Las Vegas as the UK’s post Brexit business model is a bad idea, here is why.

English: Las Vegas Strip

English: Las Vegas Strip (Photo credit: Wikipedia)

Mark Littlewood, Director General of the Institute of Economic Affairs[1] (IEA), argues in a Financial Times article that a post Brexit UK should emulate Las Vegas.[2] Like many tourists, Mr Littlewood appears to have been seduced by the city’s bright lights, good customer service, and overall “buzz”. The Strip is seductive. To those who live in Las Vegas, the reality is less glamourous, exciting, or promising. At times, his article reads like a tourism advertisement even as it contains an insight into what the IEA value and seek to promote. It is the latter that should give us cause for concern.

The following commentary is designed to help the reader decide if the gap between what Mr Littlewood proposes and what Las Vegas understands about itself can be bridged. There is a large gap between the vision and the reality.

If you want to get an idea of what Brexit Britain could — and probably should — look like in years to come, then you should pay a visit to Las Vegas. Sin City is an amazing tale of human endeavour and imagination overcoming apparently insuperable odds and confounding the experts at every turn.

What is strange is why Mr Littlewood chooses Las Vegas. It may be that he was inspired by his visit. People often get caught up in the euphoria of a holiday. Perhaps he was feeling rather indulgent after a good time at blackjack. In any case, he appears selective about his example since it is the one place in the United States that has made gambling and vice work. Las Vegas is the exception that proves the rule. We could hope that the UK could succeed as much as Las Vegas, but the reality is that if it seeks to be Las Vegas, it will become Atlantic City.

Atlantic City, another gambling city, has fallen onto hard times. Casinos are closed, jobs are leaving, and the growth is a memory. The city’s bet on gambling revenue was a bust. Facing bankruptcy, it was bailed out by the New Jersey state legislature.[3] Perhaps this is why Mr Littlewood avoided it.[4] It shows us everything that can go wrong with such a vision, the US version of Blackpool.

Mr Littlewood wants to praise Las Vegas for its success, yet he overlooks that it too suffered dramatically in the Great Recession and that its success is always precarious. To avoid this inconvenience, he harkens back to the city’s halcyon days to suggest that like early Las Vegas a post Brexit UK will have its best days ahead as if its mere existence guarantees good fortune.

Its mere existence, let alone its stunning growth, would have been considered a near-impossibility a century ago. Slap in the middle of a desert, the city faces unbearable heat for much of the year and has an annual rainfall barely 1 per cent of the UK’s. Organised crime, the very backbone of the creation of the city, has been eviscerated by enlightened corporate interest.

Las Vegas has a unique position within the Nevada economy, which is something that the UK cannot emulate. As such, the city has a state and regional status that gives it financial and political clout disproportionate to other cities in the area and region, which is not the UK’s comparative advantage. The UK is not comparable to this context as the UK does not have a larger state economy or a federal economy to cushion the blow or mitigate the global economy’s worst excesses.

The article betrays a certain concerning amount of hyperbole. Consider the following claim.

The disadvantages faced by Las Vegas over the years make the challenges posed by Brexit look like a tiny rounding error.

If he wasn’t so serious and earnest in his advice, it would be funny. Brexit has encouraged; a financial crisis, a social crisis, and a constitutional crisis. The UK faces an uncertain economic, political, and financial future. Even without Brexit, the UK faces serious problems. It has deepening economic inequality. A declining health infrastructure that needs reform. An equally shaky educational system that still needs direction. The environmental threats have increased. Even without these, the UK faces terrorist attacks. What are the challenges that Las Vegas faces?

Let’s look at the worst problems facing Las Vegas *as identified by Las Vegas residents*.

  • Traffic
  • Water Shortages
  • Unemployment
  • Yucca Mountain (transport of nuclear waste to Yucca Mountain for disposal)
  • Growth and over population.[5]

I believe that Mr Littlewood has inverted the comparison. Las Vegas appears more of a rounding error in comparison to Brexit.

The population of Vegas has more than quadrupled since 1980 to more than two million residents, making it the fastest-growing city in the United States for much of my lifetime. It has attracted a good number of people departing the high-taxing, high-spending state of California.

The reality is that Las Vegas’s population growth while remarkable has slowed in recent years compared to its boom years.[6]

You can buy a decent three-bedroom house here for under £200,000, despite restrictive planning laws based on concerns about water usage.

