10 October 2012

Opportunistic capitalism and local government: EuroVegas coming to Madrid

With stagnant local economies in the Europe and the United States and related declining local revenues, many local governments are vulnerable to ‘opportunistic capitalism.’  ‘Opportunistic capitalism’ defined here is where an industry/business , seeing an opportunity to exploit depressed local economies, offers employment and potential revenue to local/regional government in exchange for tax breaks and perhaps additional infrastructure; but the city realizes low-paying jobs, a fraction of the benefits going to local government and other negative impacts such as environmental damage, crime etc.  The investors come away with tremendous profits.  This can also come in the form of ‘blackmail’ by existing industries desiring additional tax breaks, union concessions etc.; or sport teams demanding a new stadium; with the entity threating they will leave if their demands are not made.  In this environment, cities, states and even nations compete to gain the benefits of these industries.

In Europe, many regional economies are sputtering, stagnant, desperate for job creation and needing additional tax revenue.  This is particularly true in Spain with almost twenty percent unemployment.  This makes Spain ripe for opportunistic capitalism as in the case with EuroVegas being offered Madrid.  Sheldon Adelson, a multi-billion casino owner, saw another chance to make some more profits and is taking advantage of the struggling economy in Spain.  The cost of the facility to be located in the suburbs of Madrid, he named ‘EuroVegas’, will cost an estimated $35 billion and will consist of twelve resorts, nine theaters, six casinos, three golf courses, and a stadium. This is a large undertaking by anyone’s measure.  The Mayor of Madrid has pushed this project as well as other officials.  The locals ‘wined and dined’ Adelelson, competing against Barcelona who also wanted Adelson’s EuroVegas.  It doesn’t take much imagination to see a cartoon where Madrid and Barcelona are portrayed as prostitutes with Adelson as their potential client. In the end Madrid was selected to be the site of EuroVegas.

The immediate effect will be construction jobs for Madrid.  The total employment for EuroVegas is estimated to be about 250,000 . While the local officials may be pleased with the deal many Madrileños are not. They see it as a raw deal where there will be an opportunity for low-paying jobs, inviting possible mobsters into the area and more prostitution. 

Unfortunately, this is not the type of development that Madrid needs or any city/region in the stagnant economies in U.S. and Europe.  In better economic times, Spain would have rejected this deal.  Yes, jobs are being created, and there may be some benefit directly to the immediate area surrounding the casino complex, but this will not alter Madrid's overall economic base and rate of unemployment..  What is just important is what is not being said. There is no mention of the projected tax revenues or the type of concessions that were made by government officials to gain this project. How much will this cost the tax payers?   In addition, the inherent nature of casinos and gambling has related negative impacts. While other industries spin off other ventures and enhance the economic base. The only related business here which will be spun off are other services, additional low-income housing and prostitution, illegal drugs, corruption and crime. The whole deal is tawdry for those public officials who have to ‘prostitute themselves’ for a deal which may also flop, given the present political climate in Spain.

This is not the direction that local areas should be developing in the developed or developing countries. In desperation, local officials are making deals with industries and other entities which are detrimental to a regions long-term economic development.  There is a danger that all these efforts could collapse upon itself in the form of an economic situation similar to a pyramid scheme, where there is speculation on construction projects, financial loans being made on risky investments and distinct possibility that the projects will be caught up in labor unrest, corruption and additional controversy.   Instead of catering to ‘semi-shady’ characters such as Adleson, local decision-makes should be putting efforts to facilitate the development of  sustainable industries such as development of Green Energy (solar, wind, geothermal etc.) and gearing up for a high technology economy.  There is an under-current of increasing energy prices driven by the expanding industries in China and India, increasing global warming and environmental damage , populations in developing countries desiring to see direct benefits from their countries’ economic development, and the emerging use of Spatially Aware Autonomous Robots (SAARs) (see my blog entry, “Personal Robots: a new development in Spatially-Aware Autonomous Mobile Robots (SAAMRs)” in Geographic Information Science blog  The latter will completely change the global economy and place those countries which have highly skilled labor at the forefront. 

For more information:
Jonathan Blitzer, “Can EuroVegas Save Spain?--Sheldon Adelson goes scavenging in the euro zone,”The Atlantic, September 2012: http://www.theatlantic.com/magazine/archive/2012/09/can-eurovegas-save-spain/309053/ 

Christopher Caldwell, “EuroVegas is a gamble not worth taking”, The Financial Times, 14 September 2012, http://www.ft.com/intl/cms/s/0/5f7891e0-fd93-11e1-8fc3-00144feabdc0.html#axzz28rQnTesr

Lauren Frayer, “Not Everyone In Spain Eager To Wager On EuroVegas”, National Public Radio (U.S.A.),5 October 2012,  http://www.npr.org/2012/10/05/162297447/not-everyone-in-spain-ready-to-roll-dice-on-eurovegas  (also broadcast on the Morning Edition 5 October 2012.)

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