Russia » Economics
Author`s name Alex Naumov

Restricted gambling areas to bring positive results to Russian economy

Moscow has no intention of becoming the Las Vegas of Russia and is strongly opposed to plans for a gambling zone in or near the city, according to deputy mayor Iosif Ordzhonikidze. He said that the proposed gambling zone must be placed 'in the middle of a barren field' and that he would oppose one in the town of Ramenskoye, a region of Moscow which has been named as a potential site.

"Moscow will not lay claim to hosting a zone of gambling outlets and will never accept such an offer," he said. "We are against the idea of a gambling zone close to Moscow’s perimeter beltway, we are against our roads, our people, and our infrastructures being involved in servicing such a zone.

"We shall object to the creation of such a zone in the town of Ramenskoye, too, as well as in any other district center close to Moscow,” Ordzhonikidze said.

Ordzhonikidze said that the position of the city's authorities was a "clear reply to all those who think that Moscow is reluctant to lose control of the gambling industry."

Pravda.ru has interviewed Clyde W. Barrow, Ph.D., Director, Center for Policy Analysis, University of Massachusetts at Dartmouth, to find out whether the “clustering” of casinos in a special zone could bring positive results to the Russian society.

Pravda.ru: Today there are a lot of casinos in Moscow. The Russian government has recently decided to move all the casinos to four special gambling zones outside the big cities. Do you think it will bring positive results for the Russian society?

Clyde Barrow: The decision to create special gambling zones outside the big cities is a sound gaming policy for two reasons. First, by “clustering” casinos in a special zone, it creates a dynamic synergy that allows the casinos to evolve into full-scale entertainment and resort destinations. This allows the casinos to attract more patrons, for more reasons, and from further distances. Second, in the United States it has been found that rural or suburban casinos, as opposed to urban casinos, tend to generate more economic development spin-offs in the form of hotels, restaurants, bars, and other entertainment venues, as well as public infrastructure investment, because a travel and tourism infrastructure has to be created in such zones.

Whether this policy will bring positive results for Russian society depends entirely on how the casinos are regulated and taxed by the government. It is well documented that casinos generate positive economic impacts in the form of new full-time employment, good wages and benefits for employees, new capital investment (public and private), and substantial tax revenues for government.

However, casinos can also generate negative social impacts in the form of organized crime, if not regulated properly. There are also local and central law enforcement costs, as well as regulatory and licensing costs, if regulated properly by the government. There are also some social costs associated with problem and pathological gambling that can lead to personal bankruptcy, divorce, and petty theft. The government needs to impose a tax rates, licensing, and administrative fees on the casinos sufficient to offset these social costs. On balance, however, the positive impacts of casinos have generally outweighted the negative social costs, when located, taxed, and regulated properly.

In the United States, commercial casinos typically pay about 26% of their gross gaming revenues to a central (state) government and another 1% to 2% to the local host community. They also pay sales taxes on meals and retail purchases, and room occupancy taxes on hotel rooms, as well as property taxes and various fees to the local host community.

Pravda.ru: Casinos are very popular in Russia. Do you think that special gambling zones could decrease the amount of gamblers? And why?

Clyde Barrow: Gambling zones will not likely decrease the number of gamblers. In fact, by clustering casinos and developing resort destinations, those facilities will actually be able to attract gamblers from further distances by attracting regional, national, and international tourists. The key is for casinos to develop into more than just “slot parlors” and “poker rooms,” but to develop into full-scale resort and entainment destinations.

Pravda.ru: What are the main tricks used by casinos to drag money out of their clients?

Clyde Barrow: Casinos do not really need to drag money out of their clients. The bottom line is that the odds favor the house in every form of gambling. Over the long run, casino gamblers as a whole will loose more money than they win, which is why casinos are so profitable. However, two of the main marketing devices are “frequent gambler programs,” which offer “compensation points” to free spending customers that can be cashed in for “free” hotel rooms, meals, and retail purchases at the casino. Well-run casinos also tend to focus on luring so-called “whales,” which are wealthy patrons who are more likely to spend large sums of money at a casino.

Pravda.ru: Do you consider gambling to be a serious mental illness?

Clyde Barrow: Gambling is not a mental illness, but research by psychologists, psychiatrists, and sociologists, and others document that it can become a problem or pathology. The distinction is that pathologies are considered a “behavioral” problem, rather than an “illness.” However, it has been found that many problem gamblers have underlying problems such as depression, which makes problem gambling the effect, rather than the cause of a mental illness. In the United States, it is estimated that about 2.7% of the population will develop a gambling problem at some point in their lives and about 42% of that problem (1.1%) is due to casinos, as opposed to other forms of gambling (e.g., lotteries, sports betting, horse and dog racing).

Pravda.ru: Could you name several main reasons why people gamble?

Clyde Barrow: The main reason that people visit casinos is for entertainment. Most people are responsible gamblers who limit and regulate their spending by setting aside a fixed “stake” that they can afford to lose. Most casino gamblers expect to spend that is, lose money to the casino. When developed as resort destinations, casinos are viewed as a night out with friends, where they not only gamble, but have dinner, dance, and visit other entertainments venues, such as a caberet or music event. Some casinos now have health and beauty spas and golf courses. It is not just about gambling, but about having fun. In the United States, we estimate that about 10% of the people who visit casinos do not gamble, but visit them for the other amenities.

There are, of course, many other reasons that people gamble: to win money or to escape from personal problems, but these are losing propositions.

Prepared by Alexander Timoshik
Pravda.ru

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