Archive for the ‘regulation’ Category

Lobbying, Subsidies, and U.S Multinational Corporations (Part 4)

June 30th, 2008 Comments off


 |   [Part1] |   [Part2] |   [Part3] |   [Part4] | 

While oil interests may not be the sole explanation of their foreign policy goals, they stand as part of a wider variety of interests that share common goals, such as defense contractors. A glimpse at the news today reveals that the price of oil per gallon to the customer is as much a leading economic statistic as the stock indexes. The “price at the pump” has become a highly symbolic issue, and many Americans often complain that gas prices have been allowed to become too high and that something ought to be done about it. To some, this means moving to alternative fuel sources. To oil companies, it is an opportunity to continue arguing for the necessity of oil on the basis of economic growth, appealing to the average American’s lifestyle.

The issue of global climate change has particularly in the last decade led to political gamesmanship from major corporate interests in the oil industry. The Kyoto protocols, negotiated and signed by the Clinton administration in 1997, were drafted with the objective of “stabilization of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system. “[9] This would entail the reduction of emissions, either via increased automobile efficiency among other conservation measures, or even possibly the development of permanent alternative fuel sources- a clear threat to the oil industry’s many sunken capital costs. Exxon-Mobil, the largest oil company in the world and contributor of the greatest amount of U. S. lobbying dollars in its industry, has undertaken a strong anti-global-warming campaign, funding private think-tanks to promote uncertainty over global warming and the economic danger of environmental regulations. Not surprisingly, their business model is suited primarily for research and development in oil extraction and refinement, and they hold several oil assets abroad, including major pipelines in Siberia and Africa.

Oil companies like Exxon-Mobil had quickly realized that they needed to win the war against the Kyoto protocols and all other climate control policies, and doing so would require the scientific agreement of the public, and in turn Congress. In 1998, the New York Times revealed a leaked American Petroleum Institute (an organization whose membership includes Exxon-Mobil) memo aimed at addressing the ubiquitous presence of global climate concerns. Its proposed organization, the Global Climate Science Data Center, would serve several useful functions, among them, “identifying and establishing cooperative relationships with all major scientists whose research in this field supports our position,” and “developing opportunities to maximize the impact of scientific views consistent with ours with Congress, the media and other key audiences. ” It is quite clear that no matter where the evidence lies for global warming phenomena, money is pushed into politics in a manner concurrent with partisanship over science. [10]

In Opensecrets. org’s special election report, “President Bush’s First 100 Days: A Look at How the Special Interests Have Fared,” the section subtitled “Energy” begins bluntly: “If there were any doubt that President Bush and Vice President Cheney, two former oil executives, would be sympathetic to the interests of energy companies, it has been put to rest in the first 100 days of the new administration. ”[11] Evidence of a “revolving door”-style administration is abundant with respect to the petroleum industry. In 2001, Exxon-Mobil lobbyist Randy Randol sent a memo to the White House requesting that Intergovernmental Panel on Climate Change (IPCC) chairman Robert Watson resign. Though he did not resign, his reelection was blocked one year later. [12] In 2003, the Bush administration officially denounced the Kyoto protocols. Presently, the administration shows few signs of substantively addressing the global warming issue, and the “lame-duck” period will likely prolong that trend until 2009.


The omnipresence of private interests bearing significant influence on governmental policy is not unknown or surprising to most people. However, an understanding of the process of how these interests come to affect government policies is important for the MNC strategy theorist, for the foundations that underlie it must be considered as new developments in globalization world governance begin to surface. Greater empirical study of the effects of political dollars on profits can yield great insight into the causes MNC decision-making, along with possible reforms to counteract the exploitation of political systems for subsidies, but it is ultimately limited by the obscure nature of the interpersonal dealings and complexity of publicized procedures that constitute the lobbying-subsidy process. More exploration of the broad spectrum of powers such as multilateral institutions that can be tapped for MNC benefit can also explain how government intervention is still not out of the question in a rapidly globalizing economy.

[1] Lobbying Database, Center for Responsive Politics. http://www. opensecrets. org/lobbyists/index. asp (Accessed April 3, 2007)

[2] These large firms, because of their size, require bureaucracy-like institutions in order to effectively manage their vast resources.

[3] This is a quasi-political function of corporations that is captured exogenously in ui in order to keep the lobbying-subsidy model simple.

