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You're kind of saying, listen. People, everyday consumers are the ones who are making the whole system go.
Tim Simpson:I look at the casino in Macau as an environment where people are introduced to behaviors and practices that have to do with risk, anticipation about the future, and financial calculation. They're all parts of becoming a capitalist subject.
Cathryn H. Clayton:Hi, everyone. I'm Catherine Clayton, associate professor and chair of the department of Asian studies at the University of Hawaii at Manoa. I've been researching and writing about Macau since the mid nineteen nineties. Today, I'm very excited to be talking with Tim Simpson about his book, Betting on Macau, Casino Capitalism and Consumer Revolution, which I think is such an ambitious and fascinating read. I'm particularly happy to be here since, Tim and I have known each other for, gosh, more than twenty years now, believe it or not.
Cathryn H. Clayton:We were colleagues at the University of Macau in the early two thousands, just around the time the book begins. Well, I mean, the book goes back to the fifteenth century, but, this book opens with Tim talking about his time in the early two thousands. So, Tim, could you just tell us a little bit about yourself and how you came to the topic of this book?
Tim Simpson:Yeah. Thank you. I was working in my first job in The US after graduating from my PhD program. I was working at Ohio University, and that school sent me to, both Bangkok and Hong Kong to work in some overseas programs. And I got really interested in Asia and Asian cities as a result, and so I decided to try to relocate to Asia.
Tim Simpson:And I was looking for a job in Hong Kong. I wasn't successful, but I happened to see an advertisement for a job at the University of Macau. And I was able to get that job, fortunately, but I knew nothing about Macau at the time. I only knew it was somewhere close to Hong Kong and that it had some vague association with Portugal. And so I moved to Macau to take up the position at the University of Macau in 02/2001, and that, coincidentally, was at the very end of Portugal's Four Hundred And Fifty Year administration of Macau.
Tim Simpson:Macau was a Portuguese territory for almost five hundred years. In 1999, Portugal returned Macau to China, handed over Macau to China, and I arrived eighteen months later in 02/2001. So that was one coincidence, which I is is that I came right at the end of Portuguese rule. And the other coincidence was a couple of years after I arrived, there was a major transformation in Macau's casino industry, and some foreign casino companies came in and started building casino resorts. And the first one of those opened in 02/2004, which was three years after I arrived, and Macau started this incredible transformation at that time.
Tim Simpson:So I just happened to arrive right at the beginning of what would be a twenty year transformation of Macau into to a completely different kind of place. So I had the, just a fortunate opportunity to observe that firsthand. It was a total accident and coincidence that I happened to arrive at that time, and that sort of prompted my interest in writing the book. And it then it took about twenty years to actually finish the book, to to really think it through and finish it.
Cathryn H. Clayton:Yeah. Slow slow thinking is is good. It's better than the fast food variety of books if you ask me. And so you're currently still at the University of Macau. Is that right?
Tim Simpson:Yes. I've been here twenty three years now.
Cathryn H. Clayton:So maybe we can jump into the book itself and you can perhaps give us a sort of a general overview of the book.
Tim Simpson:Sure. Like I said, I arrived in 02/2001 and Macau's casino industry started to change. And actually, the entire city itself started to change in 02/2004 in a dramatic way. I decided to write the book focused on that twenty year period of radical transformation of Macau starting in around 02/2001, basically, the next twenty years. But to do that, to write about the that twenty year period, I tried to to situate Macau in the five hundred year history of Portugal's role in Macau.
Tim Simpson:Macau was a Portuguese territory for almost five hundred years. And I tried also to situate Macau in the five hundred year history of global capitalism Because I as I learned something about Macau, I discovered that Macau played a crucial role at the very outset of the emergence of the global capitalist system five hundred years ago. It was the the gateway for trade between China and Europe. Macau sort of managed the vast majority of trade between China and the Western world five hundred years ago at the outset of the emergence of the global capitalist system. And then it sort of fell into a state of obscurity.
Tim Simpson:The world sort of passed Macau by, and everybody kind of forgot about it. And it was this sort of interesting peripheral territory for hundreds of years. And then because of China's economic reforms, which started in 1978, Macau sort of emerged again to play a new role in a new era of capitalism that I think is defined by the reform era of China and China's emergence as kind of a market society. I focus on the the last twenty years of Macau, and that's primarily what the book is about, but I try to situate it in this five hundred year narrative about the emergence of the global capitalist system.
Cathryn H. Clayton:It's really fascinating. There's some of the parallels you draw between sort of, you know, Venice and of the sixteenth century and Macau of the twenty first century. I really love that sort of way that you go you tack back but in forth between the grounded observations of what's going on in Macau these days and this harking back to five hundred years. One of the points we make in the book is that it's really common to call Macau the Las Vegas of Asia. And in the book, you start out kind of with the idea that this ain't Vegas.
Cathryn H. Clayton:Could you talk a little bit about what the differences are that you see between these two cities and why sort of it ain't Vegas is, a really important thing to keep in mind when thinking about Macau?
Tim Simpson:Yeah. Las Vegas is obviously sort of in the global imaginary, the prototypical casino city. And when people think about gambling cities, they think about Las Vegas. I guess a long time ago, it was Monaco. But in the twentieth century, it's Las Vegas, and everything sort of measured against the the model of Las Vegas.
Tim Simpson:And when I came to Macau, that phrase, it ain't Vegas, is something that a lot of people said to me, a lot of expats. They asked me when I first arrived, have you ever been inside the Lisboa Casino? That was the epitome of the casinos in Macau at the time, and it was completely different from the typical Las Vegas casino. And that's the way that expats tend to to describe it when they ask me. Have you been in the Lisboa?
