There is a good section in the book Soccernomics about the economic impact studies that cities and countries sponsor when they are hoping to host a huge sporting event like the World Cup or the Olympics. The gist of it is that you can make an economic impact study say pretty much whatever you want, since it’s an exercise in speculation, and that the economists hired by bid committees make sure the numbers say yes.
The truth, however, is that most such events don’t provide much economic stimulus, and often turn out to be money losers. This isn’t to say that cities or countries shouldn’t try to host these events — but, as the Soccernomics authors argue, they should at least realize that what they’re doing is paying for the right to host a big party. The same is generally true for public funding of new sports arenas, as the economist Dennis Coates made clear not long ago.
Coates, who teaches economics at University of Maryland, Baltimore County and is the immediate past president of the North American Association of Sports Economists, is back with a stern warning for certain people with soccer fever. As it seems the U.S. is going hellbent for leather trying to land an upcoming World Cup, he wants to get ahead of the cheerleading to make clear how the economics will actually play out. His new paper, “World Cup Economics: What Americans Need to Know about a US World Cup Bid,” is an attempt to challenge “the rosy assumptions being made by U.S. bid leaders, and I hope it will force proponents to be more forthcoming with answers about what we can really expect from a U.S. World Cup.”
Coates’s central claim:
Despite bid organizers’ claims, the World Cup won’t be a boon for the American economy; in fact, it will likely cost the United States billions of dollars in lost economic impact. For example, economic estimates in support of the 1994 U.S. World Cup were later shown by economists to have been off by up to $14 billion. Far from having a positive economic impact, the last World Cup we hosted, a so-called major success, had a negative impact on the average U.S. host city of $712 million. Yet no one is discussing these figures despite the current economic troubles we face. … Few analysts who aren’t in the employ of the event boosters have ever found such events to pay for themselves in a purely dollars and cents view.
The recently completed South Africa World Cup is hardly an exception, with the bulk of the trouble lying in the gap between optimistic projected costs and actual costs:
The proposed budget for the 2010 games was about $225 million for stadiums and $421 million overall. Expenses have far exceeded those numbers. Reported stadium expenses jumped from the planned level of $225 million to $2.13 billion, and overall expenses jumped similarly from $421 million to over $5 billion.
And don’t forget the “ruins of modern Greece” — i.e., the abandoned facilities from the 2004 Summer Olympics in Athens. You think Greece might be feeling a bit of buyer’s remorse about now?
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How silly to compare the economic impact of hosting a world cup in the US with cost in Greece or South Africa. Different economies, different developmental needs. Still, the comparison might have been necessary, if we did not have a recent US experience as a comparison point. And what benefits are listed, other than questions of how busy buildings remain, after the event?
Clearly, a column written by a person without a day job.
While I would love to see soccer more popular in the US, do we really need to spend taxpayer money to make people more interested in sports? Really? We don’t like them enough and spend enough on making athletes and owners megarich? Why not spend the World Cup money on something else we don’t already pay too much attention to that will or won’t pay off?
A couple of points:
1. The US is bidding for 2018/2022. The current economic climate is not really relevant, unless you believe it will last for another 8-12 years.
2. We are not directly comparable to South Africa or the Greek Olympics because we don’t need to build a bunch of white elephant stadia. Thanks to the NFL, we have all the stadia we need to host a World Cup. There might be some necessary renovations/expansions, but not whole new construction.
3. It’s hard to quantify or predict the long-term effect of things like national prestige or even good performance in the Cup (most nations experience some amount of home field advantage). For instance, will South Africa now see an increase in foreign investment, now that they’ve proven they can pull off an event of that scope? The 1994 Cup virtually created the MLS (the MLS was founded in 1993 as part of the 1994 bid), which is just starting to come into it’s own as a national soccer league. Not only does that help sponsor a new professional sport, but has also resulted in the construction of a bunch of smaller, soccer-specific stadia.
4. I don’t know about other countries, but most of the work that would be done for the Cup here would be done by American workers. For those Keynesians out there, that sounds like stimulus to me. It may not, in the end, add up to a net positive, but I’m curious what is meant by negative economic impact, or lost income. Are we talking about opportunity cost here (i.e. the government would get more bang for it’s buck spending elsewhere… or not spending at all), or raw tax receipts minus government outlays?
I don’t know that another World Cup here would necessarily make a positive financial impact, but I think the article glosses over some factors that are worth at least considering (even if they don’t all translate well to dollars and sense).
I’m not saying that another World Cup here
That’s not to say that another World Cup would be
Only IF:
1. Adrian Cronauer, the Long Winded Radio Host of ‘Good Morning, Vietnam!’ fame is the official GOOOOOOOOOOOOOOOOOOOOOOOOOOAAAAAALLLLL!Anouncer.
2. Our Best Scientists can create a World Class Annoying Stadium Noisemaker that would put the Vuvuzela to shame, make it crawl into a cave and cower in a fetal position.
3. We have an American Octopus named Nostrodamus who does thumbs up or thumbs down for ever match before play can commence. He will have a glass acquarium on the 50 yard line. –Don’t Forget, an Octopus has 8 thumbs.
4. We can save money on scoreboards. SInce most matches are low scoring affairs, drop the second and third digits from scoreboard construction. And don’t buy the hand lettered numbers above ’5″ since most matches are 1-0 if not 0-0.
If I’m not mistaken, the residents of Quebec are STILL paying for the 1976 Olympics.
Ok so throw out the Greece and South Africa example. You still have to look at the 1994 US World Cup which posted a loss and ask what changes are they going to make so that the city profits from the World Cup. We did not have to build stadiums then either.
Read the report before you claim that stadiums are all that matter — think security, which now runs into the billions post-9/11. Or the opportunity costs of allocating resources. Or the fact that temporary jobs, once gone, can lead to a new rush of unemployed in a worse situation than they were before. There are a lot of costs beyond what we think of (bricks and mortar).
I also don’t understand how the US could lose money while hosting the WC.
UNLESS.
1. Idiotic government officials/pseudo-governmental officials are allowed to run said affair.
2. These officials insist on foolishly high levels of security.
3. They also insist on unneeded infrastructure improvements.
A WC hosted in the USA could easily be a moneymaker if we treated it simply like 64 NFL games and played all of them in 20 (ish) of the NFL stadiums (maybe even one or two in the MLS stadiums built for teams like the Galaxy and the Fire).
The best part about hosting the WC in the USA is that most of the US games could be scheduled for AFTER work hours and preventing the massive productivity drop associated with millions of US workers streaming the games on ESPN.com/Checking scores every 30 seconds.