[4] “Lobbying in the United States. ” Wikipedia. http://en. wikipedia. org/wiki/Lobbying_in_the_United_States

[5] Compiled from Opensecrets. org.

[6] “Pharmaceutical Industry Spent $800M on Lobbying Over 7 Years, Report States. ” Medical News Today. http://www. medicalnewstoday. com/medicalnews. php? newsid=27125

[7] “The U. S. Congress Votes Database. ” The Washington Post. http://projects. washingtonpost. com/congress/109/house/1/votes/443/

[8] “CAFTA, Data Protection and Generic Drugs. ” Embassy of the United States: Guatemala. http://guatemala. usembassy. gov/factsheetcaftagenerics. html

[9] The United Nations Framework Convention on Climate Change. http://unfccc. int/essential_background/convention/background/items/1353. php.

[10] Global Climate Science Communications: Action Plan. The American Petroleum Institute. http://www. euronet. nl/users/e_wesker/ew@shell/API-prop. html

[11]“President Bush’s First 100 Days: A Look at How the Special Interests Have Fared,” Center for Responsive Politics. http://www. opensecrets. org/bush/100days/energy. asp

[12] Mooney, Chris. “Some Like it Hot. ” Mother Jones. http://www. motherjones. com/news/feature/2005/05/some_like_it_hot. html

 |   [Part1] |   [Part2] |   [Part3] |   [Part4] | 


Lobbying, Subsidies, and U.S Multinational Corporations (Part 3)

June 30th, 2008 Comments off


 |   [Part1] |   [Part2] |   [Part3] |   [Part4] | 

” Increasing demand for lobbyists in the late 1980s led to a growth in popularity of the practice, and the “Washington Game” began to perpetuate itself. The high demand also changed the traditional viewpoint that it was inappropriate for former elected officials to become lobbyists. Since 1998, 43 percent of the 198 members of Congress who are no longer in any elected office have registered as lobbyists at least once. [4] The overall result of this evolution is the ever-increasing presence of private money circulating in public affairs. The bottom line is that to the American politician, money matters greatly. In the 2002 midterm elections, candidates who spent more money than their opponents won 95% of all contested House seats and 75% of all Senate seats. [5]

In context of the model provided, there are many examples of the significant influence of multinational corporations on economic policy. America, despite being considered the most laissez-faire major power, is a massive provider of corporate welfare. A symbolic and instrumental assessment of most recent U. S. policy relating to multinationals bears very strong explanatory power. Partisan politics serve as a major front for symbolic stratification of policy. Generally, at least some semblance of connection between the larger stated ideological issues and the actual policies must exist. Though members of both the Democrat and Republican parties regardless receive immense contributions from multinationals, the prime political actors on behalf of large MNCs usually consist of Republicans, likely due to their ideological platforms which usually involve deregulation, trade liberalization, belief in the strength of entrepreneurship, and so forth. These beliefs, ironically, are used as the symbols to mask the economic interventionism of subsidizing large MNCs.

Given the general claims stated up to this point, the next inquiry must be into their actual historical relevance: what contemporary examples are there of MNCs demonstrating a palpable influence on U. S. policy? The difficulty of finding information on the topic is testament to the transparency that MNCs often enjoy in their lobbying activities, at least in regards to the general public. To discover the appropriate connections, one must integrate diffuse pieces of information from diverse sources in order to draw the connection between a particular firm’s action and how a government policy was determined. Furthermore, lobbying disclosure law is only relatively new, with the Lobbying Disclosure Act having been only passed in 1995. Besides the fact that lobbying activities falling under the guidelines of the law were sometimes underreported (especially during the first few years), there are still many methods of lobbying that have no legal disclosure requirements. These include “revolving door” offers, personal favors, insider information, and other transactions that frequently have no official paper trail. Discovering these obscure relationships beyond mere speculation is a matter of intensive research, including investigative reporting across many sources that only provide small amounts of information individually. For now, we will briefly explore two major and well-known contemporary examples of multinational industries that engage in and profit from abundant political activity: pharmaceuticals and petroleum.

The pharmaceuticals and health products industry constituted the largest portion of reported political contributions in 1998-2006, spending over $1 million.

