Tuesday, April 14, 2009

Stealing From The Poor And Giving To The Rich

If you are looking for a good little business to keep you afloat during this Global Economic Downturn you might just be in luck. A great little cash flow business has just come onto the market, and it could be just the ticket to see you through the tough times. Yes, if you have the upfront cash you could be the lucky bidder to take over running New South Wales Lotteries for the next thirty years, and enjoy a return of around $50 million a year, with unlimited opportunity for future growth. Even better, you can pick all this up for just half a billion dollars, a massive saving on the $800 million that was discussed a few short years ago.

Right now, it would seem that the New South Wales government is desperate to sell just about everything because it is so short of cash. Items up fro grabs include the electricity retailers, a couple of prisons, school playgrounds and various buses and ferries. While there can be sensible and compelling reasons for governments to sell various assets and enterprises, the bottom line here is that the government has mismanaged its way into a position where it is flogging off the farm to pay the bills. Instead of reinvesting the proceeds into capital works, a big chunk of it is set to be used to pay the wages of police and nurses. The problem of course is that they will still need to be paid next year and there won’t be anything left to sell.

New South Wales Lotteries in particular is not an appropriate target for privatization for a long list of reasons. Firstly, it’s just a bad deal. Aside from the fact that selling now while the financial markets are weak guarantees that the price achieved will be considerably less than it otherwise would have been, there is the simple fact that the dividend it provides to the government is a better return on investment than almost anything else that the government could do with the money. It is the proverbial license to print money, so who in their right mind would give that away at a bargain basement price?

Secondly, the purchase of a lottery ticket can be viewed by the individual as a sort of voluntary tax. Yes, you might win something back again, but even if you don’t you know that the money is going towards paying for hospitals and schools, highways and railways. Once the lotteries office is sold to a private operator, such as perhaps Jamie Packer, every lotto ticket you buy is making him richer at your expense. Yes, the government will still collect the gaming taxes, but why sell the goose that lays the golden eggs, even if you put a tax on the eggs? Why not keep the goose and invest the golden eggs into the services that the community should be entitled to expect?

Thirdly, any private operator will expect, and be entitled to expect, the opportunity to expand and grow the business in order to maximize the return on investment. There’s nothing wrong with that except for one little thing. This is not a business in the normal sense of producing a product or service which fills an economic need. It is a gambling operation, and the only way to expand or grow the business is to entice more people to gamble, whether they can afford to or not. It is not socially responsible for a government to be handing over even more gambling operations to the private sector. The reality is that many gambling operations are already in private hands, but the sale of New South Wales Lotteries will only add to the proliferation of gambling which carries proven and significant social costs.

While it is within the government’s prerogative to allow private operators to run gambling outlets, such activities are heavily regulated. Such regulation inevitably means that the fortunate few in a position to command a license become the beneficiaries of gambling, at the expense of the rest of the community. While I am not suggesting that gambling should be unregulated, such an arrangement only serves the interests of the elite, rather than the interests of the people of New South Wales.

Selling the lottery office is quite simply stealing from the poor and giving to the rich.

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