Tim Simpson:It ain't Vegas, they would say. And I heard that phrase so many times, it stuck in my mind. And when Macau's casino industry started taking off, there was a lot of comparisons of Macau to Las Vegas, and it only took a few years before Macau's casino revenues surpassed Las Vegas. And then a few years later, Macau's casino revenues were five times greater than Las Vegas. And at the epitome of Macau's the the year that Macau's revenues reached the global record, it was seven times greater than Las Vegas.
Tim Simpson:And, actually, Macau's revenues, that that was 2,013, 7 times greater than Las Vegas and equal to all of the casinos in every gaming jurisdiction in the entire United States. So so I started thinking Macau is not the Las Vegas of Asia. I think Las Vegas is the is the Macau of North America. You know? Tried to turn the tables.
Tim Simpson:But the more I thought about it and really tried to to understand Macau, the more I realized it's completely different from Las Vegas in a lot of ways. And I try to set up those differences in several ways in the book. In terms of the big picture, in terms of political economy, Las Vegas is a product of the suburbanization, the twentieth century suburbanization of The United States, and Macau is the product of the twenty first century urbanization of China. So when I say Las Vegas is a product of suburbanization, I'm drawing on a book by David Schwartz called Suburban Xanadu. And David Schwartz is a historian at the University of Nevada, Las Vegas, and he makes a very interesting argument that we need to understand the development of Las Vegas in the twentieth century as part of that general suburbanization process.
Tim Simpson:And there's several, elements to his argument. I won't go over all of them, but I I I thought that was a really interesting way of thinking about Las Vegas. And even the casino resorts on the Las Vegas Strip, he compares to, like, the shopping malls that would typify twentieth century suburban United States. And Macau, by contrast, is a product of the urbanization of China. And China's reform era transformation into sort of a consumer economy, which I try to track in the book, is driven by this state directed top down urbanization project where the central government is trying to rapidly urbanize the population.
Tim Simpson:China, as you know, was largely a rural population and sort of personified by the rural peasant when people thought of China historically. And today, the the goal is to try to rapidly urbanize that population and to move everybody to cities in hopes that, when people relocate to cities, they will buy houses. They will buy cars. They'll eat in restaurants and buy cosmetics and fashion and so on, and it will create a domestic consumer economy in China. So I think Macau's emergence sort of coincided with this urbanization project, which is on a scale that's sort of never existed in global history before, China's urbanization.
Tim Simpson:So if Las Vegas is a product of twentieth century suburbanization, I thought of Macau as a product of China's Twenty First century urbanization. So that in in terms of this the political economy of Macau, that's how I would make that distinction. But in a more practical way, there's some real differences between Las Vegas and Macau. So anybody who's been to Las Vegas would recognize right away that it's a party city. And you don't have to even do anything in Las Vegas except go to the Las Vegas Strip, and you can sit by the side of the Strip and in an outdoor bar and and have a cocktail or a beer and just watch this parade of debauchery happening in front of you.
Tim Simpson:And that's that's the whole fun of Las Vegas. It's just as soon as you get off the plane, you feel that party vibe in the airport. There's people gambling in the airport. There's music playing, limousines lined up, and you feel like you're in this party city. Then you go to the strip and you become part of that parade of people.
Tim Simpson:You become part of the spectacle just by observing it. And that's sort of that party vibe is sort of what's interesting about Las Vegas to tourists. But Macau, even though it's a casino city and there are casinos, throughout the city, they're everywhere, it doesn't have that same party vibe at all. Las Vegas makes the majority of its money from things other than gambling. You know, people go to Las Vegas to, eat at a steakhouse and buy a bottle of champagne right in a limousine and sit by the swimming pool, go to a nightclub, and they spend their money on all those things.
Tim Simpson:And then they also gamble sort of as a complement to all those activities. And so most of the money in Las Vegas, most of the revenue comes from those nongaming activities. But in Macau, by contrast, people come to gamble, and the large majority of the revenue comes strictly from gambling. And that's one of the first things you notice about Macau. It's not that people aren't having fun, and it's not that they aren't partying because, of course, they are, but it doesn't have that same vibe at all.
Tim Simpson:Macau has something like a Las Vegas Strip. It's called the Cotai Strip, and it was created by Sheldon Adelson, who was a Las Vegas Entrepreneur. And he was trying to create the Las Vegas Strip in Macau. But if you go to the Cotai Strip, you've been there, there are not parades of people walking down the street. There aren't people getting drunk.
Tim Simpson:There aren't people in bathing suits out in public like you see in Las Vegas. It's it's a totally different vibe. Peoples tend to come to Macau to gamble, and they take gambling very seriously. And they don't get drunk while they're gambling because they wanna concentrate on the game. They don't wanna be distracted by the party.
Tim Simpson:So the the vibe is completely different in Macau. But when you get inside the casino, you see other distinctions as well. When people do gamble in Las Vegas, their favorite activity is to play the slot machine. So electronic gambling is where the majority of Las Vegas revenues are made. And in Macau, people like to play table games.
Tim Simpson:They like to play against a live dealer, face to face. In Las Vegas, when people play table games, the favorite game tends to be poker or some variety of poker. There's many different variations on the game. But the prototypical table game in Las Vegas is poker. Whereas in Macau, the most popular game by far is baccarat, and that's what everybody plays.
Tim Simpson:And when you get into the VIP rooms, which used to be a prominent part of Macau's gaming economy, baccarat is the sole game played. It's the only game played. When people told me described Macau by saying it ain't Vegas, I try to take that seriously take that literally and just understand why it's not and how that distinction is important to understanding what's happening in Macau today.
Cathryn H. Clayton:Do you have a sense of why Macau Gamblers tend to prefer table games and baccarat?