Their critical policy objectives focus on international recognition of “intellectual property” rights to their drugs, in order to undermine cheaper competitive drugs which cut into their market shares, and the elimination of price controls caused by growing desires for healthcare guarantees. [6]

The pharmaceutical industry deals primarily with products that prolong or improve the bodily well-being of humans. In most societies, the act of “saving lives” is a moral priority, or at least a noble deed. It is no surprise, then, that all related policies are couched in strongly symbolic terms. Their public claims are broadly reflected by statements such as “without [assistance on this issue] from government, expensive research on important drugs will stop and many life-saving implements will not be available. ”

The industry’s influence on international trade is very palpable and significant. Its trade association, Pharmaceutical Research and Manufacturers of America (PhRMA) includes Pfizer Inc. GlaxoSmithKline Plc, Merck & Co Inc. primarily functioning as a means to increase transparency of individual companies’ political influence. PhRMA has filed 59 lobbying reports concerning the Office of the U. S. Trade Representative, more than any other organization historically. Drafts of the Dominican Republic-Central American Free Trade Agreement echo the pharmaceutical industry’s sentiments about price controls and intellectual property. Under its provisions, member nations will be required to comply with deregulated pricing and international patent laws. An examination of the voting record for implementing DR-CAFTA demonstrates almost unanimous votes along party lines: only 15 Democrats voted for the measure, and only 27 Republicans voted against it. [7] Furthermore, in light of CAFTA in 2005, Guatemala was pressured to repeal a law that would allow for increased marketing of generic drugs as long as the drugs were demonstrated to behave like approved drugs. The U. S. ambassador to Guatemala issued presented an ultimatum: Guatemala had to change its law to provide the clinical study data exclusivity mandated by CAFTA, or the U. S. Congress would not allow them membership. [8]

The oil industry, especially in extraction and transportation, is the beneficiary of a large amount of both direct and indirect subsidies. Two of the most significant (relating to their international position) are in the use of government resources in protecting their assets abroad as well as expanding their potential asset base, and in their lack of responsibility for environmental externalities caused by the consumption of fossil fuels.

The physical security of oil drills, pipelines, and shipping lanes constitutes billions of dollars of U. S. government services. Friendly diplomatic relations must be maintained with major exporter countries, especially those with U. S. -owned holdings. Likewise, military force must be readily available to combat any attempt to seize or otherwise disrupt oil supplies by foreign aggressors. Besides maintaining existing American assets and relationships, the government has also engaged in policies in seeking out new sources of oil. One need only imagine a world that did not need petroleum, and aptly ask: “would our foreign policy be the same if that were the case? ” It is misleading, of course, to characterize the government’s heavy interest in maintaining and expanding oil supplies as only a resource transfer to large oil companies, as much income in America is authentically dependent on the energy generated by oil. Nonetheless, it is still a subsidy that discourages substitutes and conservation.

It is no surprise that Republicans advocate the very symbolic policy goal of an aggressive outward foreign policy. According to the Center for Reponsive Politics, in the 2006 election cycle, Republicans received 84% of all campaign contributions from the oil industry.

 |   [Part1] |   [Part2] |   [Part3] |   [Part4] | 


The Online Gambling Industry [Part 1]

December 17th, 2007 No comments


 | The Online Gambling Industry[Part 1] | The Online Gambling Industry[Part 2] | The Online Gambling Industry[Part 3] | The Online Gambling Industry[Part 4] | 

A report on the Online Gambling industry, focusing on general issues of the business and government interference in it. This was partially motivated by the Senate ruining my shit by launching the war on international gambling.

Online Gambling: The Ideal Global Industry?

Gambling has long been a part of human history. For the past two thousand years, and likely even longer, societies have wagered their properties in games of chance. The earliest evidence of gaming for money coincides with the invention of the coin in 700 B. C. [i] In the present, gambling is still a popular past-time: in 1999, over two-thirds of Americans reported having gambled at least once in the previous year. [ii] With the introduction of personal computing and the integration of the internet into mainstream culture, real-money wagering has moved into cyberspace, resulting in the birth of a brand new industry: online gambling. –more–>Internet gambling[1] is blessed, having essentially “hopped on” pre-existing, well-developed technologies and infrastructures that constitute a majority of its business necessities. The industry relies on the independent, rapidly-expanding internet; the well-developed, low-cost financial system available to the consumer; and the large global markets created by the widespread cultural phenomenon of gambling. Despite these favorable circumstances, the industry is ultimately constrained by legal issues. Regardless, internet gambling in its current state is inherently international, with greater possibilities to be made available by the destruction of those legal barriers.

