Arguments of the kind "let's carry this to its logical conclusion" are almost always fallacious, because they ignore limiting factors, or alternative explanations.

If your only advantage is speed then you need to have the fastest connection to the exchange, else your business model doesn't exist. If you have other advantages, then speed is less important. Nowadays there are very few market makers whose only advantage is speed, because most of them realized that continually paying through the nose to compete on speed is a mug's game.

That doesn't disprove my statement. The "multiple competing market makers who are all profitable" all have extremely fast connections to the market. They compete on relatively equal footing speed-wise, and so other factors come into play. But everyone outside of the small group of players with that speed advantage will always be paying a tax to those who do. And good luck compensating for your lack of speed by out-predicting large teams of MIT-educated quants with unlimited technology budgets. As an individual investor, your only hope for profit is that market values of the stocks you invest in rise by more than the tax you have to pay to HFT's. You better buy and hold, because with every transaction, you're paying them an additional tax.

When market values are rising, these effects go unnoticed because everyone is generally making money. That doesn't make the tax we are paying to these HFT's any more fair or less damaging to the market.

You've also got a very peculiar definition of winning. A person who wishes to buy 10,000 Ford shares who places an order at $17 only to find that in the meantime the market has shifted to $17.01 and therefore purchases at that price hasn't "lost". They set out to buy Ford stock at market rate, and that's what they ended up doing.

Not really. The stock market is a giant pool of money. These parasite traders are nothing more than leaks in that pool. With enough of these leaks, the pool runs out of water. Additions of water to the pool (through a combination of rising market values and more investment) at various times will overshadow the effect of the leaks, but they are there nonetheless.

A person who wishes to buy 10,000 Ford shares who places an order at $17 only to find that in the meantime the market has shifted to $17.01 and therefore purchases at that price hasn't "lost"

Actually, they have lost. They lost 10,000 pennies, or $100, and received absolutely no value in return. That money is gone, never to return, into the pocket of an HFT. It has simply evaporated from the market.

Last I checked, the stock market was a market. Anyone is allowed to play, and like most things in life, you can pay to upgrade (either your connection, your analyst talent, etc. etc.). Look at the recent Barclays dark pool fiasco to find out what the liquidity in a market without HFT and transparent books looks like.

Well, when you have a pool, and water is constantly being sucked out of it, even a tiny bit at a time, eventually you will have no water left in the pool. Not a hard concept.

As I look around the markets, I don't see a lot of participants that are there to lose money. The ability to make a profit from market activities is central to a correctly working market.