Tim Simpson:Yes. There's a lot of literature in the industry, the gaming industry, trying to understand what they would call the Chinese gambler. And I try not to talk about the Chinese gambler versus the non Chinese gambler because I don't wanna make that kind of distinction. But I I I do focus on the Macau Gambler, And most of the gamblers in Macau are Chinese tourists. So the Chinese gambler in Macau tends to prefer to play table games.
Tim Simpson:One reason may be because people like the face to face, head to head battle between the gambler and the casino. They like to gamble against a live dealer, and they like to gamble directly against the casino. Part of that has to do with people's ideas about luck and their ability to engage in behavior that will help them, they believe, control the outcome of the game. Gamblers in Macau feel like when they play a table game, they can intervene sometimes in the outcome of the game by engaging in certain kinds of behaviors or ritual practices, and they feel like maybe that's not so possible with a slot machine, which has just been programmed to have a certain outcome. Historically, people just didn't trust slot machines, and they felt like they had a much better chance of getting a fair deal with the by playing a human.
Tim Simpson:But I think now people may have more trust in the slot machine, but they're just they find it less interesting to play. So when they play the table game, they feel like they can intervene in the outcome. And if you watch gamblers in Macau, you'll see a lot of this kind of behavior that people believe may affect the outcome of the game. For one thing people do is they keep a record of all the prior hands that have been played on a baccarat table, and there are some different, methods for sort of recording the outcome of those hands, then trying to find patterns in the past play that they believe will help them predict what's going to happen in the next hand. And they also engage in a behavior they call squeezing cards.
Tim Simpson:The baccarat cards are dealt face down. And instead of just turning them over to see the hand, they will very slowly bend over the corner of the card so they can see just a little bit of the the face value on the card. And then when they think they have an idea of what that face value may be, they may bang on the table or chant or blow on the cards to try to change the the face value before the card is ultimately revealed. And so people believe they they might be able to intervene in the the final outcome of the of the card of the hand by engaging in those behaviors. And those kinds of activities aren't really possible on slot machines.
Tim Simpson:Although I should say there are electronic versions of games that are created for the Macau market, which allow people to simulate those kind of behaviors, to feel like they're squeezing the card even though they're not actually touching the physical card.
Cathryn H. Clayton:That's fascinating. That's such a convincing explanation. I now wanna flip my question around and ask, why would people in Vegas play slot machines? It sounds so much more boring. Sounds so much less fun than doing what you're talking about people doing in Macau.
Tim Simpson:Exactly. And and that's another feature of it is that the slot machine in Las Vegas tends to be a very individual activity. And, Natasha Dal Scholl has a a really great book called Addicted by Design, which is about slot machines in Las Vegas. I think it's the best book ever written about gambling. And she does a very good job of describing that kind of solitary environment that people meld with the machine, and they zone out everything else.
Tim Simpson:They get in the zone, and the outside solitary experience. Whereas gambling on the at the table game in Macau is a collective experience, and people like to gather around and watch the gambler play and and place bets, and they will back bet on on on the bet. So someone standing behind the table may place a bet behind the person who's gambling, which is something that's not so welcome in Las Vegas, but it's very common in Macau. And people like to gather around and cheer on the the activity. So if you're in a casino in Macau, you'll often hear a lot of noise.
Tim Simpson:And if you follow the sound, you'll see a big group of people gathered around a baccarat table where something interesting is happening. So it's a very much group oriented practice in Macau. That's another distinction. The other part of the question you asked was why baccarat. And the reason baccarat is so popular I mean, there's probably a lot of reasons, and maybe I don't understand all of them.
Tim Simpson:But one reason is that baccarat has the best odds of any table game in the casino. It has the lowest house advantage. Of course, the casino always has the advantage in every game, and that's how casinos make their money. But baccarat has the lowest house edge. It's a extremely simple game to play.
Tim Simpson:The rules are ridiculously simple, sort of like, betting on flipping a coin. There's only two possible outcomes. There's really three outcomes. The version of baccarat that's played in Macau Works, it's called Punto Banco baccarat, player banker baccarat. And there's two positions at the table, player and banker, and each position is dealt two cards, and then you bet on whether you think player or banker will have the better hand.
Tim Simpson:It's sort of like betting on flipping a coin, heads or tails. And there's no decisions made by the gambler or by the better. The only decision is, do I think player or banker is going to win? So it's an extremely simple game. But when it's played for high stakes, it's a very dramatic experience.
Tim Simpson:And I think that the fact that it has the best odds of any table game and the fact that it's so simple and therefore so dramatic and the swings between wins and losses are so extreme in baccarat. That's what makes it so interesting to play.
Cathryn H. Clayton:Well, as somebody who's not much of a gambler, I appreciate your ability to explain these games, and their appeal. It strikes me too. I mean, I've been to Vegas once, and I'm one of those people who I didn't go to gamble. I gambled because I went, because that's what you're supposed to do in Vegas. And it strikes me that maybe that's part of it.
Cathryn H. Clayton:I'm not gonna go to a table and show off how little I know about gambling. I wanna go to a slot machine and see if I can win anything without anyone knowing that I'm a complete ignoramus. But if you go to Macau to gamble, then you probably also want to have this experience of being there with friends and maybe showing off how good you are at these various games even if they're not necessarily skill based.
Tim Simpson:I think that's exactly right. And I've had the same experience in Las Vegas. By the way, I'm not any big gambler either. I've gambled just just so that I know what it feels like to do it. I'm not good at it necessarily.
Tim Simpson:But I have gambled in Las Vegas, and I've have had the experience of playing blackjack, which does have an element of skill, and drawing cards when everybody else expected that based on the dealer's hand that no one would draw a card, and then I screwed it up and made everybody lose money. You want you do that one time with a group of strangers, and you never wanna sit back down at another blackjack table. So you you quickly realize, oh, I can sit at the bar, and I can play video blackjack, and that's much safer and simpler. And that's the appeal of the slot machine, I think. But in Macau, yeah, there's definitely a public performance involved.
