There are many legitimate uses of a short position. For example, you can short a stock as a hedging play.
Real life example: My husband had an interest in a limited partnership that owned a large number of shares in a small internet company. Well, the internet company was bought out by a big internet company, and the value of the shares more than doubled.
The acquiring company was a typical internet bubble company, and my husband thought it was due to crash at any moment. But he couldn’t cash out since the limited partnership only allowed redemtions once a year, and the general partner would not listen to reason.
So, my husband shorted the stock, which fell by more than 70% last time we checked. So, the loss in value of my husband’s limited partnership was offset by the proceeds from the short sale.
This is known as “selling short against the box.”
While it is true that many unscrupulous short-sellers slander companies, the flip side (as was pointed out above) is that many unscrupulous shorts overhype stocks.
Note also that short-selling tends to make the price of a stock go down at the time of the short sale, and up at the time of the covering purchase. This is a simple result of supply and demand. There is nothing inherently wrong in this – if you think that the shorts have things wrong, just buy the stock from them - they are letting you have it cheaper.
Although I’m sure it happens that unscrupulous shorts badmouth a company into bankruptcy, I think it’s a lot more common given that shorts are blamed for the collapse of a company that didn’t have a workable business model or was the weakest in an overcrowded field of competitors.
One last comment: You characterize short-selling as “basically gambling.” I think it’s fair to say that going long in tech in the past couple years was also “basically gambling.” Unfortunately, your gamble didn’t pay off.
My husband made a ton of money from the whole bubble, but I have no illusions that his gain wasn’t at the expense of someone else who wasn’t so lucky.