I was on a road trip recently, driving through the American south, and ended up coming face to face with the economics of gambling. The friend I was travelling with is a professional poker player, making his living at casinos all across the U.S. He used to work as an IT consultant in Toronto, helping companies with their computer systems before he decided to quit and earn his keep in a more unorthodox fashion.

At one point, as we drove along the highway from New Orleans towards Texas (we were heading for Austin) I noticed that just about every gas station had a casino attached to it, albeit small ones. They were big enough to contain some slot machines and crap tables. In New Orleans itself, I visited the Harrah’s casino, a huge building in the downtown core, hermetically sealed to keep the sunlight out in order not to distract the visitors from the task of valiantly trying not to lose their money. My friend spent a few hours there to make some quick cash.

Casinos have been springing up in cities across North America in recent years. They are seen by governments as an economic elixir — a one-stop job creator and tourist attraction designed to replace employment lost because of de-industrialization in America and Canada. By now it’s as much as a (US) $20-billion industry combined between the two countries. In cities like Windsor, which used to employ huge numbers of people in the auto industry, when those jobs vanished, the Ontario government built casinos in the hopes of taking up the slack.

Yet any fool can see that gambling makes for a lousy economic remedy. Back in the mid-’90s, at the time the Ontario government was leaping into the casino business, I wrote a feature for The Financial Post about why expanding this sector was a stupid idea. I hate to say “I told you so,” but just about everything I predicted in that article has come to pass.

For one thing, casinos don’t actually produce any commodities to be sold. Instead, they vacuum out money from communities that could be used to buy goods and services and shovel it into the coffers of casino operators and governments. In so doing, they kill jobs and stunt economic growth.

Moreover, casinos have a vampire effect — sucking money from one region temporarily before new casinos are built to suck the money away again. Recently, the New York Times Magazine wrote a massive feature about how the Foxwoods Resort Casino in Connecticut is on the verge of going bust. Foxwoods is huge. As the article says: “Forty thousand patrons pack in Foxwoods on weekend days. The place has 6,300 slot machines. Ten thousand employees. If you include everything — hotel space, bars and restaurants, theatres and ballrooms, spa, bowling alley — Foxwood measures about 6.7 million square feet, more than the Pentagon.”

Owned by the Mashantucket Pequo tribe, Foxwoods is in trouble because so many competitors have sprung up in nearby regions. Which exposes the lunacy of the economics of gambling: anyone can set up a casino, making it inevitable they all face a falling rate of profit.

In a way, though, the rise of the casino industry is symbolic of the ruin of the North American economy. Just look at the financial industry in recent years, where it was felt gambling with our money on the capital markets was a legitimate occupation — that is, until their recklessness sent us spinning into the worst recession since the Great Depression. Instead of building an economy based on goods and services that are of tangible value, we have become a nation of financial speculators and casino operators. It’s as if we have forgotten what the Chinese and Indians and Brazilians have, in recent years, so intelligently embraced.

My exposé of the crimes of Canada’s financial industry, Thieves of Bay Street, is being published by Random House Canada in mid-April. You can read about it here.

This article was first posted on The Progressive Economics Forum.