If casinos are the answer, what was the question?

There are heroes in our city who oppose casinos at their peril.  Reputations and relationships are at risk for those resisting the pressure from Paul Godfrey and the Ontario Lottery and Gaming Corporation (OLG), their consultants and lobbyists, and the team behind our once-and-possibly-future Mayor, Rob Ford.  Remember who these champions are when the next election comes around.

The province’s finance ministry has permitted its gambling agency to pit Torontonians against one another over a massive casino proposal.  Both sides offer specious forecasts of economic and social consequences, and neither side is finding many converts.

This conflict might have been avoided if the OLG had been forced to make a compelling economic case for a Toronto casino before tormenting the city with its proposal.

True to its mandate, the OLG’s casino proposal seeks to maximize gambling profits for the Province of Ontario.  However, provincial government has responsibility for the economy as a whole, which is quite a different mandate.

Hopefully it’s not too late to challenge the OLG’s case.  Its unspoken premise is that construction and operation of a Toronto casino will yield greater benefit to the City and the Province than other practical means of growing our economy.  Again, this might be the best and only thing the OLG can do, given its mandate, but our provincial and municipal governments have other options to consider.

Remember, casinos don’t make anything.  It sounds obvious, but hardly anyone ever says it.  Casinos provide a means of wealth redistribution, not wealth creation.

They redistribute money from citizens’ pockets to government coffers.  Like public lotteries (aptly named, “tax for the stupid”) proceeds from casino gambling are taxation by another name.  That’s why governments tolerate casinos.

However, it’s a grotesquely inefficient means of taxation.  Building a system of gambling palaces is an insane way of funding government services.  Every dollar tied up in casino gambling (billions), displaced commercial activity (millions and millions), or administration and marketing (millions more), is a dollar that could have been spent or invested more productively elsewhere.  A vast quantity of dollars must be churned before the Province gets its small percentage of the take.

Casinos can also redistribute wealth from one jurisdiction to another; however, economists generally agree that smaller communities benefit more than metropolitan areas do because big city casinos take money from residents more than from visitors.  Casino Rama on the Mnjikaning reserve near Orillia, is a great example.  Ninety minutes from Toronto, the casino provides a means to transfer wealth to economically depressed Aboriginal communities.  This accomplishes some important social and economic objectives of government.

Beyond redistribution of gambling dollars, casinos get credit for all kinds of economic activity that, in large measure, would have occurred anyway in a city like Toronto.  The money lost by gamblers at the casino is money they would have spent doing something else in Toronto.  Discretionary spending is limited, so a rise in casino spending correlates to a decline in spending elsewhere. Perhaps that’s why foreclosures and bankruptcies appear to rise in proximity casinos.

The same goes for real estate development on prime urban land.  It’s going to happen with or without casinos.  It’s naïve to add short-lived construction jobs to the grand tally of economic benefits, as if none of this would occur without gambling.  This is Toronto in 2013, not Reno during the Great Depression.  Land already has value here.  Things are already built on it, and the building never stops. It’s silly to argue as if we live in a desert and a casino is the only way to improve our lot.

My point is that there are better ways to accomplish the economic outcomes sought by this desperate measure (for instance, see my posts on incubators and high-rises).  The benefits, net of hidden social and economic costs, haven’t been substantiated well enough for us to be thinking about possible sites yet.  Nor should a misconceived casino proposal distract us from more positive and enduring forms of economic development already available to us.

Casino promoters mustn’t be allowed to set the agenda for this discussion.  The profitability of a casino is no measure of economic well-being.

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