Tim Simpson:It takes a lot of confidence because the person who places the largest bet on a hand is the person who gets to squeeze the cards, who gets to bend over the card to reveal the the face value. And people do it in a very dramatic way, and they destroy the cards every time they do it. So the Macau casinos go through hundreds of thousands of decks of cards because they have to throw them out after each set of play. Yeah. Because the cards are destroyed when people bend over the the edge, but you have to have a lot of confidence to do that in front of a crowd of people who are gathered around the table.
Tim Simpson:And especially if you if you believe that the way you squeeze the card can have an effect on the outcome of the hand, because in there's a lot of pressure on your ability to do that procedure correctly.
Cathryn H. Clayton:Totally fascinating. But, so just building out of this casino experience, you use the phrase casino capitalism, which other authors have used before kind of metaphorically. Can you talk a little bit about how you use that phrase in this book? You're talking not just about the actual experience of the casino, but sort of how we can extrapolate that to thinking about capitalism and this perhaps new era of capitalism that we're entering into.
Tim Simpson:Yeah. Casino capitalism is a key concept in the book. It's actually in the subtitle, casino capitalism and China's consumer revolution. I even hesitated to use that phrase in the subtitle because there are several other books that have the phrase casino capitalism in in the title. But I felt like the reason it's often used is because it's a catchy phrase, and people immediately know what it means.
Tim Simpson:But my book is a extended effort to try to theorize casino capitalism in a kind of distinct way in reference specifically to Macau. So I thought it was important that it be in the title because it is central to everything I'm trying to to do in the book. Casino capitalism, I think the first use of that analogy that capitalism is like a casino can be attributed to John Maynard Keynes. He said the market is like a casino or capitalism is like a casino. But the person who popularized that phrase is Susan Strange, political economist who published a book called casino capitalism that was very widely read, and it's her characterization of the global economy post 1970.
Tim Simpson:The end of the gold standard, the gold backed dollar by Richard Nixon in the early nineteen seventies, the rise of financialization, the emergence of kind of electronic forms of globalization that connected all the different markets together into a global market, and also the tendency to turn things like life insurance policies into financial products, that could be traded on the market. All of these things, she said, turned the global economy into something like a casino. And what she meant was that people were engaging in these very risky financial trades that affected everybody because things that we thought were sort of safe investments, like our life insurance policies or our retirement policies, were all sort of being traded on these financial markets. They were all being turned into financial products. And she was interested in the risk intensive characteristics of the global economy that emerged starting in the nineteen seventies, and that's what she called casino capitalism.
Tim Simpson:Some people have pointed out that if you're worried about risk, the global economy is not really like a casino. The casino company, the owner, pretty much knows what the outcome is going to be because all the casino games are based on probabilities and where the casino will always win in the long term. So it's not really so unpredictable in the way that Susan Strange was trying to describe the global economy. But, anyway, that's what she meant by casino capitalism, and that's the use of the phrase that became very popular. But I try to take casino capitalism much more literally and really look at the casino as a environment where tourists learn behaviors that are part of capitalism.
Tim Simpson:They learn how to be capitalist. And I'm talking specifically about casinos in Macau, not just casinos everywhere, because I wanna sort of historicize or contextualize, my discussion to Macau because I think Macau is a unique place, a unique history, and a particular geography. And to understand what's happening in Macau, we have to understand it in terms of that historical trajectory. That's the five hundred year trajectory of global capitalism, the emergence of the global capitalist system, but it's also the more recent trajectory of China from from a socialist economy to a what they might call a market socialist economy. And I'm interested in Macau's role in that transformation of China's economy.
Tim Simpson:And that's why the other part of the subtitle is casino capitalism and China's consumer revolution. I'm trying to look at Macau's role in China's transformation into a consumer economy. That's driven by that urbanization project that I mentioned earlier, the attempt by the central government to implement policies in China that will transform China into a consumer economy, a a domestic consumer economy. So I'm interested in Macau's role in that process. And for this reason, I look at the casino in Macau as a environment where people are sort of introduced to a certain set of behaviors and practices that have to do with risk and anticipation about the future and financial calculation and so on that are all parts of becoming a sort of capitalist subject.
Tim Simpson:And so I take casino capitalism very literally and try to look at the casino as a pedagogical environment where people learn a set of behaviors that are typical of capitalism.
Cathryn H. Clayton:I like that because you're putting the consumer back. I mean, Susan Strange's idea of casino capitalism doesn't really talk about us peons who are consumers as anything but sort of pawns in the system or who are victims of these larger forces, and you're kind of saying, listen, folks, people, you know, consumers, everyday consumers are the ones who are making the whole system go, and here's here are places where they learn the ways of being capitalist. By that, do you mean, like card squeezing, or what what are some of the things they learn in these casinos that would be an example of this kind of capitalist behavior?
Tim Simpson:I have several chapters where I try to talk about different dimensions of that question, but I'll give you one sort of practical example which comes at the very end of the book. I I talked earlier about the popularity of baccarat in Macau and the popularity of the table game and the tendency of Chinese gamblers to in Macau to prefer to play table games rather than a a slot machine. But there's been a big effort in Macau by the global gambling industry and also by the local Macau government and also by the Chinese central government in different ways to sort of transform the gambling activities and the typical gambler in Macau into a different kind of person. And one element of that is the introduction of electronic games and the desire to get gamblers in Macau to stop being so reliant on playing the table game of baccarat and to play electronic games. In a variety of ways, the electronic games are much more predictable.
Tim Simpson:And they also have some advantages having to do with the labor in Macau. The the table games require a live croupier. And in Macau, because of the labor law, the only person who can hold that job as a dealer in a casino is is a local Macau citizen who has a Macau resident ID. And there's a very small population in Macau, and there's a very small population of people who can be dealers. And there's a lot of competition among the different casino companies to hire those dealers away from each other.