The Nature of Gambling as a Business

In most respects, internet gaming is an unconventional international industry. Its first defining characteristic lies in the character of the service provided by gambling, whether by traditional means or internet. A casino (“the house”) has several different outward manifestations its ways to make money, but its methods reduce to two basic concepts: rake and house edge.

Rake is primarily used only in games such as poker and sports betting, where wagers are made against other players and the house has no stake in the outcome. At some stage in each wager, a “fee” is collected for the services provided by the casino for the game (tables, cards, dealers, video screens, security, etc. This allows for a gambling environment that permits skilled players to become consistent winners, meanwhile not affecting the casino’s profits.

House edge, undoubtedly the most popular method used in Brick & Mortar[2] casinos, is incorporated into slot machines, bingo, “dealer” games, etc. which are the indicated preference of the average gambler. In such games, one wagers against the house, some randomized selection occurs, and the wager is either lost or the appropriate payout is given. The randomization process can occur through dice, a deck of cards, or computerized machines, but how these games are designed is ultimately governed by the principle of expected value: in short, the sum of the products of each payoff and the probability of it occurring, which equals the house edge. [3] Thus, if a house edge for a given slot machine game is 2%, in the long run each pull of the lever with a $1 wager should yield on average $0. 02. Conversely, the player’s edge is -2%, losing $0. 02 per $1.

By definition, a negative expectation is a losing proposition and should be avoided. However, casinos understand this and always investigate how their customers will treat it as well. Any casino’s profit-maximizing objectives can be generally summarized as a function of the number of wagers made in a given time-frame (quantity supplied), the size of the house edge or rake (price per wager), non-monetary value for the customer (entertainment, social interaction, etc. and the costs of meeting those goals.

The Speed, Power, and Expansiveness of Internet Technology

The internet is, quite obviously, as important to online gambling as roads are important to automobiles. Barring some disanalogies, both industries have largely been the beneficiaries of massive subsidies: common and widespread means for their customers to consume their products.

By far, the internet has become the supreme technology of commerce. The exponentially growing power and applicability of computers combined with lightning-fast transmission of data over long distances has- beyond its obvious contributions to production itself- lowered transaction costs while uniting buyers with sellers unlike ever before. By employing the tremendous strength of computers to achieve the casino’s profit-maximizing objectives, internet businesses have attained new-found efficiency in the service of gamblers.

Computers have reduced the physical limits of wagering itself. In traditional casinos, games like poker and blackjack are constrained by the ability of a human dealer to shuffle and distribute cards, count and appropriately pay bets, and determine outcomes- each with the possibility of human error at any stage. These obstacles are eliminated in the virtual world, thus allowing for the rapid, error-free execution of all games. For example, the average 10-player B&M Texas Hold’em[4] game plays about 30 hands per hour (thus rake is collected 30 times), but an online game of the same type plays between 60 and 80. Players also have the option of playing in multiple games at once (some experts play up to 12) since the games can be centralized and sorted conveniently on a single screen. [iii] In the same amount of time, the result is much more enjoyment of the game itself for the player and greater profitability for the casino.

To the consumer, the principal advantage offered by internet gambling is the increased comfort level of enjoying entertainment in one’s own home.

 | The Online Gambling Industry[Part 1] | The Online Gambling Industry[Part 2] | The Online Gambling Industry[Part 3] | The Online Gambling Industry[Part 4] | 


The Online Gambling Industry[Part 2]

December 17th, 2007 No comments


 | The Online Gambling Industry[Part 1] | The Online Gambling Industry[Part 2] | The Online Gambling Industry[Part 3] | The Online Gambling Industry[Part 4] | 

Driving, parking, waiting in line, and breathing second-hand smoke among all the other costs of visiting a B&M casino vanish. Getting into a game is nearly as fast as leaving a game; with two clicks players can quit for the day or just for a restroom break. Also, for communal games like poker, all sites have a chat feature for communicating with other players. Although the social experience is incomparable to that of a traditional casino, the difference may help as much as it hurts. Internet poker provides a non-committal, anonymous environment to play and interact with others (and for the sadistic, to take their money). These factors are likely to attract latent markets of individuals greatly discouraged by the prospects of visiting a local casino.

