The Global Betting Economy: What Hides in the Shadows?

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The talk about betting and gambling and their effect on the global economy is a long-standing discussion that has too many points to address. However, some of these points are interesting enough to warrant for another spin of debate. One of the core pivots that we must focus on is whether economy needs betting and gambling to continue developing and growing.

Another big question is whether betting and gambling should be supervised on the global scale. With billions of dollars being lost and won annually, there is no doubts that this stream of money should be controlled at least somehow. As of right now, the supervision is done mostly locally. Each government decides on its own how to approach gambling industry and each government uses different methods to conduct supervision. Some countries prefer stricter forms of control, others let bookies operate pretty much how they like.

These two pivots are important while obscure. Understanding them is the best way to analyze the impact of betting and especially sports betting on the global scale. Should we encourage the development of betting and gambling in general?

Global economy and betting

Many believe that allowing betting to exist is a good idea. However, counterpoints can be made considering that betting is an entertainment industry that produces no goods. This is a big point of concern for an economy. Producing goods is the most important part of any economy and gambling does not contribute to this process. At the same time, specialists make point that gambling industry does not consume significant resources or even time and thus has no downside in this regard. Paul Samuelson, Nobel Prize winner, once said that while gambling industry is a non-factor in generating GDP and simultaneously does not require time or resources to operate, the very fact that this industry helps in consuming leisure time extensively is enough to have a negative impact on the economy.

Maybe, this is why this industry has one of the best forms in USA where gambling is centralized in several big cities and prohibited outside of them. This makes sure that people who want enjoy easy betting and gambling have to plan their trips and will less likely use gambling as an entertainment beyond its recreational purposes.

Supporters of gambling often refer to Las Vegas in order to prove their point. The city has shown how gambling can create a blossoming successful city in the desert. Some even say that gambling should be encouraged in other cities in order to force the same path of development. This is plain silly. Consider some important facts:

·         Gambling industry often slows down or negatively affect local businesses drastically changing the flow of money in the region. Local businesses often suffer from neighboring a casino as customers shift their expenditures to gambling instead of purchasing goods produced or distributed locally.

·         Gambling industry usually does not need specific resources and materials and while being responsible for a great deal of overall regional expenditures, does not spend money or buy locally produced goods or materials apart from food and services.

·         Entertainment industry in general and betting and gambling in particular significantly increase the costs of various public services including but not limited to police, social services, and medical centers.

·         Gambling industry often skews the balance of entertainment values in the region. When casinos exist, tourists lean to visiting them instead of spending money on locally produced goods, food or other entertainments.

 These factors are not negative by themselves. However, it is clear that regions that start focusing on gambling and betting are suffering from imbalance in their economy. Once chosen as a part of local priorities, gambling industry will shortly overwhelm the local economy. This is completely normal for a city that was built in the middle of a desert where local population is scarce and the amount of goods produced is not even close to that of some other regions. In such regions gambling is actually a good priority for the economy.

Allowed sports betting and gambling provide some apparent benefits:

  1. People who live nearby will no longer leave their home city/state to gamble outside. This is a good thing for the economy.
  2. Tourists will come much more often as gambling is prohibited in their home cities/states.

Aside from gaining benefits from tourists, gambling industry does not provide any other significant advantages to the economy and arguably hurts society. However, with a more controlled approach, gambling can be used for the economy growth. As mentioned above, ensuring proper allocation of resources and gambling centers will provide benefits to regions where the amount of produced goods is naturally low. Deserted areas and industrially inactive areas will greatly increase their entertainment value if used as gambling and betting clusters.

This works globally. Many small states decided to focus primarily on entertainment and gambling. States like Macao or Monaco are perfect examples. These countries cannot produce enough goods to ensure stable income, but gambling and betting allow them to feel comfortable. Another factor is that clustered gambling industry is easier to supervise countering illegal betting.

The Gambling Industry: Shadows Within

This could be a great title for an action movie. However, this is not a phantasy, illegal betting exists and it is a bigger problem than one might imagine. Firstly, illegal betting makes it harder for governments to control the industry and makes its economic impact negative. Secondly, illegal betting abuses psychological aspects of gambling and many people are using betting beyond its recreational limits. Thirdly, illegal betting is often a fraud that provides unfair odds and conducts fixes.

These issues are more than negative for the industry in general. We all want to enjoy fair games and earn money from betting. Fixed matches, shady bookies, and other problems greatly reduce the amount of fun we can have. The entertainment value is diminished in the long run. While many people want betting available everywhere, this is actually unhealthy for the industry in particular, economy in general, and even for society.

Another big issue is that governments should benefit from gambling centers situated on their soil. This helps in a plethora of ways.

·         Income from gambling ensures that governments will morel likely invest in gambling industry making it safer, providing better infrastructures, and ensuring that both bettors and bookies are in good shape.

·         In case gambling industry generates stable income for the state, it actually positively affects the economy of the state as money is reinvested in the economy.

·         Legal and supervised gambling is a great source of entertainment and invites tourism to the country.

At the same time, illegally operated gambling centers often decrease the safety of the region, increase public security costs, and creates big problems for any government in general. To round up this part of the discussion let us just mention that over 52% of gross winnings generated in China and Korea are coming from illegal bookies and casinos. We are talking about millions of dollars missed by the economies of these countries. This is also a big hit to the global economy as both China and Korea could be contributing even more to the global GPD with reinvesting money in their economy and infrastructure.

Controlling the beast: Online Betting

Online casinos and bookies are in the vanguard of the gambling industry. Being online is more beneficial for the vast majority of bookies. They cater to a wider audience, they can provide services worldwide, and they benefit from being registered offshore. Being offshore is a widely adopted practice. Many bookies prefer Cyprus, Gibraltar, and other similar regions to register their businesses. Then, they proceed to offer their services in other countries enjoying benefits of being a foreign resident.

This is a big issue that has been addressed by many countries. For example, the United Kingdom now forces all foreign companies to pay taxes simultaneously freeing their citizens from an old 9% tax that bettors had to pay. Now, foreign entities in the UK pay 15% tax. This immediately forced some offshore companies to buy licenses in the UK and start contributing to the British economy. A similar approach adopted France. While Spain went even further and completely prohibited foreign countries from operating on its territory.

These examples show how some countries are approaching this issue. Everyone wants to control the gambling industry, but these measures will not be efficient enough until we create a more powerful controlling organization on the global scale. This will help to reduce the amount of illegally operating online betting companies.

Note that online betting is a healthy way of providing gambling and betting services. This is an easily accessible and comfortable way of betting. It is fairly easy to regulate. The only issue is how to apply limitations. Underage young people also use online betting sites quite often and this is a problem we cannot turn our backs on. Simultaneously, mentally unstable people and those who have addiction problems also can access online betting services without any troubles and this is an even bigger issue to consider.

However, speaking about economic effects, online betting is the way to go.

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