Tim Simpson:And so the the gambling industry has a desire to move people onto electronic games that don't require, the live dealer. And there's also a problem of money lending in Macau. That's a large a big issue. VIP gambling, which requires people in Macau to loan money to the gambler, and the this has caused concerns among the Chinese central government about the amount of money that crosses the border and the gray market and black market into Macau for the purpose of gambling. And so for a variety of reasons, there's been this effort to to move the gambler in Macau to electronic games.
Tim Simpson:And and so there was an electronic baccarat machine that was invented designed just for the purposes of Macau. It was designed by, a biopharmaceutical company in Hong Kong that was doing research about treatment for liver fibrosis. And then when Macau's gaming industry exploded, they diversified into the design of gaming machines for the Macau gaming industry, and the biopharmaceutical engineers created this baccarat machine, which has some of the characteristics of live baccarat that attract the gambler, but it has electronic elements as well. And so in one late chapter of the book, I try to focus specifically on an analysis of that baccarat machine. It's called live baccarat.
Tim Simpson:And it sort of combines a live dealer with the electronic placing of bets. It has the advantages of the table game, the head to head competition between the gambler and the croupier, but it also has some of the advantages of the electronic games. So I do an analysis of that game. And what's interesting to me about that game is that while baccarat doesn't require any decision on the part of the gambler except whether they're gonna bet on player or banker, heads or tails, basically. The baccarat machine requires all kinds of decisions.
Tim Simpson:It's a it's a much more complex version of the baccarat game, and the designers introduce all a a variety of, very complex forms of betting that require different forms of calculation. So in order to play the game at all, it requires calculation. So I try to analyze that that game, that device as a way into understanding how when somebody plays that game, they are also putting into practice forms of future anticipation and financial calculation that are part of capitalism.
Cathryn H. Clayton:That's totally fascinating. And one another reason I I'm not a very good capitalist. I that sounds like so stressful, that game. But is this what you mean by you use the phrase laboratories of consumption. You you sort of talk about Macau and Hong Kong as laboratories of consumption.
Cathryn H. Clayton:Is that sort of what you're getting at with that phrase is the idea that people are learning these sort of capitalists ways of being?
Tim Simpson:Yeah. The phrase laboratory of consumption is my interpretation of the phrase laboratory of production, which was comes from Deng Xiaoping, who was responsible for introducing China's economic reforms in 1978. So as you know very well, the start of economic reforms began with the creation by, Deng Xiaoping by China's Central Government in 1978, the creation of special economic zones along the Southern Coast of China. And the first one was Shenzhen, and the second special economic zone was Zhuhai. And these were these two cities are adjacent to Hong Kong and Macau.
Tim Simpson:And they were specifically chosen as the first special economic zones because of the proximity to Hong Kong and Macau and the idea that Hong Kong and Macau would be sort of gateways for investment from the overseas Chinese diaspora in Hong Kong and Macau and Taiwan and Southeast Asia and so on. And the special economic zones were created, according to Deng Xiaoping, as laboratories of production. And they he he specifically said, we will create these special economic zones. We will allow joint projects that involve foreign capital and Chinese workers, and we will allow foreign companies to set up factories in the special economic zones and produce goods for export. And they will be laboratories of production where where we will study capitalism, and we'll sort of study how, foreign companies set up factories, how they manage workers, how they operate private real estate, and so on.
Tim Simpson:So the special economic zones were these self contained zones, and they were purposely located right on the edge of China, the the the initial zones. And they were sort of self contained places so where this experiment could be undertaken. And then if it didn't work, they could just be shut down, and most of the people in China would never know that they existed because they were so far away from everybody's daily experience. But they were they were ostensibly designed to be laboratories of production where China would study capitalism, and this was the beginning of the economic reforms. And so I just took the liberty of thinking of Hong Kong and Macau as complimentary laboratories of consumption.
Tim Simpson:If the special economic zones were laboratories of production, then Hong Kong and Macau, which are special administrative regions, they have a a unique designation, in China, special administrative regions, the post colonial city city states could be thought of as laboratories of consumption. China, in an effort to to build its consumer economy and its urbanization strategy, one of the first innovations that they introduced was a special exit visa that would allow certain select Chinese citizens from particular cities and provinces the ability to get a visa, which would allow them to travel overseas. And the first places they were allowed to travel were Hong Kong and Macau. And there was a special visa called the individual visit scheme, which was implemented actually in 02/2002 or 02/2003 at the end of the SARS epidemic, the severe acute respiratory syndrome epidemic, which happened so I moved to Macau in 02/2001. SARS hit in 02/2002.
Tim Simpson:That was like COVID, except it was the early version. And then in 02/2003, at the end of SARS, because SARS really devastated the economies of Hong Kong and Macau, especially Hong Kong. The central government introduced this individual visit scheme, the special visa, which would allow select, Chinese citizens to travel freely for the first time to Hong Kong and Macau. And I thought of Hong Kong and Macau as serving a a a particular role in the economic reforms as laboratories of consumption that tourists were allowed to come to these two cities. The first place they were allowed to go travel freely as tourists outside of China.
Tim Simpson:And both Hong Kong and Macau became very popular for Chinese tourists. Just before COVID in February when was that? 02/2018, Macau was visited by 40,000,000 tourists in one year, and that's 40,000,000, most of whom were from Mainland China. And you have to understand, as you know very well, Macau is a very, very tiny place, much smaller than you can imagine if you've never been here. And with with a very small population, 650,000 people, even of that 650,000, half are foreign workers, basically.
