The messy divorce of horse racing and slots in Ontario
Jul 3, 2012

The messy divorce of horse racing and slots in Ontario

I play online poker regularly. My wife loves to watch horse racing on TV. Given this, one might think I would be sympathetic to the long running slots-at-racetrack program which sees government run slots available at racetracks around Ontario in a revenue sharing agreement where the racetracks get 20%, or $345 million a year, from the slots. I am not. The Liberal government is moving to end the program and pull its slots out of several venues, much to the chagrin and protestations of the horse racing industry. They should be applauded for this decision, particularly given the extensive influence of moneyed lobbyists. 

Imagine, if you will, a list of the various aspects of society which you would most wish to funnel money into should the government receive a surplus and have money to spent. Education, healthcare, or infrastructure may be on the list. But horse racing? A third of a billion dollars is no chump change, and given the financial and social pressures facing us there needs to be a very clear argument for why spending this enormous amount of money on what is effectively a subsidy for horse racing should be justified. The Liberal government rightly wants to funnel the money into education and healthcare instead. 

The first receivers of all this money (about half of the subsidy goes to prize purses) don't exactly tug at my heartstrings. I care very little what happens to the rich owners of racetracks and the horses who collect the prizes (many of these being American). Horse racing is an incredibly elitist sport with only the wealthiest owners able to own the best horses that are likely to win the big races in the US and Canada.

Unsurprisingly, the industry in its advocacy (I have seen several ads in the subway) don't emphasize the elites, they emphasize the small players who will be affected by this. The industry "supports" perhaps 55,000 jobs (although the "direct" jobs were 9,574 in 2006) and adds $1.1 billion to the economy. I fully acknowledge that you pull the third of a billion out of this economy and there will be some level of job losses and an economic hit. But one has to factor in all the opportunity costs. Putting the money into healthcare and education will also create jobs and add to the economy, jobs that are currently "lost" because of the investment instead in this subsidy. I won't attempt to say which will have the larger issue, but will simply note that focusing on one side of this equation is folly. 

One can also look at the larger social consequences in addition to the economic ones. Healthcare and education have clear and direct social - and indeed socioeconomic - benefits. That is, there is both value in having a healthier, better educated population in and of itself, as well as having value in the economic benefits that results from a healthier, better educated population. With horse racing - the principle economic activity being that people gamble on the outcomes, this is where they make money - it is hard to see what larger social benefits there might be and, indeed, there is something of a case that there are various negatives that result from a population with a higher tendency to gamble and all the problems associated with that. At the end of the day, this hardly seems like the kind of industry that I would want the government to give a massive subsidy to. 

The horse racing industry does have some right to feel entitled. The government has a monopoly on brick and mortar gambling in this province (and there are rumblings that may extend online in the future). Were it not for this monopoly, the industry could offer the slots themselves and quite possibly may have done very well. And were it not for slots, it is possible that far more would wager on the horse racing directly. However, we again have to ask the socioeconomic questions. Gambling revenue is an excellent source of funds for government and it is far better, in my mind, that the revenue from what is arguably a social negative (much like smoking) be funneled into the best programs that  government can offer than stuffing the pockets of rich casino executives a la Las Vegas. 

Ironically, the standard analogy for economic change is that of the horse and buggy. We should not, as the argument goes, worry about the lost jobs for the horse and buggy driver; society moves on and is better for the fact that the horse and buggy goes away and the car arrives. The same is true here with horse racing. If the apocalyptic consequences to the horse racing industry in Ontario were to be true (and I doubt they are, the pre-1997 era when the program didn't exist was smaller, but still very much alive), then this would be a good indication that the industry was not able to survive without massive subsidies and, indeed, should not survive for exactly that reason. There are better things for us to spend our money on.  

Thoughts on this post? Comment below!

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Harold Howe said...

You obviously have very little knowledge of the horse racing industry and the slots at racetracks program. I would love to take you on a tour of some of Ontario's many training centres and racetracks and introduce you to the so called 'wealthy' horse owners. You should also be aware that the money which is returned to the industry is not a subsidy and the $1 billion per year the government received from the program will not be available once the industry is destroyed thanks to the government's actions.

bazie said...

How is it not a subsidy? The government is giving revenue from a separate industry - slots - to horse racing, the purses of horse racing are comprised in significant amounts from this money. This is the whole issue that the industry crying about apocalyptic consequences if this money does not come to them....and you think it is not a subsidy?

I think I acknowledged in my post that the industry at large does support tens of thousands of workers and, further, that some of these jobs would be lost (just as jobs are lost in other places by not having the gambling money filtered there). The point was that the money distribution is very hierarchal, with most of the subsidy going to a minority of owners of racetracks and the like as first receivers.

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