haven’t noticed.
Why would the serious gamblers bother gambling at a casino? The game is rigged and frankly that’s penny-ante chump change anyway. If they can gamble on the worlds financial markets, that’s where the really serious money is, trillions of dollars of it. What’s more, that is a game where they can get to set it all up and rig it so that they are the House, they make the rules and can guarantee their cut. Can we say Goldman Sachs anyone? Their preferred casino town isn’t Las Vegas, its Wall Street and City of London.
So, we have addicts controlling our lives and livelihoods. You know what, that’s not too smart! We are going to have to find a solution to this because as we are finally starting to see, we can’t afford not to.
Its just not going to be easy, the whole essence of a gambler is that they are always looking for a loophole, an opening and an opportunity to get around the system, the rules and the regulations. They inherently don’t like the safe and stable and the regulation modestly profitable approach. They are always trying to sniff out a scheme, a scam or a subterfuge to escape the rules, justify their behaviour, or otherwise bias the situation to their advantage.
Which is unfortunately why my favourite idea to deal with this just wouldn’t work. I reckon they need to be licensed. You don’t get to be allowed to gamble unless you are a registered and licensed gambler, but if you are a licensed gambler then you would be excluded from working in certain types of jobs. Like dealing and trading with other peoples money for example. See, simple and elegant – and unworkable. If there was money to be made by cheating the system, then these are exactly the people who have the psychological makeup to want to try to.
Still, that doesn’t mean that mean we shouldn’t try and regulate to license gamblers and licence gambling operations. We already have laws and regulations to manage Casino’s and that is entirely appropriate. Equally there are certain types of trading environments and markets that need to be properly monitored and regulated in the recognition that if left to their own devices they will become populated by people motivated to also make these into just another casino. Things like currency markets, share and commodities markets, futures and hedging contracts, and derivatives are all sitting ducks ripe for exploitation. Unless they are regulated in such a way as to exclude gambling behaviour, then they will attract risky behaviour and attempts to subvert the rules and regulations to allow the gamblers in. In the United States the prime example of that is the repeal of the Glass-Steagall Act. That Act was a package of regulations introduced in the wake of the Great Depression specifically to address the causes of the rampant speculation, insider trading and convergence of financial control that had precipitated the whole mess. 70 years later there is effectively no-one left alive that lived through that last catastrophe and is old enough to remember exactly what had happened. Those who forget history are doomed to repeat it. So at this point the sharks and shysters were able to manoeuvre a repeal of the rules that had prevented then from gaming the system the way they wanted too. There were good reasons for not letting them do these things, and now we get to see all over again why it is a bad idea to let the gamblers set the rules.
Re-regulating would entail a whole lot of bleating about interference in markets, economic socialism, blocks to market efficiencies and constraints on the availability of capital for worthwhile investment opportunities. All of that is almost entirely a smokescreen of course. It has just fractionally enough creditability to cast doubt, but far and away it is mostly just whining by the gamblers that you aren’t letting them do what they like. Therefore, if they can play a public relations and political game to get their way then they will, that’s all par for the course . And if they have got a bit of money to slosh around to grease the wheels, that’s all to the good too, that’s how it has been played for centuries. A bit like prostitution, this is one of the oldest games around.
If we are not aware the game is being played and we don’t have the right rules and structures in place to constrain them, then these junkies will play us. I don’t know why so many people respect and bow to the super wealthy, the billionaires and the like. Well apart from the obvious reasons of course, these are the people with the money, power and patronage to disperse and it’s not so terribly hard to buy many people. But just take a bit of a look at the bigger picture for a moment and add up the facts. How many of the worlds billionaires made their money through financial wheeling and dealing, as opposed to actually productive industrial and commercial enterprises. People in law enforcement who have dealt with narcotics trafficking come around to the thinking that the most dangerous and destructive people involved isn’t the drug addicts, it is the money addicts, because they will push anything, hurt or exploit anyone, in order to secure their money fix. Just because these types may wear suits and ties and work on Wall Street doesn’t mean they too aren’t dangerous, they most certainly are. They are not constrained by rational evaluations of risk like the rest of us and they have no compunctions about systematically undermining the system if they can get theirs. People addicted to money are junkies and will do anything to get their fix. It would be an interesting exercise to test all the senior financial executive for psychopathic personality traits. Being a psychopath doesn’t inherently mean you want to kill people and eat their brains, but it does mean they will have little to no sympathy or empathy for anyone else. It is all about them. While that can make then very focused and driven people who can make things happen, you really don’t want them running the show.