Tim Simpson:So the actual population of Macau is very tiny. So when you put 40,000,000 tourists in that tiny city in one year, it's it's a it's a massive amount of people. And Hong Kong is the same. Tens of millions of tourists from Mainland China every year going to Hong Kong. I mean, there's a lot of reasons people might travel to Hong Kong and Macau, but one reason has to do with shopping.
Tim Simpson:And there's all kinds of advantages in terms of taxation on luxury goods, that that make both Hong Kong and Macau very, popular, very desirable places to go if you wanna buy things. Either luxury goods, Louis Vuitton bags, or or gold and diamond jewelry, Chanel fashion, those things are cheaper in Hong Kong and Macau than they are in Mainland China because of the different tax regime. Also, very ordinary consumer goods like shampoo and liquid soap and baby formula are also cheaper and more available in Hong Kong and Mac Macau than they are in China. And they're all and also people trust the veracity of those products because they know that there's a lot of consumer protection in Hong Kong and Macau. So there's a lot of reasons that people are motivated to cross the border.
Tim Simpson:For all these reasons, I really thought of Hong Kong and Macau as laboratories of consumption. And like I said, it's really my I took the interpretive license of just kind of riffing off the laboratory of production phrase that Deng Xiaoping used to try to characterize what I was seeing in Macau. And this that really came from my just my observation of everyday life in Macau. When when tens of millions of tourists started showing up every year, I just watched watched what they did, what they bought, and what they carried around the town with them, and that all fed into my characterization of of these places as laboratories.
Cathryn H. Clayton:I remember that particular moment in early two thousands probably when in the downtown kinda little Snotter Square area, there used to be a bunch of shops that locals would find useful. And suddenly, you had three SASA cosmetic shops open up almost next door. Not quite. They were, like, maybe two or three minute walk away from each other. And it really struck me.
Cathryn H. Clayton:It was like, how could three shops all selling the same brands of cosmetics thrive in this economy? But that you that you pointed to it right there. It's like people would just come and buy cosmetics for all the reasons, you know, for very good reasons. But it struck me that that's sort of when I saw what you're talking about sort of playing out in the city in my daily life, my daily walks around town.
Tim Simpson:That's exactly right, and that's that's a perfect example. I live in that neighborhood. The Sonata Square area is the historic central city that has architecture that's reminiscent of Lisbon, and it's got this very old labyrinthine network of of little streets and alleys. And I live right there. And you're exactly right.
Tim Simpson:On that Sonata Square area, which is now a major shopping area, every tourist who comes to Macau is gonna go there and take photos. And there are three there are still three Salsa shops. The same cosmetic company has three shops all located on that same square. And it's not just Salsa. There's there's probably seven cosmetic shops of several different brands within about a two minute walk of each other, around that area, and they're packed full of people.
Tim Simpson:The cosmetics is a perfect example because, it it it sort of articulates together so many things that have to do with China's consumer revolution. The the focus on fashion and cosmetics, the very calculating way people compare the prices in Hong Kong and Macau versus China for the same item and realize that it might be slightly cheaper in Macau because it's kind of a duty free city. It's exempt from the luxury tax, which is applied to goods luxury goods in China. And the availability, once you come here, of all those places makes cosmetics the perfect kind of product for people to buy as part of this consumer revolution. And I see the same thing in Hong Kong.
Tim Simpson:Sausage is everywhere. If you go to, Causeway Bay, you see the same collection of companies who's offering the same cosmetics products.
Cathryn H. Clayton:You know, I live in Hawaii now, and some of the issues are similar. Right? To what extent do we want this economy? Obviously, we can make a lot of money off tourists, but to what extent does that then displace and disadvantage locals?
Tim Simpson:Hawaii is one of the only states in The US without get some form of gambling. I think it's only only Hawaii and Utah, if I'm not mistaken, that don't have at least a lottery or something. Yes.
Cathryn H. Clayton:Yeah. But I keep trying to introduce it, but there's there's quite a bit of resistance to it. I'd like to just I always like to get a little bit of the backstory sort of, you know, the making of kind of questions. So I was just wondering how you did the field work for the book, especially your you have chapters about the junket trade where, you know, you there are dryads and organized crime involved. So I was wondering if you had any problems accessing sources, especially when it came to doing field work in and around casinos and junkets and things like that.
Tim Simpson:Yeah. That's a great question, and that's something I really struggled with for a variety of reasons. One very practical obstacle to doing this kind of research is that I'm a public I'm I'm considered a civil servant in Macau because the University of Macau is a public university, and civil servants are not allowed to go inside of the casinos in Macau. We're not allowed to gamble. We're not even allowed to go into the casino.
Tim Simpson:We can go into the resort, but we can't cross into the casino. And that's another way that Las Vegas and Macau are different. If you walk into a casino resort in Las Vegas, you can't help but walk through the casino. They just merge in with the lobby of of the hotel. But in Macau, they're sort of self contained.
Tim Simpson:We have to walk past a barrier to get into the casino, and that's one of the main reasons is because, civil servants in Macau are not allowed inside the casinos. The only exception to that is Chinese New Year. There's a proclamation that civil servants are allowed to gamble for three days, and it tells us at a certain time, we can go in the casino on a certain day at noon, and we can stay in three for three days until midnight on a certain day. Or but if you're if you're in the process of gambling at midnight, you can stay for one more hour just in case you're having a lucky streak or something. So that was a very practical obstacle.
Tim Simpson:I did discover that there are it's possible to apply for permission to go into the casinos for research purposes, and I did that many times in over the years in Macau. I applied to the government for permission. I I didn't ever ask for permission to gamble, but I asked for permission to go into the casinos, which which was granted. So I was able to observe people gambling. I spent a lot of time doing field work, in the resorts, hundreds of hours of time just sitting in there walking around, following tour groups.
