Does hosting a major sporting event boost economic growth?
- The hope for host countries is that infrastructure building and tourism will bring new prosperity
- However, often the money would have been better spent on other types of infrastructure
- Tourism receipts may also be over-rated
Countries fight hard for the right to host World Cups and other sporting events. They bring prestige, a chance to show off shiny new stadia, beautiful hotels and some of a country’s highlights. However, the hope is that they will also bring new prosperity, justifying the cost of building new infrastructure. But is this actually the case?
First there is the infrastructure side, Here the question is whether the infrastructure can be put to good use after the event. Certainly, infrastructure building creates jobs and boosts productivity, but the real question is whether that money would be better deployed in building railways, hospitals and schools rather than a football stadium.
A research article from the World Economic Forum was unequivocal: “Unfortunately, sporting infrastructure is expensive to construct and run, takes up scarce and high-value real estate, and is often difficult to use with enough frequency to cover maintenance costs. A stadium is not really essential to the economic well-being of a median worker.
It pointed out that Brazil's most expensive World Cup stadium is now a parking lot, and the country’s preparations for the World Cup cost an estimated $11-14 billion. The National Court of Auditors of Brazil concluded that public spending on the World Cup would be "enough money to pay the entire country’s annual Bolsa Familia [social welfare] bill twice over".
But a World Cup also brings tourists to a country. However, here too, economists believe the effects are likely to be temporary. Analysts at Moody’s said the food, hotel, telecoms and transport industries could see a temporary boost in revenue, but that this would be short-lived. It added that the sectors likely to benefit most from higher tourist numbers “are not key growth drivers in most hosting local economies”.
There is also the problem that the World Cup can prove a distraction from other areas. The British Museum, for example, saw a drop in their usual visitor numbers during the 2012 Olympic games. It displaced regular visitors who feared overcrowding and higher prices.
Finally, there’s the productivity problem. People who are watching football generally aren’t doing any productive work, so productivity tends to drop. This is a particular problem in those countries where the matches fall during the working day.
So if Russia was hoping for an economic boost, it may be disappointed. However, Goldman Sachs has shown that the stock market goes up in both the host country and the country that wins the World Cup. The English will be crossing their fingers.