The Czech Republic: “A paradise of slots on Earth it is to see”?

The gambling industry has become one of the most profitable and controversial branches of the Czech economy, mainly due to the deliberately pro-gambling laws and state authorities’ unwillingness to regulate it properly. Private companies reap enormous profits while the state is obliged to pay the costs associated with the negative externalities that the industry produces. Yet the history of Czech gambling also includes a success story of civil society striking back.

Foto: CreativeCommons/ Dave Nolan

25. 03. 2014

“Play is older than culture…”, famous Dutch historian Johan Huizinga wrote in his book Homo Ludens (1938) in which he focused on play as a deeply embedded feature of the human nature and culture. Human beings are willing to take irrational risks in order to improve their lives immediately and without any great effort. To ban gambling completely is a futile struggle against reality and a huge interference with individual freedoms. However, the Czech case proves that limits must be set and enforced, as unregulated gambling can easily turn into a dangerous problem affecting individuals as well as their families and the entire society.

Pathological gaming has been widely recognized as an addiction on par with smoking or alcohol and hard drugs abuse. Its impact on the physical, psychological and social status of an individual and his neighbourhood can be just as severe. One of the most respected Czech experts on gambling, psychiatrist Karel Nešpor, M.D., has enumerated a series of negative features linked to gambling. A gambler can suffer from loneliness, depression, anxiety, suicidal thoughts or a tendency to self-harm, all of which lead to worsening ability to communicate and cooperate with other people. He or she can neglect work or school, incur debts, and thus quickly fall into the trap of the debt collection system. His or her personal problems are then transmitted to his or her family, with fatal consequences for their functioning. A gambler gets divorced, finds it difficult to seek a new shelter and thus becomes a homeless person. In order to be able to continue gambling, he or she begins to commit petty thefts and may become involved in prostitution or violent crime, then combine them with other addictions such as alcohol or drugs. Experts estimate that there are 40.000 – 80.000 “problematic” players with pathological gaming patterns and 168 000 adult Czechs (2.3 per cent of the population) highly endangered by pathological gaming in future. This creates a great burden for the social benefits, healthcare or police systems. It is also argued that the unregulated gambling business has negative impact on GDP. Billions are neither invested into the development of human capital or capabilities nor spent rationally on goods.

“…a paradise of slots on earth it is to see”  ⃰ 

The gambling industry has been booming in the Czech Republic since the early 1990s. In 2012, Czechs put almost 135 billion CZK (5 bil Euro) into various forms of gambling (bets, lotteries, slots), which was more than double the amount of 2009 (60.4 bil CZK; 2.2 bil Euro) and 14 times the amount of 1992 (9.5 bil CZK; 0.35 bil Euro). This sum is almost as high as the 2012 budget of the Ministry of Education, Youth and Sport (138 bil CZK; 5.1 bil Euro) and almost 16 times higher than that of the Ministry of Culture (8.5 bil CZK; 0.31 Euro).

The gambling industry became one of the most profitable branches of the Czech economy in 2012–2013. According to the economic news website, the top five gambling corporations claimed revenues of about 50 billion CZK (1.8 bil Euro) and paid 3.5 billion CZK in taxes. The source of the gambling problem are not so much the lotteries, bingos or sport bets, but slot or reel machines, defined as casino gambling machines with three or more reels which spin when a button is pushed. It would be difficult to find an average Czech pub without a beaming slot machine. The number of slot machines in operation has experienced a dramatic boom, too. There were approximately 125,000 of them in 2010, which was the highest number in Europe with respect to the population – one for every 84 people in the Czech Republic (192 in Spain, 417 in Germany, 1700 in Austria).

Basically, there are two types of machines: reel machines and video slot machines. The reel machine is a mechanical device which can stand by itself, and the amount of money a player can lose (and win) is limited by the coin bin in each separate machine. Although visually the video slot machine resembles the reel machine, it is an electronic device connected to a central server, and theoretically, there is no limit on the amount of money bet.

This difference is key to understanding the gambling boom in the recent decades. While reel machines are regulated by local municipalities, which can impose a one-year limit on their operation, video slot machines have until recently been regulated solely by the Ministry of Finance (MoF), which could grant a license of up to ten years. This was the first paradox. While video slot machines obviously have a far more profound impact on an individual´s wallet and greater potential to ruin one’s life within the local community, locally elected representatives could not until recently efficiently regulate the business. When a license for a reel machine expired and the municipality decided not to renew it, it did not mean that the municipality succeeded in getting rid of a gambling spot for good. On the contrary, the operator applied for a video slot machine license and the MoF approved it, in most cases, with the longest possible limit of ten years. It was a classic example of the struggle for competencies between central and local authorities.