So that leaves us with the quandary of how to structure the system, the economy and our society in order to best manage this issue and mitigate any damage. This isn’t an issue that is going to go away, it is build into our nature and indeed can have some positive advantages. Gambling covers a very wide spectrum of behaviour, from drunk-driving to rock-climbing and from the pokies to the share-market. Most gambling is extensions of legitimate and even conservative practises, but taken to extremes. It is the money side of gambling I am interested in here. Money markets were set up to provide legitimate avenues for the productive investment of finances and capital. Unfortunately if there is more money to be made in gaming the system than in building productive enterprises, guess what happens. Our problem is how to demarcate between what is reasonable and acceptable and what is not. How to accommodate a inherent human instinct and how to structure the system so it is not subverted by it.
Lotto is an interesting example of a state administered gambling scheme that offers a game of chance, taxes the process pretty heavily and then distributes the revenue into worthy social organisations. All in all it actually works pretty well. Casino’s are another sort of ring fenced gambling operation; although it is interesting just how much peripheral offending occurs around them, they tend to be a bit of a crime magnet – surprise, surprise. One quite useful approach is to impose a hefty tax on gambling, such tax’s can generate useful revenues and remove a certain degree of the attraction. A sin tax creates a handy addition to social services revenues and can help to balance the harmful side affects on an individual level. But on a larger scale it can further assist by removing much of the incentives. Buying and selling in order to take a percentage profit on price differentials isn’t gambling per-se necessarily, it’s called arbitrage and proponents will argue that in theory it is a useful market mechanism for creating efficient markets, price discovery and correcting distortions in markets. There is some justice to all of that, but once again it all depends. It can just as easily work counter to those objectives if it instead becomes a gambling operation. Far too often that is exactly what happens. There is no easy answers or quick fix, but a transaction tax could significantly reduce the incidence of gambling by limiting the incentives.
In the end the incentives are what any solution will have to address, removing the profit from the gamble. Although, how do you differentiate between what is a normal and acceptable business operation and one where there can be no assurance, or even expectation of successful resolution of risk? If there is only the hope that it will be possible to enter and exit the game in a manner that can take a profit before the system collapses, it is speculation, trying to time the market on a gamble. In theory at least, if it was only their own money at risk and that was the end of it, I would leave them to it. One solution could be to regulate who may operate in any type of market. For instance, commodities markets could be limited to actual market participants, Hedge-funds and the like, which are just interested in speculative trading positions could be either excluded completely or taxed so heavily as to remove any incentive to participate.
Another approach that there is a definitely need for, is proper retrospective action. In the event of outright fraud, Ponzi schemes and the like, where it is mathematically certain that when the music stops there will be big loses; there needs to be mechanisms for effectively reaching back and confiscating the proceeds of the crime. It is axiomatic that the worst type of junkie gambler will attempt to lay off their loses onto any stooge they can find. The best of them are master at this trick, just look at all the big Wall Street banksters getting bail-outs, they do it because it simply pays so damn well. These guys should be bankrupt, in jail or both, instead they have now got your money. Interestingly, there exist plenty of laws that should do exactly what I am advocating, and yet somehow they don’t ever get applied. Ahh, the convergence of money, politics and corruption, that’s always a hard one to beat. But assuming you can manage a revolution to remove all the crooks and cronies, then we need to ensure we investigate and reach back as far as it takes to confiscate all the ill-gotten gains. There is a lot of damage to pay for afterall.
Unfortunately it is always going to be an ongoing battle countering the scheming and excesses of gamblers, but it is also a fight we can not afford to loose. Our societies should be enjoying the fruits of our stunning productivity and surpluses. Instead, the gains have been privatised and the loses socialised. The change that needs to occur is that we need to be actively aware of the threat that Junkie Gamblers pose and be prepared to deal with them. The cost of doing nothing or neglecting it is a disastrous corruption of our political and economic systems, bubble economies and boom/bust cycles. Managed appropriately, gambling does actually have a very important place. It is what leads us on to try new and different things, some of which work out, some of which don’t. On a small scale, we are all gamblers and a flutter on Lotto for instance is neither here nor there; most of us can control and manage how and when we gamble. The thing is, gambling is much like fire; it makes for a good servant, but a terrible master.