Gambling in Russia and the Rust Belt

BOULDER, Colorado -- Earlier this month, the Russian government implemented a ban on gambling, restricting casinos to four special zones scattered across the country. The Western press was all atwitter over this story, acting as if the Kremlin had declared over night that casinos be shuttered.

The deadline of July 1, 2009 to close or relocate all gambling establishments had actually been established two and half years ago, but due to a lack of planning by the government and the general arbitrariness of the law in Russia, few operators chose to close before the deadline, and none have yet moved to the new gaming zones.

The four tiny enclaves to which gambling is now restricted are located in the Kaliningrad Region along the Baltic Sea; in the Altai Region near the border with the Altai Republic in southern Siberia; near the Far Eastern city of Primorye; and along the border between the Krasnodar and Rostov regions along the Sea of Azov.

The regions have been described in the press as "remote," "far-flung," and "far from Moscow." It should be noted that the last casino zone listed above is not far from Sochi, the city that will host the 2014 Winter Olympics. Like the casino operators view of the ban, I have a similar attitude towards the Sochi Olympics - I'll believe it when I see it.

Says one resident of Siberia, "When do we get the showgirls?"

The Russian Ministry of Finance has plans to spend $31 billion of public and private money (roughly 80% from the private sector, the rest from the state) developing these gambling regions, but so far no one has stepped up to invest anything. Some operators have even chosen to move to the hermit kingdom of Belarus rather than open up shop in the Russian enclaves.

As this ban was taking force, I found myself driving across America's rust belt - though upstate New York, Pennsylvania, and Michigan - where casinos are popping up everywhere. Many of these dying post-industrial cities have decided to bet their chips on gambling to improve their fortunes.

Downtown Detroit is now dotted with massive new hotel casinos, built to compete with the establishments across the river in Windsor, Ontario, a city hit just as hard by the decline of the auto industry. Meanwhile, the landmarks of Detroit's city center remain dilapidated, the city remains as dysfunction and destitute as ever, and the crushing competition for gambling dollars has driven Windsor to become one of the worst cities in Canada.

Bethlehem, Pennsylvania, once one of America's colossal steel centers, has turned to the golden gambling goose to at least slow its breakneck decline. A massive steel crane that in a previous era may had carried iron ore to the blast furnaces is now adorned with a massive sign welcoming you the new Sands resort casino.

This is not a new trend, of course - the former steel town of Gary, Indiana opened its first casino over a decade ago, and a growing list of cities and states with nowhere left to turn to improve their economic plight fight and claw with one another to attract the next gleaming casino to their city.

Not only do casino operators squeeze the most desperate municipalities for tax breaks and financing, but they then turn around and squeeze their profits out of the most destitute members of the population. Anyone who thinks that casino revenues come from high-rollers, or from people who are making a reasoned, informed choice to gamble, has clearly never been to the casinos outside of Las Vegas or the Riviera. Bethlehem, Detroit and Gary will never become vacation destinations, meaning the casinos will sell their "entertainment" to the unemployed citizens of these impoverished cities.

This was the case in Russia as well. Yes, the law was poorly planned and badly executed, but gambling had become a serious social ill in the country. Roughly 400,000 people have lost their jobs as a result, a tough pill in Russia's faltering economy, but I have little sympathy for the operators who are mostly homegrown gangsters or foreign profiteers. I can say from personal experience that the expats working in Russia's gambling industry are some of the worst people in the world.

One of the most depressing sights I have ever seen was a man, drunk and likely homeless, pouring 1 ruble (roughly 3 cents) coins into slot machine outside a Moscow subway entrance. The machine was nothing more than a steel box with three digital clock-like displays that flashed random numbers. No bells, no pictures of fruit, and no waitresses plying him with free drinks. For millions of people, this is the so-called glamorous world of gaming.