The Las Vegas property is still recovering. It is only exiting a period when foreclosures were surging.[7] The same problem has beset the Strip.

The world-famous Las Vegas Strip has been completely reinvented since the late 1980s. More than a dozen super-resorts have been built from scratch since then. Commercial build completions last year alone amounted to nearly four million sq ft, creating about 7,000 jobs in the construction sector. A further three million sq ft is being built.

The glory years for Las Vegas began in the late 1980s and they stalled dramatically in in the Great Recession (2008-9). They have yet to recover with no resorts opened for over 6 years.[8] Even the recent promised “boom” has been more of a promise than a delivery.[9]

Hotels no longer seen as fit for purpose are literally blown up. The 23-storey Riviera, a famous part of the city since the mid-1950s, was destroyed in the midst of a firework display a few months ago.

The Riviera will be replaced by a large convention centre. Perhaps this is the IEA’s vision for the UK. Destroy the old institutions and turn it into Europe’s convention and tourist centre. Will the Monarchy will become a tawdry tourist attraction? Is this the future  for the UK’s most recognizable institution? Out with the old and in with the vulgar, crass, casino culture, as long as it makes money, who cares?

Yet, this is not the real issue. The focus on Las Vegas and jobs is only a prelude to the real issue. Instead, the real issue is attitude. He likes that the customer is king in Las Vegas.  If only the UK could change its “attitude”. Brexit with a smile and all will be right. We can almost hear Mr Littlewood singing “accentuate the positive, eliminate the negative”.

The true success story of Las Vegas is based on attitude. The customer is seen as king and there are few sacred cows. Unsurprisingly for a gambling paradise, risk is positively embraced rather than reviled.

This is surely an appropriate meme for post-Brexit Britain — and, indeed, is pretty good shorthand for the key difference in attitudes between Leave and Remain voters.

If only Las Vegas success was due to attitude. If only the key difference between Leave and Remain voters was attitude. If only the world were this simple. The right attitude, good spirit, and some good old fashion positivity and anything is possible even the impossible. Perhaps this works for selling fads, dreams, and snake oil. Nature is not to be fooled. Success comes through hard work and a bit of luck.

Las Vegans seem so enthused by the joys of life and the taking of risk that they stretch it to extreme levels. If there is a squad of public health lobbyists here, popular culture seems blind to them.

In reality, Las Vegas and gambling houses are extremely risk averse. They want the punter to take the risks. The House never loses for the simple reason that it is amazingly risk averse and looks to mitigate if not control all risks associated with gambling. The House has one goal, take your money, and if that means giving you a smile or a “good time”, then that is a small price to pay to get your money. I doubt it is a sustainable business model as it does not encourage thrift, hard work, savings, and a measured approach to invest in the future. Instead, it encourages a “live for the moment” attitude, that does not encourage growth or long term vision by the average person. As for the joys of life, nature has a nasty way of intruding. Mr Littlewood  seems to think that public health ok as long as people can do what they want. So long as they consent to the risks as if what the individual wants to do is without consequence for everyone else. The Las Vegas reality is one of addiction, crime, poverty, and hopelessness. Mr Littlewood appears to celebrate a morally questionable “success story” –The Heart Attack Grill.

The Heart Attack Grill has recently relocated to the Strip. You can eat there for free if you can prove on the machine by the front door that you’re over 25 stone in weight. Among the items on the menu is a “quadruple bypass burger”. The restaurant’s advertising slogan is that it has been combating anorexia since 2005.

Mr Littlewood glosses over some important caveats. Several people have died at the store. The first Heart Attack Grill in Chandler, Arizona closed after the first death.[10] The next one that opened in Dallas, Texas closed shortly after a customer died.[11] The Las Vegas location has had several patrons die in the restaurant. The owner has gone so far as to make their deaths part of his marketing strategy.[12] I wonder why this is something to laud as a benefit or a good thing especially as obesity among UK population increases with each year.[13] As the UK population becomes obese; the medical costs increase. I suppose when you want to harvest the financial rewards from human misery you are being faithful to Margaret Thatcher’s vision that you can make money without regard for how it affects society or the common good. As she argued, these do not exist.

The ranks of chief medical officers probably feel that such an enterprise should be banned outright, but to most people here it seems like a witty celebration of abundance rather than a crass display of gluttony.