MoF’s disregard for municipalities´ wishes with respect to video slots operation within their territories was just one aspect of the problem. The massive expansion of the industry would not have been possible without the overly benevolent (some say malevolent) “non-regulation” by the MoF. The civic society organisations fighting the gambling industry have long openly declared that the MoF has breached and disrespected the lottery law. For example, the MoF authorized slot operations regardless of whether they were placed in close proximity of schools, hospitals, churches or offices. It did not apply proper rules to set maximum bets, maximum losses per hour or license prolongation limits (in fact, the MoF prolonged some slots’ licenses indefinitely). It also disrespected generally binding ordinances issued by small towns aimed to regulate gambling on their territory. Even when municipalities won the first round of the conflict in 2011 with a Constitutional Court ruling stating that local authorities do have the right to regulate every gambling site within their territory (including video slots) if it is in public interest, the MoF was more than hesitant to revoke its concession and regulation policy. NGOs then accused the MoF of serving the interests of the gambling industry and submitting to its threats of suing the state if previously approved concessions were revoked. They even accused the MoF, headed by the powerful Miroslav Kalousek (TOP 09, in office 9.1. 2007 – 8.5. 2009; 13.7. 2010 – 10.7. 2013), of refusing to obey the recommendations, appeals and decrees of the government and the public defender of rights (ombudsman).

The Hollan phenomenon    

NGOs have learned some lessons since 2011 and shown great progress in their ability to influence local and governmental policy and win over the sympathies of the public. Instead of just protesting and criticizing politicians, they hired voluntary professionals, lawyers and economists and created a mutual network of professional lobbyist groups. They focused on real decision-making centres and become effective consultants and lobbyists. The civic group Brnění sent the Czech government a digest of foreign scientific works analysing gambling and its psycho-social impacts on individuals and society. It then joined the nation-wide network Občané proti hazardu (Citizens against Gambling) at the end of 2012. Together, they prepared simple, ready-to-use manuals for municipal heads in order to help them “…quickly get rid of black gambling spots…”

One of the most visible people fighting the gambling industry has been Matěj Hollan (29), who is generally considered to be a “professional activist”. He (and not only he) began his activist career by mocking the official activities of the magistrate of the second biggest city in the Czech Republic, Brno. His group applied and developed a powerful, yet simple and very old strategy to pinpoint officials’ shortcomings and attract the attention of the public; ridiculing and making fun of those in charge. They created a web site (Žít Krno – To Live Krno) mirroring the official website of the city (Žít Brno – To Live Brno) and exposed local politicians, mocking them with humorous exaggeration and hyperbole and attracting public attention to their failures and corrupt behaviour. Instead of scaring people, they made them laugh at the stupidity, inanity and greediness of their local representatives. This strategy had one big advantage: it was difficult, if not impossible, for the targeted politicians to retaliate or sue them without looking like total “morons” (although they scored when they succeeded in getting the official Facebook profile of one of the “mocking” organisations deleted).

When Hollan started engaging in the struggle against the slot machine industry, he was able to draw the media interest necessary to win over public opinion. He knows how to communicate excellently with the media, attract their attention and set the agenda for them. The weekly Reflex named Hollan the first politician/activist of the Facebook generation because the core of his activity takes place on Facebook, which he skilfully used as a tool for discussion, calling for action, and meeting adherents. He was awarded the František Kriegel Prize for civic courage, presented by the Charta 77 foundation. After 11 April, 2013, when the Constitutional Court struck down the part of the lottery law that postponed the right of municipalities to regulate the placement and operation of video slots within their jurisdiction until the end of 2014, Hollan´s successful struggle has shifted him from non-conformist activism to real political engagement, as a few weeks ago, he has announced his intentions to run in the next municipal elections in Brno. 

We can. But do we want to?

In the cult movie Thank You for Smoking (Jason Reitman, 2006) there is a scene in which PR professionals and lobbyists representing the most controversial industries, such tobacco, guns and alcohol, gather for an informal supper. They jokingly compete with each other about the number of people “killed” by their industry. Their job is primarily to win the lost public opinion battles for their employers. The above mentioned ruling of the Constitutional Court was a real watershed moment for the industry because it enabled local authorities to ban video slots immediately. The gambling industry grasped what was at stake and began to defend itself. It argued that the state is not entitled to interfere with the freedom of entrepreneurship and should not attempt to tell people what to do; gambling was a private matter. Unfortunately for the industry, it chose the wrong timing. The public was already disgusted by the recently released documentary Šmejdi (Crooks, dir. Silvie Dymáková, 2013) depicting the outrageous and sometimes violent behaviour of doorstep salesmen selling overpriced goods to pensioners. The representatives of the gambling industry fell into the same category in the eyes of the public. Following international arbitration, their threats of making the Czech state pay billions in penalties also proved futile. The gambling industry has had only a few valid arguments. One is that a portion of the revenues from gambling is redirected to the budgets of local municipalities. When gambling is reduced, regulated or banned from a territory, local budgets could face huge decreases in their revenues. This is a powerful incentive for local authorities to not ban gambling totally.

The story of Czech gambling has reached a new stage in 2014. The gambling industry has been put under great pressure and thanks to the concerted application of legal, public relations and political tools the situation in this area will hopefully get back to standard, Western Europe-like “rails” where gambling is a legal business subjected to strict regulation, taxation and public control both on the state and local levels.

 A paraphrase of the Czech anthem: Where is my home, where is my home? / Water roars across the meadows, / Pinewoods rustle among crags, / The garden is glorious with spring blossom, / Paradise on earth it is to see. / And this is that beautiful land, / The Czech land, my home, / The Czech land, my home.

Jan Adamec

Jan Adamec

is editor of the V4Revue, historian and political scientist. His area of expertise is the history of Hungary, USSR and Czechoslovakia 1948 – 1957. He graduated from Central European University in Budapest and Charles University in Prague where he currently completes his PhD degree with thesis about the Hungarian uprising in 1956.