Tim Simpson:But access to the VIP gambling is is definitely challenging. And so just to clarify for people who don't know, Macau has something called a junket industry, and it's kind of unique to Macau. It's a VIP, system, which actually has pretty much just ended about a year ago, because some new laws were implemented. But up until about one year ago, the majority of Macau's casino revenues came from VIP gambling, which happened in private rooms inside the casinos. And those private rooms are managed by companies which are called junkets.
Tim Simpson:And the role of the junket is to recruit high roller gamblers from China or other countries like South Korea or Japan to pay for their trip to Macau and to host them while they're here and and to get them to gamble inside the private VIP room, which is managed by that junket. And there are restrictions on Chinese citizens in terms of the amount of money they can take out of China when they travel abroad, and it's very tightly controlled. There's a a limit on how much cash a Chinese tourist can take out of China into Macau, and there's a limit on how much money they can get out of an ATM each day. So if you're a high roller gambler and you wanna gamble, let's say, a hundred thousand US dollars per hand, you can't bring that money with you into Macau. The only way you can gamble that money is if somebody in Macau is willing to loan you that money.
Tim Simpson:And so the VIP junket industry was all about loaning money to high roller gamblers. And because gambling debts are not enforceable in Mainland China, If somebody brings in a a high roller tourist from China to Macau and then loans them a million dollars to gamble and that person loses that million dollars and then they go back to China, there's no legal way you can get your money back. So the only people who were willing to loan money like that to gamblers in Macau were people who had associations with triads or Chinese organized crime, because only the triads were, confident of their ability to coerce repayment of of loans when people went back to China. So the VIP industry, which is a major part of Macau's gaming industry historically and generated a a large percentage of the revenue, is is very opaque. And it's not something that somebody like me, an American guy who just showed up in Macau is gonna be able to just get access to because, these are secret societies in the first place.
Tim Simpson:There nobody would wanna say overtly that that the triads are even involved in the VIP industry even though everybody knew it. People had to say that that there was no triad involvement. So getting access to that population of people and that what what was going on behind closed doors in the VIP gaming rooms is difficult. And I was actually fortunate to get to know one person who was an executive in one junket company. Through him, I learned a lot about how it works, how that whole business works.
Tim Simpson:Through him, I was introduced to a lot of Triad members, I guess we could say, but also to a lot of people who just worked in that business. And there was a lot of car dealers and security people and bodyguards and drivers and, you know, that that was a very large industry that had all kinds of employees. I think anybody who does ethnographic sort of field work knows it. It all comes down to those key informants who can connect you up to other people. One other thing I'll say, I just had the advantage.
Tim Simpson:In a way, it was an it was a disadvantage to be a foreigner, but in some ways, it was an advantage because when Macau's casino industry exploded starting in 02/2004, The first thing that happened were was that all of these casino companies brought, managerial staff from abroad, and suddenly there was a huge influx of expats from Australia and The United States and New Zealand and places like that. I was also an expat, and it was very easy for me to to meet those people. And because Macau is such a small place, it was very easy to to sort of run into people. And I was I'm kind of a recognizable person. I'm easy to spot because I'm a small guy with a shaved head and a goatee.
Tim Simpson:And so once people saw me a couple times, they remembered me, and it was easy to strike up conversations with people. So I actually had an advantage initially in being an expat here because it was easy for those other new expats to talk to me. And since I've been around for a while, they often sought me out to ask me questions, and it just gave me access to people who are working in sort of executive level of those gaming companies. So I was fortunate to make a lot of contacts like that. And over the years, actually, because of the labor law in Macau and the encouragement by the Macau government for those companies to stop using expat managerial staff and to start using Macau Staff, that's completely changed.
Tim Simpson:A lot of those expats are gone, and a lot of the executive level people in Macau now are local people. And, fortunately, some of those people I I met when I first came who used to be sort of low level local casino workers are now some of them are now executives at some of the big resorts. And so I I still have some fortunate access to people like that.
Cathryn H. Clayton:And students. Right? Teaching at a university, I'm sure you have a lot of, students who've gotten jobs who might be well placed.
Tim Simpson:That's very true. That used to be very common. Ten years ago, fifteen years ago, everybody wanted those gaming industry jobs. There's one particular student who also became a a major important executive at one of the casino companies, and he was also a key informant for me who helped me a lot to understand how things worked and to get access to people. But it used to be very the casino industry jobs, especially those junket related jobs, which a lot of has to do with, like, marketing and public relations, were very desirable to university students, I would say, ten years ago.
Tim Simpson:But today, it's it's very much changed. The students today are not so interested in those casino industry jobs. People lost confidence in dedicating their life to that industry. A lot of local people did. I think young people, and they're looking for other kinds of opportunities.
Cathryn H. Clayton:So maybe one last question, Tim. It seems, you know, you just mentioned that a lot of students perhaps aren't so interested in getting jobs in the industry anymore, and that makes me think about the future of this whole industry. It seems that the licenses for the six gaming concessionaires were recently renewed. When I was in Macau last summer, the new resorts were still being built a pace. So what do you think is the future of, Macau's gaming industry?
Cathryn H. Clayton:What's that gonna look like?
Tim Simpson:Yeah. That's that's a very good question. And I, actually, I should back up for a minute and mention something that I didn't mention at the outset, and that is that, historically, the casino industry in Macau was a monopoly concession, and there was one person or one company that owned the rights to all of the casinos in Macau. And in the last forty years of Portuguese rule, the casino monopoly was controlled by Stanley Ho, who was a Hong Kong billionaire. And he had four wives and 17 children, many of whom continue to work in the gaming industry today.
Tim Simpson:So he had a lot of he had more influence in Macau than probably any other individual. He controlled that monopoly for forty years. And when Portugal returned Macau to the PRC in 1999, the first decision that the new local Macau government made was to break that monopoly and to invite outside companies to bid for the rights to get casino concessions in Macau. And that was what completely transformed Macau's gaming economy after 1999. The result of that process was that, ultimately, six companies ended up winning concessions to operate casinos in Macau.
