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A Comeback for Robber Barons
“Yes, I am a pirate. 200 hundred
years too late. Cannons don’t thunder;
there is nothing to plunder.”
-Jimmy Buffett
Jimmy Buffett’s character in the song “A pirate looks at 40”
laments the fact that he missed the era of high-seas piracy.
Like Buffett’s “pirate,” there are modern businesspeople who
wish they were living in the time of industrial “robber barons.”
Now those wannabes could get their chance. With the new
proposal to privatize state lotteries, 21st century robber barony may
be ripe for a comeback.
19th century robber barons had their gains subsidized
by the government. They were given land,
inside deals, and special considerations that made it impossible to lose
money. In return, the robber barons
cycled money back to politicians in the form of bribes, gifts, and campaign
contributions.
The “money for favors” cycle has been around since time
immemorial, but no one put it into practice like the robber barons. In a time when railroad construction put huge
money on the table for government officials, there was always plenty to steal
and pass around.
Everyone was happy except for the taxpayers.
I thought the robber barons might have gone the way of
pirates until the story broke about the state of Illinois wanting to sell its lottery to
private owners.
Illinois
wants roughly $10 billion for the lottery. If I can scrape up the $10 billion
and get connected to the right politicians, I want to buy it. There is no way
to lose.
Most businesses start with a dream, a prayer, and then a
test in an unknown market. In this case, however, Illinois has already done the testing. Whoever
buys the lottery has a monopoly, stable market, steady players, and the benefit
of advertising paid for by Illinois
taxpayers.
A pretty good deal.
Since Illinois
politicians are giving away their future for a one-time payoff, there will be a
lot of interested buyers. Don’t be surprised if potential buyers throw a few
dollars the politicians’ way. There is too much at stake to not want an
inside edge.
I wish the great Chicago
columnist Mike Royko had lived to see the lottery sale. It’s a story he would
have loved to have written about. Not
only will there be potential buyers currying favor, there will also be a ton of
people who want a piece of the $10 billion dollars brought in by the sale.
Illinois
politicians will feel like Scarlett O’ Hara at the big barbeque. They will be
wined, dined, and courted.
Even if the sale can be done on the up and up, it is still a
terrible idea.
Illinois
will eventually have to raise taxes or cut services to compensate for the
income that was once generated by the lottery.
I worry about private industry managing a lottery. Private
owners can market in ways that governments won’t. Moreover, the purchasing
company will seek the quickest way to boost profits--namely, exploiting the
poor.
The Illinois
lottery can’t sell tickets next to welfare offices. A private owner will. People
will blow their family’s money before they get off the block.
Before states made them legitimate, lotteries had a
different name: the numbers racket.
The crime lords who ran them made an incredible amount of
money, just like the states are making now.
State-run lotteries took the stigma away from the numbers
racket.
You will see huge corporations looking to a buy a lottery. What
will happen when these companies are managed by the same people who managed
Enron?
Do the lottery winners get stiffed? Does the state of Illinois jump in and
guarantee the payments? If so, they may need more than $10 billion.
The Mafia-fronted businesses are always interested in
gaming. Care will have to be taken to get them out and keep them out of a
private lottery.
The mob has their own way of ensuring profitability. The
numbers racket in my hometown was run by a guy named Frank “Screw” Andrews. At
some point, Screw’s business came into question. Shortly thereafter, he “accidentally”
fell out of a fourth-floor window.
It could be that Illinois
has it right. Selling the lottery might
fund some great programs if the money were spent wisely and robber barons,
mobsters, and greedy corporations were kept at bay.
But I would take the other side on that bet.
With billions of dollars to plunder, my bet is on pirates
and robber barons making a big comeback.
Don McNay
is Chairman of McNay Settlement Group in Richmond, Kentucky and the author of the Unbridled
World of Ernie Fletcher. You can
write to him at
This e-mail address is being protected from spam bots, you need JavaScript enabled to view it
or read
other things that he has written at www.donmcnay.com. His award-winning column is syndicated on the
CNHI News Service.
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