The products supplied by the casino can be understood in terms of the different games in which one can wager. B&M establishments, to add one new game, must allocate floor-space for it, pay for the table or machine, and hire staff to operate and oversee it. On the other hand, computer software only needs to be designed once to be replicated infinitely; it only occupies abundant, cheap memory and processing power; and it requires a minimal fraction of the oversight. This has allowed a wide variety of games and stakes to be available instantly when there is a demand for them. Expenditure on the construction of massive buildings, their aesthetics, and their infrastructure is no longer needed. Meanwhile, internet servers can support numbers that would conventionally require an entire stadium: in 2005, PartyGaming Plc often hosted over 60,000 players at one time. Hosting is so cost-effective that most sites offer an amount of “play money” games identical to real ones. This has the added benefit of letting customers get comfortable enough with the games and software interface to make the transfer to real wagers.

Relative ease of physical set-up is also a great boon of efficiency. Unlike in most material goods and services industries, infrastructural concerns including electricity, water, and mass/rapid/heavy transportation are not troublesome. Internet server housing facilities can be built practically anywhere, while only needing one or two landlines to a web source or a satellite uplink. Electricity and power demands can be met by autonomous sources. Transportation only needs the capability to support individual commuters. Most importantly, internet infrastructural technology has become so advanced that, especially for activities demanding as little bandwidth as online gambling, almost any two places on the globe can be seamlessly connected.

The Importance of Financial Transactions

It can be said that automobiles benefited from prior development of the petroleum industry. Similarly, internet gambling has profited tremendously from the well-developed financial system that preceded it, though this analogy does not do justice to the critical dependence of the former on the latter. The modern, advanced international financial system provides a strong foundation for the rapid and convenient placement of bets. The popularity of electronic, low-cost bank transactions goes hand-in-hand with an industry that is inherently monetary in its end product: money flows in for wagers, and money flows out for winnings. Inconveniences or long wait periods at either stage result in lost profits, by slowing down the wagering process and alienating casual consumers.

As it is in the B&M business model, the average user is potentially the source of greatest revenue. Millions of users around the world are already acquainted with using credit cards, and EFT-funded “e-cash” accounts such as Paypal to purchase goods on Amazon, eBay, and major retail stores’ websites. These stores have brought interstate and international trade closer to the average consumer by making him a direct participant. As buyers’ comfort with purchasing on the internet increases, so increases their likelihood of gambling online.

Internet gaming has even caused some minor new developments in the financial system. U. S. prohibition of credit card use for e-gaming transactions has itself produced an evolution of payment methods. Several offshore “e-wallets” and other accounts out of the reach of U. S. regulators sprung into existence to meet demand for legal and safe transfer points for gambling funds. International phone card balances became legal tender for some sites. Exchange rates play a major role in allowing individual sites to unite markets. Some sites, such as those hosted by Cryptologic, Inc. allow users to keep their accounts and even wager in different denominations.

In the past four years, investment has reached online betting. Explicit legalization and effective regulation has made the U. K. the de facto capital of online gambling, and the London Stock Exchange is host to all major publicly-traded gaming sites. The introduction of new cash reserves was originally part of an expansionary plan that shifted to consolidation via acquisition, following U. S. legislation in 2006 that prevented American financial institutions from dealing with online gaming sites, yielding devastating effects on revenue. [iv]

Global Markets

Games of chance are nearly cultural universals, especially in the Western World. Any person with access to a personal computer and the internet is a potential customer, and the internet is a single, united global network. As such, internet gambling is a truly global market. Ownership of computers and internet access has grown significantly in the past 10 years, and continues to grow quickly. Internet users constitute 16. 6% of the world’s population, for a whopping total of approximately one billion. [v]

North America is the first and biggest market considered by large online gaming firms, and the European Union is the second.

 | The Online Gambling Industry[Part 1] | The Online Gambling Industry[Part 2] | The Online Gambling Industry[Part 3] | The Online Gambling Industry[Part 4] | 


The Online Gambling Industry[Part 3]

December 17th, 2007 No comments


 | The Online Gambling Industry[Part 1] | The Online Gambling Industry[Part 2] | The Online Gambling Industry[Part 3] | The Online Gambling Industry[Part 4] | 