For from being a witty celebration of abundance, it is a sad commentary on our inability to control our appetites even to save our lives. Even the owner of the restaurant says as much.

“I’m probably the only restaurateur in the entire world who is unapologetically telling you that my food is bad for you, that it will kill you, and you should stay away from it,” said Basso.

What is not surprising, though, is that Mr Littlewood fails to realize Las Vegas is designed to be crass, vulgar, and morally vicious. Being crass and vulgar are its unique selling points.[14] Las Vegas is not intended to be subtle or refined. The city’s amorality is such that solicitors for Sodom and Gomorrah have filed a legal brief asking God for an apology. Mr Littlewood wants Blackpool to become the UK’s Las Vegas.

The areas of Britain that would benefit from an injection of Las Vegas spirit aren’t the rich parts of London, but the left-behind areas that voted so substantially for Leave last June. It is fair to say that Blackpool, for all its charm, has not experienced Vegas levels of growth in recent times. In fact, its economy has shrunk by 8 per cent since the turn of the decade and it is now considered one of the ten most deprived towns in Britain. More than two thirds of Blackpool residents voted for Brexit, the highest percentage in the northwest.

Blackpool has tried to improve and it has tried to develop its own approach to Las Vegas, yet it faltered because people could travel abroad inexpensively. “Cheap flights” made sunnier locations available and drew customers away from Blackpool.[15] A super casino is not going to change that reality. Moreover, the deeper problem is that Blackpool lacks the resources, infrastructure, and most importantly the political culture to even approach such an effort. With Westminster, the UK has one of the most centralized governments in the world which the IEA should know.[16]  By contrast, Las Vegas grew in large part because power was local and decentralized as in a federal system.

To help to regenerate this city, along with the Clactons, Margates and Southends, we should equip them with the tools to become mini-versions of Vegas. This would involve a huge programme of deregulation around leisure and lifestyle activities.

The issue is not deregulation, it is about political reform to help localism thrive. Yet, Mr Littlewood wants to focus on “regulation”. All we need are less regulations and all will be well. If we just indulge, encourage, and promote more private vices, then we will have great public virtues and benefits. If only we could legalize, drugs, gambling, and prostitution, all would be well in Blackpool and the UK. One wonders if Mr Littlewood has read Mandeville’s Fable of the Bees or Private Vices, Public Benefits.[17]

In 2008, the last Labour government ditched its plans for super-casinos across Britain. Initially, 40 were suggested, but this was swiftly cut to only eight casinos, then one and then none at all. In any event, British casinos were to be prohibited from opening 24/7 or from serving free alcoholic drinks to customers, both key ingredients of the Las Vegas success story.

What Mr Littlewood overlooks is that the UK has many large casinos and those areas have not seen Las Vegas style growth or success.[18] The UK has a several large casinos and the effects are not as dramatic nor does their effect suggest if they were larger, open longer, and less regulated that they would lead to greater regeneration.[19] Leaving aside the idea that UK seems bereft of large casinos, Mr Littlewood misinforms the reader by suggesting that Las Vegas succeeded because of free drinks. Nothing is free in Las Vegas. Everything has to be paid for either directly or indirectly. The “free” alcohol only occurs when you are losing gambling. Does Mr Littlewood want to encourage us to gamble our lives away, indulge our excesses, and live with copious, costly addictions?[20]

In a report at the time, showing all the detachment from reality of what we now label the “liberal metropolitan elite”, it was suggested that a better plan for regeneration might be to build museums or theatres. Opera, ballet and exhibitions of natural history all have their role, but they are not a replacement for the mass market, relatively low-brow entertainment that so many millions of us crave.

Why Mr Littlewood sees Las Vegas gambling as “entertainment” is beyond me. The House is not providing entertainment, it is designed to take money. If it is entertainment, surely there is less damaging and still profitable “low brow” entertainment. He seems to think that he must face down the “Puritans” who deny everyone fun.[21]

The government should dust off Tony Blair’s casino proposals, give them an enhanced liberal polish and reintroduce them to help to supercharge our struggling seaside resorts. The vast army of interventionist campaigners demanding stricter caps on gambling stakes, restrictions on happy-hour promotions and a wide range of other bans need to be firmly faced down. If you continue to prosecute a “war on fun”, don’t be surprised when towns that rely on producing fun experience hardship and fall into disrepair.

After all of this enthusiasm, Mr Littlewood offers a sober warning.

