Casino Capitalism, Literally
The financialized economy of the last thirty years is sometimes called “casino capitalism.” Returns are big or small due to random chance or fluctuations in meaningless metrics rather than actual value creation. The brilliant minds on Wall Street might as well be pulling the levers on a slot machine, the phrase implies. But in an age when casino gambling is no longer confined to Las Vegas and Atlantic City but has spread to hundreds of cities across 35 states, does comparing something to a casino pack a moral punch anymore?
Keeping gambling illegal was once a pillar of social conservatism, up there with abortion and school prayer. Any time a Southern governor proposed getting a state lottery, the Christian right would leap into action. That began to change in the 1990s, when Bill Clinton and Newt Gingrich became the first national politicians to tap casino owners for large donations. When Bill Bennett, author of The Book of Virtue, was revealed in 2003 to be a slots addict who reportedly lost millions of dollars at casinos over a decade, his allies on the Christian right suffered a massive blow to their credibility as gambling opponents. By the time Donald Trump ran for president in 2016, as far as I know not a single person mentioned his casinos as a potential problem for evangelical voters.
Today, another industry has arisen that seems able to mint money by playing on addictive behavior: Big Tech. The tools it uses to manipulate our brains are often the very same ones casinos use, flashing lights and dopamine hits spaced out at optimized intervals. Has our moral response to Big Tech been handicapped by the fact that its closest analogue recently became respectable overnight? Might the values we abandoned be ones we once again find ourselves needing?
The modern American casino industry is a lot younger than people think. The first casino outside of Las Vegas opened in Atlantic City in 1978. The Indian Gaming Regulatory Act was passed in 1988, but the Indian casino era didn’t really take off until Foxwoods added its first table games in 1992. Until about 1990, casinos catered to a much narrower demographic: stag parties, not family vacations. Only 15 percent of Americans had ever visited Vegas in 1989. Six years later, with the launch of the Mirage and Excalibur and other family-friendly megaresorts, that number had doubled to 30 percent. In 2019, 45 percent of Americans reported having visited a casino in the last year.
Respectable banks used to avoid casinos, which is how the mob got involved in the industry in the first place, as an alternative source of funding. The first gaming company to be listed on the New York Stock Exchange was Harrah’s in 1974, and even after that for a long time Wall Street mostly kept its distance. Steve Wynn forged a close personal friendship with Michael Milken in the 1980s because nobody but the junk bond king would work with him back then. When the Mashantucket Pequots built their first bingo hall on the site that would later become Foxwoods, they had to use Arab money, and Foxwoods itself was financed by a Malaysian investor.
Now the gambling industry is too big for Wall Street to ignore. In the 1940s, organized crime kingpin Meyer Lansky boasted that his casino-based empire was “going to be bigger than U.S. Steel.” His prediction has been wildly surpassed. In 2014, U.S. Steel had revenue of $17.5 billion and employed 42,000 people. Indian casinos alone employed 400,000. In one recent year, gambling took in $72 billion in the United States; movie tickets, $9.5 billion; theme parks, $10.3 billion, cable TV, $51 billion. Gambling is bigger than any other form of recreation and entertainment in the country.
In their book How the South Joined the Gambling Nation (2007), political scientists Michael Nelson and John Lyman Mason observe that successful campaigns to legalize gambling since 1990 have tended to focus on two main rhetorical themes: that citizens are going to gamble one way or another so it’s better to claim the economic benefits for your own state rather than let them flow to the state (or Indian tribe) next door; and that the taxes can fund worthy causes like education. It is not surprising that gambling proponents prefer to shift the debate away from moral grounds and make their case in terms of dollars and cents. What is more surprising is that gambling opponents have met them there.
The moral wisdom of keeping casino gambling isolated in a single city in the desert used to be self-evident. Gambling was a vice that bore the same relation to genuine economic activity as drugs to food, a mere simulacrum with the added side effect of eroding personal character. It could be tolerated but not encouraged. By the time it became necessary to muster actual arguments against the spread of gambling in the 1990s, social science had supplanted morality in the public sphere. Lobbyists against gambling were reduced to citing studies showing increased bankruptcy rates and drunk driving arrests in casino-adjacent counties and other such statistical trends, which did not quite capture the full heft of the moral arguments they replaced.
The one thing you were allowed to moralize about, ironically, was Indians. Every expansion of Indian gaming has been accomplished by sanctimonious moral pressure to redeem centuries of broken treaties. In 1991, the Connecticut legislature was poised to deny permission to build a full casino at Foxwoods when the tribe’s lobbyists made a last-minute appeal based on Dances with Wolves, which had just won the Oscar for Best Picture. Suddenly arguments about organized crime and whether rural roads could handle the traffic went out the window. One Republican legislator said emotionally during the floor debate, “The Trail of Tears stops here in the Connecticut House of Representatives.” He got a standing ovation. The tribe got its casino.
(Incidentally, one of the few people who stood up to this taboo was Donald J. Trump. “I might have more Indian blood than a lot of the so-called Indians that are trying to open up the reservations,” he told Don Imus during a 1993 radio appearance. “They don’t look like Indians to me, and they don’t look like Indians to Indians.” As usual, Trump had a point. Skip Hayward, founder of the so-called Mashantucket Pequot tribe, is at most one-sixteenth Pequot, assuming his qualifying ancestor had a genuine connection to the defeated tribe, which is uncertain. Neighbors who grew up with Skip don’t remember the Hayward family identifying as Indians. Nevertheless, many politicians including longtime Indian gaming defender John McCain rushed to condemn Trump’s remarks as racist.)