In 2006, 69. 1% of North Americans (about 229 million) and 51. 9% of Europeans (about 240 million) had internet access. In both these markets, alliances were formed between television and individual websites following the explosion in popularity of televised poker events. The largest sporting event worldwide featuring multi-million dollar cash prizes, The World Series of Poker, grew huge markets in the developed world almost overnight. In addition to providing regular cash games and tournaments, sites began hosting “satellites,” in which one pays an entry fee and competes with other players to win entries into one of the major televised events. The thrilling nature of No-Limit Texas Hold’em[5], plus enormous sums of money, appearance on television, and a chance at immortal fame as a World Champion of Poker was heartily accepted, especially by Americans. In 2005, PartyGaming Plc- the largest online gaming company at the time- earned 80% of its $1 billion revenues from U. S. players. Between 50% and 60% of the entire industry’s revenues of $12 billion in 2005 can be attributed to North American players. [vi]

Legal Issues and Obstructions

The issues most prominently affecting the growth and progress of internet gambling are nearly always legal. At the forefront of attacks on the industry, the United States Federal Government has been consistently battling domestic internet gambling since the late 1990s. It has justified this on grounds that internet betting sites can be easily exploited for money laundering, additionally arguing that online betting accentuates pathological gambling problems and undermines the integrity of professional sports. [vii] A more plausible explanation for this stance points to protectionism on the behalf of deep-seated domestic gambling interests. [viii] Because U. S. players constitute the industry’s most important market, the federal government’s aggressive stance is of immense concern. In October 2006, Republican Senator Bill Frist championed and passed the Unlawful Internet Gambling Act of 2006, a last-minute rider on the essential Port Security Act which passed in the final vote before Congress adjourned for the session. The law expressly prohibits U. S. financial institutions from conducting any transactions with “bet-taking” websites. The result of this law was the total shutdown of U. S. operations for three of the largest internet casinos: PartyGaming Plc, Sportingbet Plc, and 888 Holdings group, which lost 84%, 54%, and 52% of their revenues, respectively. Though business still continues for many rogue, but reputable sites, U. S. policy dealt a crushing blow to the industry.

International legal frameworks have played a role, albeit a minor one thus far. In 2003, the tiny island nation of Antigua lodged an official complaint in the World Trade Organization against the United States, citing that the U. S. discriminated between domestic and foreign providers of remote gambling and was therefore in violation of trade reciprocity requirements set forth in the General Agreement in Trade Services. It would either have to ban domestic remote bets, or permit WTO member nations access to its remote gambling markets. [ix] The U. S. was given until April 3, 2006 to comply, but took no action and claimed it had complied. Antiguan counsel Mark Mendel commented that it was the first time “an implementing [losing] party has announced itself in compliance with the recommendations and rulings of the Dispute Settlement Body of the WTO without having done anything at all. ” Nonetheless, the ruling demonstrates that the U. S. will have to comply eventually, or repudiate the workings of the WTO. Trade partners Japan and the EU have filed reports in support of Antigua; threats of undermining U. S. intellectual property rights are in the making. [x]

What of the regulatory option, supposing it were to be exercised? The internet intrinsically grants online casinos a great deal of protection from regulators. The ability to send and receive messages anonymously, change locations, and encrypt transmitted data may not make it impossible to trace transactions, but the cost of doing so will be prohibitively high. Mass subpoenas of thousands of private internet service providers’ records would be required, raising a storm of objections and privacy issues. “The very architecture of the Internet renders gambling prohibition futile,” states Tom Bell of the Cato Institute, as many experts have about the futility of regulation. [xi] New web-crawling technologies may begin to solve this problem, but even then, problems of jurisdiction persist. The ubiquity of possible locations for gambling sites’ servers presents a formidable obstacle to regulators, and sites can even go as far as making their operations extra-jurisdictional by preventing their cyberspace activities from being associated with any geographic location. [xii]

Given the regulatory environment, or lack thereof, in most of the world besides the U. K. this means that a sizeable portion of the internet gambling market is almost completely anarchic. There are no legal controls to protect consumers’ gambling accounts, yet the number of fraud operations conducted by any major sites has been limited for the brief history of the industry. A small degree of self-regulation has risen, likely due to large profit incentives and a desire to appear credible to skeptical customers. Accusations that online casinos are run by criminals persist, especially from the U. S. government, but these claims reflect scare tactics more than reality (at least in terms of how large sites treat their customers, not in the personal behavior of their owners). Ironically, government prohibition policies are responsible for driving poker sites underground.

 | The Online Gambling Industry[Part 1] | The Online Gambling Industry[Part 2] | The Online Gambling Industry[Part 3] | The Online Gambling Industry[Part 4] | 


The Online Gambling Industry[Part 4]

December 17th, 2007 No comments


 | The Online Gambling Industry[Part 1] | The Online Gambling Industry[Part 2] | The Online Gambling Industry[Part 3] | The Online Gambling Industry[Part 4] | 

As it stands, the U. S. government is the only real obstacle to the reliable, credible, and successful operation of internet casinos.