Of course, some people face genuine problems of addiction and need to be helped.

He offers us one sentence to limit or qualify his enthusiastic support for Las Vegas as a business model. Had he asked anyone who worked in Las Vegas, the people who live in the Strip’s shadow, he would have seen a brutal world with limited opportunity or long term growth.[22] With that briefest of caveats, he resumes his exhortations to unleash the gambling machine. How does he do it? Experts (unspecified naturally) tell us gambling is good for us.

But gambling has some measurable upside — not merely downside — risks, with academic studies showing that it can improve concentration, short-term memory and health.

If it is good for us, why not encourage children to do it? I am certain there are other activities that improve concentration, short-term memory and health, without damaging society, but these are to be avoided apparently. We need an economy that encourages excessive behaviours and bring associated crimes.[23] Unless of course Mr Littlewood believe that people only gamble in moderation or enough to improve their health.[24] In the end, it comes down to attitude and optimism as the cure to what ails the UK.

We are told that our government wants an open, confident, outward-looking Britain. So, rather than sneering at the vulgar, over-the-top nature of a city like Las Vegas, let’s see if we can capture some of its success and import its optimism to our own shores.

I am only surprised he has not yet suggested the UK import Las Vegas’s 300+ days of sunshine. What makes Las Vegas work is that it plays to its advantages and avoids its weaknesses. The UK’s strengths are not those of Las Vegas and a better attitude or optimism will not change that reality.[25] Instead of trying to capture its successes or learn from them, we should learn from its mistakes, its unique context inside a state, a region, and a federal system that allow it to thrive and chart a course for the UK that is true to its strengths. Las Vegas is the exception that proves Mandeville correct. On a small scale, private vices can create public benefits within a managed context. However, as a recipe for a whole nation, it is a recipe for disaster, a brutal, vicious disaster.[26] Curiously, Mr Littlewood did not consider this possibility. I wonder why.

 

[1] https://iea.org.uk/

[2] http://www.thetimes.co.uk/edition/business/viva-las-vegas-gamblings-mecca-shows-how-brexit-can-beat-the-odds-p2wj6jn0q

[3] http://www.mcall.com/news/nationworld/pennsylvania/mc-atlantic-city-bailout-signed-20160527-story.html

[4] http://www.usnews.com/opinion/economic-intelligence/articles/2016-04-21/atlantic-city-crisis-shows-casino-gambling-is-a-bad-bet

http://www.npr.org/2016/03/23/471618590/atlantic-city-faces-financial-collapse-cringes-at-state-takeover

[5] http://www.reviewjournal.com/trending/silver-state/5-worst-problems-faced-las-vegas

[6] http://www.reviewjournal.com/news/las-vegas/las-vegas-henderson-climb-national-us-census-bureau-population-rankings

[7] http://www.zillow.com/las-vegas-nv/home-values/

[8] http://www.reviewjournal.com/business/neon-rebirth/strip-left-reeling-picking-the-pieces-after-the-great-recession

[9] “Las Vegas may need some revitalization

It’s been six years since a new resort opened on the Las Vegas Strip, and that’s an eternity in a city that’s used to opening new mega-resorts on a regular basis. Maybe it’s good news that new competitors aren’t coming to town, or maybe the city needs some new blood to revitalize the region. Whatever you think of the impact new casinos can have, it looks like it’ll be at least two, if not three, years before another resort opens on the Las Vegas Strip. A boom in construction that seemed imminent a few years ago has come to a grinding halt.” http://www.fool.com/investing/2016/12/22/las-vegas-building-boom-of-to-a-disappointing-star.aspx

[10] http://archive.azcentral.com/community/chandler/articles/2011/06/01/20110601chandler-heart-attack-grill-closes0603.html

[11] http://www.dallasobserver.com/restaurants/heart-attack-grill-continues-death-spasms-7021377

[12] http://newsfeed.time.com/2013/10/05/heart-attack-grill-owner-proudly-displays-dead-customers-remains-on-tv/

[13] https://www.noo.org.uk/NOO_about_obesity/adult_obesity/UK_prevalence_and_trends Nevada has one of the lowest levels of obesity in the US http://www.reviewjournal.com/life/nevada-top-3-low-obesity-rates-poll-says while Las Vegas has one of the highest. http://www.mensfitness.com/life/entertainment/2009-fattest-cities-4-las-vegas-nv