The moral case against gambling transcends American Protestantism. Many Asian countries ban casinos and others restrict them to foreigners. In South Korea, 13 of its 14 casinos are off-limits to Korean citizens. China has no casinos at all, except in the enclave of Macau. This means sacrificing billions of dollars in revenue that China’s many avid gamblers instead spend abroad in Australia, Malaysia, Singapore, and the United States. The regime has calculated, presumably not irrationally, that the sacrifice is worth it.
The fate of Bethlehem, Pa., brings together several different strands of the 21st-century casino debate. Once the steel capital of the world, the city saw its flagship corporation Bethlehem Steel declare bankruptcy in 2001. Six years later, Las Vegas Sands Corp broke ground on a resort in the old steel complex. The casino is foundry themed. Open scaffolding and molten-colored orange lights over the slot machines are meant to evoke the town’s past “circa 1942,” according to the design team. The Sands logo outside hangs on an old ore crane.
Las Vegas Sands owner Sheldon Adelson almost chose a different theme. When the company was first lobbying for permission to build a casino in the Lehigh Valley, it courted Bethlehem city elders by sending gondoliers from its Venetian casino in Las Vegas to a local festival. “We were like, ‘Are you serious?,’” said local preservationist Jenny Fosco in 2005. “This is not like a sand pit in Las Vegas where you’re pretending you’re Italy. This is real history here! You don’t have to fabricate anything!”
From Steel to Slots: Casino Capitalism in the Postindustrial City by urban historian Chloe Taft features interviews with former steelworkers about how they feel about the casino. “Where you have a business like that where there’s all this cash sloshing around and no physical thing being made,” one tells Taft, “it just seems to me that the opportunities for corruption are rife. But I can’t put my finger on it.” Another says:
There’s nothing productive that comes from the Sands. Nothing. It’s just a money exchange. People lose it, other people win it. And the guy trucks it over to Vegas. It goes on the express train. So the reality of it all is it’s not producing anything. There’s nothing to be proud of.
These blue-collar retirees are more sensitive observers of political economy than one might expect. They saw the same dynamics play out within their own company. In the 1940s, executives of Bethlehem Steel tended to be men like former crane operator Eugene Grace, president from 1916 to 1945 and then chairman of the board until 1957. In the 1970s, the company came to be run by salesmen, in the 1980s, by accountants. Its first outside CEO, Dan Trautlein, came from Price Waterhouse. He once told a gathering of his managers, “We are not in the business of making steel. We are in the business of making money.” Less narrow-minded leaders might have better navigated the trade challenges of the Reagan and Clinton years.
Sometimes casinos replace a region’s former economy, and sometimes they actively destroy it. When Foxwoods opened in sleepy Ledyard, Conn., small business owners in the surrounding area suddenly found that with the casino to compete with they could no longer hire waiters and cashiers. The best restaurants in the country today are in Las Vegas, thanks to the megaresorts’ brute-force tactic of finding the best chefs in the world and then dangling enormous checks in front of them. It is the nature of casinos to spin off more money than their owners know what to do with, more money than they can possibly invest back into their business. They are America’s oil sheikhdoms.
The sad irony is that many of the people dispossessed by casinos like Foxwoods have deeper connections to the land than the so-called Indians in whose name they were displaced. Tom and Lois Tefft could trace their family’s presence in New London County back to 1656. Court precedents in the 1970s gave Skip Hayward and his Mashantucket Pequots the right to sue the family and their neighbors on the basis that their land had belonged to Indians in the 18th century. The Teffts sold to avoid a legal battle. A living connection to history was severed, and in exchange Connecticut got a casino dressed up in kitschy fake history instead.
It took casinos a surprisingly long time to start applying technological sophistication to their games, but once they did, they took to it with gusto. Take slot machines. Slots were originally installed in casinos to give players’ girlfriends something to do. It was the lowest form of gambling, requiring zero skill either to play or to operate. The most a casino owner could do was to check at the end of each week to see how much money his slot machines had given out and then make them marginally tighter or looser.
Then Harrah’s started collecting data using its Total Rewards program, launched in 1990. Customers swiped a loyalty card before play that tracked every bet they placed, how quickly, what kind of streaks made them get up from the machine, what kind kept them in their chairs. This data was a treasure trove for psychologists and neuroscientists figuring out how to build more addictive machines, which, with digital technology, were now easier to customize.
That kind of data is nothing compared to what Big Tech collects. Now every app you use and every website you visit knows how long it has your attention, how far down you scroll, where your cursor hovers, when you close the tab. By using A-B testing, companies can endlessly refine their tactics for maximizing users’ “time on device” (TOD).
When Sen. Estes Kefauver’s organized crime investigation discovered in 1951 that illegal gambling dens near Keesler Air Force Base in Biloxi were absorbing $500,000 out of the base’s $4 million monthly payroll, nobody said that airmen were grownups who should spend their money however they want. People said that casinos and slot parlors took advantage of traits that every human possesses and military men possess in abundance—appetite for risk, concentrating on the present rather than the long view—in order to separate them from their money. Abstract notions of freedom of commerce were not assumed to be a defense.
That is how present day regulators should regard Big Tech. There are many ideas floating around for how to limit technology’s addictive power, from banning autoplay to limiting apps’ ability to tailor stimuli to individual users based on their personal data. Some of these ideas may not be practical. But none of them should be dismissed out of hand. Looking at Big Tech and saying it is free speech is like looking at a casino and saying it is just commerce. It’s not. It’s a parody of commerce.