Online Gambling: A Perfect International Market?

While perfect markets can never realistically exist, internet gambling has the potential to be one of the closest approximations yet in human history. Usually, the export of services becomes complicated, as it usually involves the movement of people and equipment over state borders thus introducing new externalities; contrarily, gambling is one of few services that can be supplied exclusively via the internet, which practically operates in the absence of the burdens of physical limitations and their corresponding distortions.

Cyberspace is an abstract realm that holds the possibility of achieving closer adherence to perfect-market assumptions. It shows promise for the ever-increasing transparency of economic transactions. Practically infinite capacity, decentralization of access control, and constant innovation of hardware and software methods allows for thousands of companies to compete and cater to different preferences, making monopoly virtually impossible (no pun intended) in 2006, U. K. government estimates projected that there are 2,300 online gambling sites worldwide. The ready, rapid access of information can allow website to provide catalogues of competitors sorted by the user’s preferences, increasing symmetry of information. Even the elusive condition of arbitrage could be brought closer to fruition by compiling prices internationally.

Present efforts by private companies, namely Google, Inc. to centralize information have been met with great success. However, such centralization is a double-edged sword for the future of internet gambling and markets like it: while it can give the consumer easy access to a wealth of information never had before, it also gives government regulators new opportunities to police internet usage. Google’s recent cooperation with Chinese authorities in blocking access to government-censored websites is testament to this danger. When the appropriate technology is attained, the political climate surrounding internet gambling will determine whether it will be abolished entirely or permitted to blossom into the profit-making machine it has the potential to be. Nevertheless, in the status quo, legal barriers have held and continue to hold the industry’s growth in check.

[1] Internet gaming, online gambling, online gaming, etc. henceforth all refer to the same thing.

[2] The term “Brick & Mortar” (abbreviated B&M) used to describe casinos refers to conventional gaming houses.

[3] A good explanation can be found at http://en. wikipedia. org/wiki/Expected_value.

[4] Texas Hold’em is presently the most popular variant of poker played in casinos and online.

[5] This is just a variant of Texas Hold’em where the betting structure allows a player to bet all the chips he has on the table at any time. The result is a very volatile, but highly skill-dependent game.

[i] Cross-Border Gambling on the Internet: Challenging National and International Law, 21. Swiss Institute of Comparative Law. (Zurich: Schulthess, 2004)

[ii] National Gambling Impact Study Commission Final Report. http://govinfo. library. unt. edu/ngisc/reports/fullrpt. html (this and all websites accessed December 9, 2006).

[iii] Online Poker. Wikipedia. http://en. wikipedia. org/wiki/Online_poker

[iv] Basu, Indrajit. US-barred gambling set to roll in Asia. http://www. atimes. com/atimes/South_Asia/HJ31Df01. html

[v] Internet World Stats. “World Internet Usage and Population Statistics. ” http://www. internetworldstats. com/stats. htm.

[vi] McCarthy, Michael. New legislation may pull the plug on online gambling. http://www. usatoday. com/tech/2006-10-02-internet-gambling-usat_x. htm? POE=TECISVA.

[vii] Illegal Internet Gambling: Problems and Solutions. http://www. ncalg. org/Library/internet/Kyl_Internet. pdf

[viii] Hansen, Burke. Tiny Antigua grabs the US by its illegal, online dice. http://www. theregister. co. uk/2006/11/21/antigua_wto_bet/

[ix] Cross-Border Gambling on the Internet, 146.

[x] Burke, http://www. theregister. co. uk/2006/11/21/antigua_wto_bet/

[xi] Bell, Tom. http://www. cato. org/testimony/ct-tb052198. html

[xii] The Technical Feasibility of Regulating Gambling on the Internet. Australian Institute of Criminology http://www. anu. edu. au/people/Roger. Clarke/II/IGambReg. html

 | The Online Gambling Industry[Part 1] | The Online Gambling Industry[Part 2] | The Online Gambling Industry[Part 3] | The Online Gambling Industry[Part 4] |