Raj Persaud: The winners and losers when gambling on prosperity

Poor Tessa Jowell has had a dreadful week due to her difficulties in persuading her own party, the media, and the country of the case for liberalising gambling laws and permitting large Vegas-style casinos to proliferate in the UK. Her arguments seem to be based on a strategy of emphasising the issue of personal freedom, emphasising that the plans for gambling are merely part of a wider government libertarian approach to our lives, in strong contrast to the "nanny state" image that has obtained in this area.

Poor Tessa Jowell has had a dreadful week due to her difficulties in persuading her own party, the media, and the country of the case for liberalising gambling laws and permitting large Vegas-style casinos to proliferate in the UK. Her arguments seem to be based on a strategy of emphasising the issue of personal freedom, emphasising that the plans for gambling are merely part of a wider government libertarian approach to our lives, in strong contrast to the "nanny state" image that has obtained in this area.

Actually, the covert agenda of the Government has gone practically unnoticed by opponents, who have been xenophobically obsessed with the culture clash of American-style brashness injected into traditional British seaside towns. The real argument for letting the gambling corporations in is all about economics, and the arguments against are sociological.

The fact is that the introduction of gambling reliably produces astonishing urban regeneration in communities that were foundering because of a lack of resources or inability to attract other industries. This has been the US experience, as documented by sociologists and economists studying what happens to communities that introduce gambling.

Patrick Long, of the tourism management programme at the University of Colorado, has studied the impact of large-scale gambling on communities in the US that didn't have any before the 1980s. They found dramatic changes for which local councils which had been in favour of the introduction of gambling were totally unprepared. In Deadwood, South Dakota, for example, a small town of just over 1,000 people, just a few months after the introduction of gambling at the end of the 1980s commercial property prices went up tenfold. Within a year, 90 per cent of the town's commercial property had been converted to gambling.

At the heart of the economic miracle that is gambling lies some deep psychology. Even when people win big, because they regard the money as an unanticipated "windfall" they tend to spend it almost immediately on personal largesse - ensuring that remarkably little gets taken out of a gambling town.

In that first year of gambling in Deadwood, 1,030 new jobs were created in the gambling industry; its employees earned a total of $14.5m (£8m) that year. The sudden revenue generated for a previously struggling local council was immense, and the first 12 months of gambling produced nearly $6.4m from gaming taxes for special local historical projects alone.

The town has tried to use the gambling revenues to diversify from such a narrow economic base and invest in more general historical tourism, as it has a colourful past, having been founded in the 1870s at the height of the local gold rush.

Back then, the new mining town averaged one murder a day and 90 per cent of the local female population were prostitutes. It is ironic that towns like Deadwood seem to be repeating their history. As in the days of the gold rush, gambling now attracts many undesirables and impacts negatively on the local character. Calls to the Deadwood police department requesting assistance more than doubled within two years of the introduction of gambling, although the increased revenue from gambling for the local council also meant they could afford to more than double the local police budget.

This perfectly captures the dilemma at the heart of the introduction of gambling into towns with no previous experience of the rapacious nature of the industry. You can afford more police, but you also need more than you did before. Child protection and other social service programmes all witnessed steep increases as youth and child neglect cases dramatically rose.

It is important to note that not all of the social impacts are negative. For example, back in Deadwood there has been a noticeable drop in welfare payments for single parents, who were unable to leave the community to seek employment but who are now able to work in the gambling industry. Residents enjoy the additional restaurants, entertainment and other amenities.

However the longer-term residents do lament the loss of places that were suitable for informal gatherings of locals. There is no doubt that when gambling comes to a town, the character and the reputation of the host community are irrevocably altered by the increased tourism. Significantly, only 10 per cent of Deadwood residents, when asked in surveys, say they would recommend that other towns legalise gambling, while 34 per cent say they would not recommend it; the rest, 56 per cent, say it depends on whether the community understands the consequences and is adequately prepared.

So it turns out Tessa Jowell is right that this is an issue of personal choice - but the realities need to be put to the communities at risk so they can make informed choices. Prosperity will definitely arrive with gambling, but so will traffic, congestion, crime and, for some, personal ruin.

The writer is Gresham Professor for Public Understanding of Psychiatry