Packer's loss is our gain

Mark Latham’s attack last month on Kerry Packer for allegedly losing $34 million in a Las Vegas Casino does not deserve to stand without a detailed challenge. Yet I have not seen or heard one in the media. Latham said "Notions of public morality and justice are under threat when it is possible for one person to accumulate such extraordinary wealth and then use it in such an extraordinary way." Latham went on to say that this behaviour highlighted one of the ethical flaws in the Howard government’s policy on mutual obligation.

Packer is not an easy case to defend. He is, after all, Australia’s richest man. Almost everyone is going to be secretly pleased to see him take a tumble. And a speech like Latham’s provides some convenient quasi-moral justification. That the assailant was one of the ALP’s clearest economic thinkers gives some clues as to why economic reform in the country has stalled. If the best are engaged in profitless point scoring, what are the worst doing?

Latham’s statement smacks of opportunism. He would have known that the figure of $34 Million misstates the size of Packer’s loss as it only takes account of one day. Packer loses big, and he also wins big. Over time both will even out and he will lose a fairly small, but predictable, percentage of his stakings. That is the nature of gambling, and Latham would know that.

Further, gaming is a legitimate industry. Most state government budgets rely substantially on licensing fees and taxes rung from TABs, poker machines, casinos and bookmakers. Bingo, chook raffles, and Unders and Overs have contributed to many a new school pool. Would Latham be complaining if Packer dropped that amount of money on the door prize at one of his fundraisers? And if not, how consistent is Latham’s moral code?

When people morally condemn gambling they tend to act as though the money "lost" disappears. In fact it is only "lost" to the gambler – it is gained by another as it passes from one set of hands to another. Not only would the Nevada State administration have gained revenue from Packer’s losses, but so would the shareholders and management of the casino, and the croupiers, kitchen hands, gardeners and anyone else who works there. One could quibble that the money was "lost" overseas, but then that merely balances out the stream of overseas punters who have been relieved of their lucre at Packer’s own Crown Casino.

If Packer had not "lost" the money in this casino he may well have spent it somewhere else. Perhaps on the golf course he is building on his property at Scone where, again, it would have been transferred from one set of hands to others. Where is Latham’s criticism of that? He condemns conspicuous consumption, but to my mind the golf course (and the polo fields) are even more blatant than the gambling. But Latham is silent on these.

A while ago there was an email circulating that measured the value of everyday consumer items, like Rolls Royces and executive jets, in "Gates Dollars". The value of a Gates Dollar was calculated by multiplying one dollar by Bill Gates’s annual income and then dividing by the average person’s annual income. The price of a variety of luxury items was then calculated in Gates Dollars. The cost of a Roller in "Gates Dollars" is a few cents. In Packer Dollars $34m is probably about the same as the average punter loses at the race track on a Saturday. Yet there was no appreciation of this proportionality in Latham’s speech, almost as though he expects rich people to be compelled to shop at Kmart and spend no more than the average person – as an act of social responsibility. Indeed, the thrill of gambling comes partly from the risk, and to experience that risk a rich person needs to risk proportionately more than a poor one. If you accept that gaming is a legitimate activity, then you accept that this is an acceptable behaviour.

What defence there was of Packer tended to centre around the fact that he should be able to do what he wanted with his own money. That is only a partial defence. We accept in a modern society that our own assets are only our own within certain limits. This is part of the so-called social contract and progressive taxation, which confiscates proportionately more from the rich than the poor, is one practical manifestation of that belief.

However, there is a social necessity to allow individuals to do with their assets what they like, so long as they obey the law and pay their taxes. To do less is to unjustifiably interfere with their civil liberties. What’s more, in an empirical sense, history has shown that all members of societies that allow individuals this right prosper more than those that do not. Allowing Packer to waste his money actually provides more to the poor than compelling him to spend it on good works, because it is a byproduct of allowing him to do what he wants with his wealth. Even if these actions are noxious, like exhaust fumes they are still necessary for locomotion. And Packer has provided a lot of locomotion to the national economy. It was pitiful, in fact, to hear him plead good works and donations as his justification. The Prime Minister used to be fond of saying that the best form of welfare is a job. Packer has done more than most of us to provide jobs.

More than that, aggregated family wealth like Packer’s is an absolute necessity for an economy to progress. Where else is the entrepreneurial leaven to come from – the superannuation funds, run at the best by grey-suited men trying to minimise risk or at the worst by high-flying unionist alumni trying to advance social aims? Not that Packer’s instincts have always been right, but recently his willingness to take a risk has been instrumental in driving a large proportion of Australia’s IT industry.

Latham’s comments are worrying because they smack of some of the themes of Marxist socialism that should have been buried by modern Labor, and they call into question the very nature of the Australian Third Way. Certainly, the surplus value theory of labour peeps out quite clearly. This theory holds that the capitalist does not earn his money, but confiscates value that belongs to the worker. It is a theory that does not take account of factors like savings and risk and ascribes no value to the ability to bring assets together and spot market opportunities.

His comments also seem to be informed by the idea that I can be oppressed by the mere fact that someone else is richer than me. This is based on the perception that resources are scarce and I am poor because you are using resources that belong to me. This second notion is a constant theme in United Nations Development Reports. It is also based on the idea that for equality to be just, it must be manifested as equality of outcome. Yet both these theories have been discredited by the facts and get short shrift in Latham’s book, Civilising Global Capital.