[14] https://www.youtube.com/watch?v=4MkecFi08Yg and https://www.thrillist.com/lifestyle/las-vegas/stereotypes-visiting-las-vegas-nevada

[15] http://www.newstatesman.com/politics/economy/2015/12/inside-blackpools-attempts-regenerate-itself

[16] http://www.lrb.co.uk/v38/n24/tom-crewe/the-strange-death-of-municipal-england

[17] http://oll.libertyfund.org/titles/mandeville-the-fable-of-the-bees-or-private-vices-publick-benefits-vol-1

[18] http://www.standard.co.uk/news/new-supercasino-attracts-30000-in-first-three-days-6375127.html see also http://news.bbc.co.uk/1/hi/uk_politics/7264143.stm

[19] http://www.bbc.co.uk/news/uk-england-34678230 See also the research on the regeneration effect of casinos. http://www.centreforsocialjustice.org.uk/library/casinos-degeneration-not-regeneration-gambling-interim-report see also http://www.ippr.org/files/images/media/files/publication/2011/05/Casinos_and_Regeneration_briefing_note_1564.pdf?noredirect=1 The research at the time suggested that it had a negative effect. http://www.sheffieldeastend.org.uk/GamblingHealthEconomicRegeneration.pdf

[20] http://lasvegassun.com/gambling-addiction/ Vegas has some of the highest addiction rates in the US, which leads to large numbers of drug overdoses. http://www.lasvegasnow.com/news/report-nevada-fourth-highest-for-drug-overdose-deaths/185717145

[21] In the past philistinism was embarrassed or even apologetic. Today, it is proud, bold and brash. All that matters is money; Culture is for the snobs. Perhaps this is really the IEA’s USP, they promote an ethos of philistinism and defend it behind economic theories.  Today, it appears common decency is elitist and puritanical. All that matters, is that  there is a market where you can make money no matter the consequences. In that sense, Las Vegas is the IEA’s poster child. Yet Las Vegas is not designed to encourage economically sound behaviour either from the Casinos nor from the punters.

[22] Las Vegas has three cities. There is the Strip which most people know. There is the city that supports the Strip. Finally, there is the city of Las Vegas that exists as the alternative to the Strip which is like any other city. The three cities co-exist with some difficulty but unless the reader understands that the city that feeds the Strip, the low paid, seasonal or temporary workers, they will confuse the other city, the professionals, 9-5 businesses, as the other side of the Strip. What is clear from people who live and work in the gaming industry that it is a tough place to live as addictions are high, unemployment is high, and opportunities for long term growth are limited. Instead, the city thrives on the constant churn from the young attracted to the bright lights and lifestyle who are chewed up and spit out after a few years to move on to a stable career or move out to another opportunity, if they can. https://www.quora.com/Is-Las-Vegas-a-good-place-to-live

Consider this view of life in Vegas. http://www.cosmopolitan.com/lifestyle/a39052/what-its-really-like-to-live-in-vegas/ see also https://www.quora.com/Is-Las-Vegas-a-good-place-to-live All of these paint a picture that life in Vegas is closer to Hobbes’s description of the state of nature.

[23] http://channel.nationalgeographic.com/drugs-inc/articles/facts-las-vegas/

[24] As mentioned elsewhere Mr Littlewood criticizes the public health lobbyists except when they support his views. As long as they agree with them, he will cite them. Is this how IEA conducts all of its research and analysis?

[25] Here are the UK’s top growth sectors. https://resources.lloydsbank.com/insight/gameplan/the-uks-fastest-growing-sectors/  Las Vegas has different ones.

http://www.newsmax.com/FastFeatures/industries-nevada-economy/2015/04/14/id/638269/

[26] “Ironically, Mandeville’s own honesty led him into trouble: he boldly claimed vice was inevitably the foundation of a thriving society, insofar as all human beings had to act viciously because their status as selfish fallen men ensured that whatever displays they affected, at bottom selfishness always dictated their actions. All social virtues are evolved from self-love, which is at the core irredeemably vicious. Mandeville also challenged conventional moral terminology by taking a term like “vice” and showing that, despite its negative connotations, it was beneficial to society at large.” http://www.iep.utm.edu/mandevil/

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About lawrence serewicz

An American living and working in the UK trying to understand the American idea and explain it to others. The views in this blog are my own for better or worse.
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