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Finland's gambling problem: "A Robin Hood system in reverse"

Big profits from Finland’s gambling monopoly fund an array of worthy causes, but experts question whether the system is as benevolent as widely proclaimed.

Image: Yle

For decades, gambling proceeds from the state-monopoly Veikkaus have provided a steady and substantial flow of financial resources into the Finnish state and civil society. Slot machines, lotteries, horse races—the billions spent on these games every year are channeled to support organisations in culture, sports, research, youth work, social welfare and health, and more.

On the surface, everyone wins: people pay to play their favorite games of chance, and their losses fund common good causes.

But a body of empirical data in recent years has challenged this narrative favoured by Veikkaus and the Finnish establishment. Studies have revealed significant economic and social costs of gambling—particularly for people already struggling—leading researchers and clinical specialists to increasingly question the wisdom of the current gambling regime.

"A Robin Hood system in reverse"

According to estimates by Finland’s National Institute of Health and Welfare (THL content in Finnish) (siirryt toiseen palveluun), problem gamblers contribute more than one-fifth (23 percent) of the money spent on gambling. Those with little money to lose—pensioners, the unemployed and those laid-off from work—hand over almost one-third of gambling proceeds.

Janne Nikkinen, a social ethicist and researcher at the University of Helsinki, believes that the moral and political implications of these figures are grave.

"What does it mean for democracy that we accept the notion that you can squeeze the poorest members of your society and take out the benefits?" Nikkinen said. "It's like a Robin Hood system in reverse. You take from the poor, and give it to the rich so that they don't have to pay more taxes."

A majority of Finns gambles—some 80 percent, according to a 2015 survey (siirryt toiseen palveluun) (content in Finnish) by THL. For most, the activity does not cause any significant problems for them or their loved ones. But according to the same survey, some 124,000 people, or 3.3 percent of the population, can be classified as problem gamblers.

Annika Saarikko, Finland’s Minister of Family Affairs and Social Services, has noted that up to 700,000 people (siirryt toiseen palveluun) in Finland are negatively affected by problem gambling when family members are included.

Jani Selin, an expert on Finnish gambling policy and a researcher at THL, says that the underprivileged are also “overrepresented” among problem gamblers.

"We know this from loads of international studies that people who come from lower socio-economic circumstances tend to gamble more," Selin said. "It’s an almost universally accepted claim. It is the same in Finland. We have known this for a long time."

Profit-seeking vs addiction interventions

In February, weekly magazine Seura (siirryt toiseen palveluun) (content in Finnish) revealed that slot machines—which are usually the biggest problem game for the poor—are more highly concentrated in neighborhoods with people with lower income, education, and employment levels. In the article, a Veikkaus representative claimed that the placement of machines simply follows "client flows."

European Union regulations only allow state monopolies that reduce and prevent gambling-related harms. Accordingly, Veikkaus’ executive vice president Velipekka Nummikoski told Yle that the company has a responsibility strategy which affects where it places machines. "Business factors are just one aspect which we base the location of our slot machines on," he said. "They are by no means the only one."

Rather than limiting the availability of slot machines as recommended by the Ministry of Social Affairs and Health, Nummikoski explained that Veikkaus’ position is that authentication -- where users verify their identities before they can play -- (scheduled for 2023) would be the best way to deal with problem gambling. Restricting slot machines to gaming arcades would also mean taking them out of the reach of hundreds of Finnish communities, and Veikkaus says it wants games "to be available to as many Finns as possible in an equal manner."

THL’s Selin disputes Veikkaus’ claims that profit isn’t driving decisions behind where to place slot machines. "They are only thinking about the revenue—the business side—when they place the slots in the neighborhoods," Selin said. He and his colleagues think that other factors must be taken into consideration. "It makes no sense to put all the slot machines, for instance, in the neighborhoods where there are lots of socio-economic problems already."

It makes no sense to put slot machines in areas with socieconomic problems, argues Jani Selin of the THL. Image: Mari Kahila / Yle

Veikkaus’ annual reports are filled with the language of growth, sales, and "record-breaking" success. Yet the National Police Board, which supervises the gambling industry in Finland, stated plainly on its website (siirryt toiseen palveluun) (page now archived) that "the objective of Finland’s gambling policy is to prevent gambling-related problems as efficiently as possible."