Tim Simpson:So the the monopoly was broken, and six companies came in. And that included Sheldon Adelson from Las Vegas, Steve Wynn from Las Vegas, MGM, a company called Galaxy, which was a Hong Kong property tycoon, and one of Stanley Ho's sons who started out with a partnership with an Australian company. Those six companies got the rights to operate casinos in Macau. Their initial concession contract was for twenty years, so starting in 02/2002. And so it ended in 02/2022.
Tim Simpson:And all six of those concessions were were renewed at that time for another ten year period. So the structure of the industry remains the same, but it was the industry was heavily affected by COVID. Macau was sort of locked down for three years during the pandemic. There was no tourism whatsoever in Macau, and the entire economy is based on casino tourism. But Macau was sort of locked down, so it was very safe place to be.
Tim Simpson:There was no COVID cases at all for several years. It was a very pleasant place to live because there were no tourists. Suddenly, there was 40,000,000 less people in the city. I experienced the Macau that I remembered when I first arrived in 02/2001 as this charming, slow paced, small community. It was nice to experience that again, but it devastated the economy.
Tim Simpson:It was handled very well, I would say, by the the local government, and there was a lot of, financial assistance for the local population that was provided. Nobody knew what was gonna happen as a result of COVID. When it finally ended, was gaming industry ever gonna come back to how it was? And what also happened during that period was that VIP gaming industry, the junket industry, was essentially criminalized by the central government. Some of the money lending activities that were so crucial to the junket industry to finance high roller gamblers, that was completely curtailed.
Tim Simpson:And the the two most prominent bosses of the two biggest junkets, two billionaires in Macau were both put in prison because of criminal activities, and then, the whole industry was transformed. It still exists. The VIP industry still exists, but it's a shadow of its former self. In its heyday, there were more than 200 junket companies operating in Macau. Now it's something like 20 junket companies, and there will be less next year than there are now.
Tim Simpson:It still exists, but it's it's not doesn't function in the same way. And that all happened during COVID. So nobody knew what was gonna happen when COVID was over, but it actually rebounded in an incredibly successful way. It only took a few months before this pent up demand by tourists to come to Macau, to go shopping, to gamble, to spend money. This past year, it's been a incredible rebound for the economy, and all of the companies are doing much better than anybody had expected that they would.
Tim Simpson:But there's been a fundamental change in the casino business in that the VIP gambler has declined, and it's been replaced by the mass market gambler or especially the what's called the premium mass gambler, which is the person who gambles large amounts of money but doesn't require a loan from a jacket company to finance that gambling. The problem with that, from my perspective as a resident of Macau, is that when the gaming economy was populated by a handful of high rollers who were losing millions and millions of dollars every time they came to Macau, when those people are no longer there and you have to rely on the mass market gambler who loses a hundred US dollars when they gamble instead of a million, then it takes, you know, a thousand times more of those gamblers to produce the same amount of revenue, which means there's more and more people in the streets in everywhere. And Macau is definitely inundated with tourists again as a result. But another big transformation, and this is the last thing I'll say about it, is the role of those six concessionaires in Macau's economy. And in order to get their new ten year license, each of those concessionaires was required to commit to a lot of nongaming kinds of activities.
Tim Simpson:They're responsible for helping to diversify Macau's economy, and a lot of responsibility has been put on them to diversify their businesses and also to participate in things that wouldn't normally be part of a casino concessionaire's business model. So in terms of diversifying their business, they're expected to have a lot more concerts, k pop concerts, and and host sporting events like marathons and things like that that will bring tourists to the city. That's pretty normal for a casino company. They wanna have these loss leader kind of activities where that that will just bring people in in hopes that those people will then gamble while they're here. But they're also being asked to do things like participate in medical tourism or to even help with the historic preservation and revitalization of old districts in Macau.
Tim Simpson:So each of those casino concessionaires has been assigned a particular historic neighborhood and asked to help, revitalize that area. And I think that's one of the more interesting things going forward. And I wonder about the role of companies like The Venetian, Sheldon Adelson's Venetian and Parisian and Londoner Resorts where his the company's expertise is how to make these simulated themed environments. What happens when they apply that expertise to the revitalization of historic areas in Macau's central city. The future of the casino economy, at least for the next ten years, looks pretty promising, but nobody knows what will happen after that because once the agreement with Macau and Hong Kong when they were handed over to China was that they would remain semiautonomous for fifty years, and then they would be integrated back fully integrated back into the Mainland.
Tim Simpson:And when that happens, nobody knows whether Macau will still be allowed to have legal gambling, legal casino gambling. The distant future is is a big question mark, I think, but the next ten years looks like it will be more of the same.
Cathryn H. Clayton:Wow. That's fascinating. I just wanted to thank you, Tim, so much for this conversation and for writing this book. I really learned a ton. And thank you for spending all those hours hanging out in VIP lounges and drinking expensive scotch with high rollers so you can tell us all about, what we need to know about the casino industry in Macau.
Tim Simpson:Thank you very much for, talking to me about this, and I'm sorry that I never mentioned that how influenced I was by your book, sovereignty at the edge, Macau and the question of Chineseness, which I think is the best English language book written about Macau, and I would definitely encourage anybody to read that. And it was a huge influence on me and a model for how to do it, this kind of book length project about Macau. So thanks a lot.
Cathryn H. Clayton:Thank you. Well, Tim Simpson's book, Betting on Macau Casino Capitalism and China's Consumer Revolution, is available from the University of Minnesota Press, and I encourage everyone to go read it. It's a really great, great read. Thanks.
Tim Simpson:Thank you.