Marxist Interventions

Social banditry

Poker machines and poverty in Victoria

By JAMIE DOUGHNEY [email protected]

Jamie has provided this short introduction to the research he and others conducted in 2000. For details of the research papers, see note 2 below.

Is gambling just harmless fun? John Maynard Keynes told a British royal commission in 1932 that, for gambling to be socially healthy, it must be "frivolous". He meant that when gamblers lose -- as they all do in the long run -- the loss must be small relative to the family budget. Gambling ceased to be frivolous and became "evil" when "indulgence of this hope" caused people to "lose a great deal of money". When losses rose as a proportion of the family budget, psychological pain compounded financial misfortune. (1)

Keynes argued that the only winners were the bookmakers and lottery operators, who made up the gambling "industry". Government had not only good cause but also a moral obligation to intervene to minimise the harm.

Our research (2) shows that just the opposite is happening in Victoria with the one armed bandits that Australians call poker machines or "pokies" (these are what Americans call slot machines.) We have reinforced previous findings that machines are concentrated in low-income municipalities. And we have now found, by closer analysis of the socio-economic data, that the machines tend to be located in poorer neighbourhoods within these municipalities. They also tend to be located in the poorer neighbourhoods in wealthier municipalities.

Research indicates also that 80 per cent of losses come from 20 per cent of users and that people gamble close to home. Thus it is reasonable to say that the industry thrives on the backs of heavy gamblers in low-income areas.

We have developed a "pokie loss severity index" that ranks the impact of poker-machine gambling on an area, by dividing average losses per adult there by the Australian Bureau of Statistics index of disadvantage for that area. Our index embodies Keynes’ principle: a dollar lost in a low-income community has a bigger effect than one lost in a high-income one.

An imaginary journey across Melbourne in a south-easterly direction gives a clue to the results. We can start at St Albans and Deer Park in the City of Brimbank, which has a ranking of 58 -- about 20 per cent higher than the overall Melbourne average of 48.5. Then we come to Maribyrnong, which at 100 has the highest ranking of all. We may even pass the Ashley Hotel in Braybrook, located in the most severely affected small area in Victoria.

From Maribyrnong we proceed through the CBD to the City of Yarra, which has a low ranking at 42.5. Yarra is significant, however, because pokie venue locations have higher severity rankings than the municipality as a whole. Next we hit Stonnington and Boroondara, with suburbs like Toorak, Camberwell and Balwyn. In these affluent areas, the index falls to 20.5 and 10 respectively. As our journey continues through Glen Eira and Monash the index rises again, reaching 60, and by the time we get to Dandenong it has reached the second highest level in the greater metropolitan area: 76.5

That’s the urban picture. There is a similar pattern in the country. Three of the most disadvantaged rural local government areas (LGAs) -- Bass Coast, La Trobe and East Gippsland -- have the highest numbers of poker machines per adult and the highest gambling losses per head of the major LGAs.

All our findings dispute the arguments in research sponsored by the Victorian Casino and Gaming Authority (VGCA). According to the latter, "Victoria has experienced significant and measurable net economic benefits flowing from increased gaming opportunities." (3) This line of argument is based on the shaky assumption that increased expenditure on pokies is financed from savings, rather than representing an alternative to other forms of consumption, such as retail spending.

It is true that household savings ratios have declined. But, firstly, the causes for that are many and complex. Secondly, gambling expenditures (losses) more than doubled per capita in real terms in Australia over the past decade. They trebled in Victoria. It is more plausible that these vastly higher losses were "financed" in large measure by reducing other consumption spending relatively. In low-income areas this diversion or substitution may well have been absolute. That is, actual revenues of local retail businesses may have fallen.

In opposition, the Labor Party attacked the Kennett Liberal government’s pokie policies and promised to do something about them. In government, it is prevaricating. Meanwhile, the gaming industry continues extracting huge profits from the misfortune of ordinary people.

There are serious concerns over the lack of clocks and natural lighting in venues, and over advertising, bet limits and locations of automatic teller machines. Strangely Gaming Minister John Pandazopolous seems reticent on these issues, despite the government’s claims to be willing to adopt a different approach than its predecessor.

Complaints from the Opposition about government inaction are obviously hypocritical. It will take years for the Liberals to live down Kennett’s slavish promotion of the interests of Victoria’s gambling barons.

Nonetheless the big issue remains: what will the Bracks Government do to make Tattersalls and Tabcorp minimise the social harm caused by their monopoly profiteering from heavy gamblers in working class areas? After all, it is the government that is partnering the industry in inflicting this damage. Of every dollar lost, Tabcorp and Tattersalls get 33 cents. The government gets at least as much.

In February 2001, the government announced with a major fanfare that it would restrict the number of poker machines in five severely affected areas. But a close look at the detail shows the actual changes will be minimal. In Maribyrnong the total will fall by 164 from 804; in Greater Dandenong by 168 from 1184; in Bass Coast by 55 from 261; and in La Trobe by 98 from 663. Overall, just 1.8 percent of Victoria's pokies outside Crown Casino may be shifted. A much greater redistribution is required. And that redistribution needs to be based on the understanding that a dollar lost in swanky Toorak is not the same as a dollar lost in working class Braybrook. Unless that happens, the poorer areas will remain disadvantaged.


1. Cited in R.M. O’Donnell, "Keynes on Gambling", paper presented to the History of Economic Thought Society of Australia Conference, Australian National University, Canberra, 15 July, 1999, p. 13.
2. Dr James Doughney and Genevieve Sinclair, "Demography And Poker Machine Gambling: The Social Policy Implications of Social Banditry". Dr James Doughney, Genevieve Sinclair and Tony Kelleher, "Using a ‘Pokie Loss Severity Index’"; "Pokie Caps and the Disadvantaged in Victoria"; The Local Economic Impact of Pokies"; and "Poker Machine Data for Victorian Local Government Areas". Workplace Studies Centre Research Reports, Victoria University, Melbourne, 2000.
3. See Summary of Research Findings: 1996-97 Research Program, on the VGCA website.

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