In the view of the Finnish police (siirryt toiseen palveluun), lotteries (a slightly larger category for games which include non-monetary prizes) are "morally questionable" and "can develop into a dangerous addiction." For this reason, the police claim that gambling must be operated "in a way that causes as little personal harm as possible."

"There is a great tension between the revenue increasing policies and the harm reduction policies," Selin said. "It is hard to make any prevention without cutting down people's gambling."

Veikkaus seems reticent to admit this tension exists. "We aim to make profit, just as any other company," Nummikoski said. "However, we do not seek profit at all costs: responsibility principles guide our operations and decisions."

Yet neither is responsibility pursued at the expense of potential revenues. Nummikoski acknowledged the decision to implement the harm-prevention measure of authentication in five years—rather than sooner—was based on more than just technical considerations: "we must also take into account the financial impacts of comprehensive identification. It may affect our beneficiaries' position in a negative way."

The hidden costs of gambling

Neighbording Sweden is one of the only countries which has tried to calculate what economist Earl Grinols calls the "hidden (siirryt toiseen palveluun)" costs of gambling. In 2009, Svenska Spel, the state-owned gambling company in Sweden, produced a report for the European Commission which looked at a range of issues: the cost of depression, the loss of output through unemployment, the cost of treating problem gamblers, the cost of crime, and cost of state efforts to combat it.

The report says that at least 230 million—450 million euros (2018 exchange rate) is lost every year, mostly from reduced economic productivity. Because of a number of costs it did not or could not calculate, the report says the number is likely higher.

Svenska Spel’s operating profit was 495 million euros in 2009. This means that gambling proceeds handed over to the government nearly matched the social and economic cost of problem gambling, perhaps even more. While Svenska Spel does not control as much of Sweden’s market (in 2009, about 50 percent) as Veikkaus does in Finland (today, about 90 percent), the results are still striking. If all of the hidden costs of gambling were calculated in Finland, where problem gambling is even more of a problem (siirryt toiseen palveluun), it is possible the economic loss could be even bigger.

Researcher Janne Nikkinen argues that there are more productive ways that Finns could spend their money. The gambling tax in Finland, he points out, is currently 12 percent, while value-added tax (VAT) on goods and services is twice that—24 percent. Overall, Nikkinen says that gambling is "not a very clever or productive business."

"Nobody wants to rock the boat"

Experts point out that a significant impediment to changing gambling policy is the dependence of Finnish civil society on gambling revenue. With more than one billion euros in proceeds doled out every year, few organisations are willing to openly criticise the system. When he gives talks to various NGOs that receive money from Veikkaus, Nikkinen says he hears "the sound of silence" when he addresses the issue of the source of their funding.

Riitta Matilainen, a gambling researcher who is personally involved in these kinds of organisations, says the situation bothers her. "It is kind of weird for me to sit there in the meetings and know that I am eating this pulla [bun] because of some problem gambler," she said. "It's a real ethical problem."

Surprisingly, gambling research itself faces the same issue, creating potential conflicts of interest. "In tobacco research, it would be outrageous to say that you have to take money from Phillip Morris," Nikkinen said. "But here it is quite normal to say, 'Why don't you apply to the Finnish Foundation for Alcohol Research?'" The Foundation receives money from Veikkaus.

This structural dependency partially explains why the gambling system has not been a major issue in national conversations, experts say. "There has been a lack of public debate and deliberation about the gambling system,” Selin noted.

Across the ideological spectrum, political parties have generally accepted the system. "There are left-wing parties, there are right-wing parties… and they all seem to agree on gambling. There is such a political consensus concerning gambling. That puzzles me," Matilainen said. She added that her sense is that the size of Finland and the intertwined networks of politicians, NGOs, and Veikkaus are small enough that "nobody wants to rock the boat, even though it means that problem gamblers suffer."

Norway, facing similar problems with gambling after liberalisation in the 1990s, made dramatic changes a decade ago with positive results (siirryt toiseen palveluun). It reduced (siirryt toiseen palveluun) the availability of machines by 86 percent, made them slower and less addictive, and imposed a full authentication system with limits to how much players can lose. Problem gaming decreased—but so did profits.

Edit: Updated at 2.27pm to include link to page on police website dealing with objectives of Finnish gambling policy.