Economist: Don’t expect windfall from World Cup

Nice piece from ABC News on Friday of the dubious benefits of hosting the World Cup, on which South Africa is spending $1.7 billion for new stadiums. A large part of the article consists of quotes from sports economist Rob Baade, who notes that his studies of such “mega-events” show they’re not worth all they’re cracked up to be in economic terms:

Before the Summer Olympics in 2004, the excitement among business owners in Athens, Greece was palpable, Baade recalled. After the Games? Not so much.

“They all told me they wouldn’t do it again,” he said, “because the infrastructure that is so critical to creating something in the way of an economic legacy was really disruptive to the normal flow of economic activity, so much so that some business owners said their revenues were down by 80 to 90 percent as a games…When you disrupt commercial activity, you’ve got to consider that as a cost.”

“When you put all those things together, that’s a pretty lengthy list,” he cautioned. “We really found that mega-events do not provide the kind of boost that apologists for the games argue will occur as a consequence. Things don’t materialize as a lot of people hope and think.”

Not to be dissuaded, sports consultant Lee-Anne Bac of Grant Thornton played the “intangibles” card, saying the real benefit would be that the World Cup “really starts to put South Africa on the map.” But as I’m sure Baade would be quick to point out, there is such a thing as bad publicity.


13 comments on “Economist: Don’t expect windfall from World Cup

  1. “really starts to put South Africa on the map.”

    That is the same exact (substituting “Chicago” for South Africa) intangible unprovable load of crap that the Mayor of Chicago, Rich Daley used when shoving the 2016 Olympic bid down our throats…Thank GOD we lost to Rio!

  2. This Reuters article includes a surprising quote from none other than Desmond Tutu:
    Nobel peace prize laureate and anti-apartheid hero Archbishop Desmond Tutu has said the World Cup will have as big an impact for black people as the election of U.S. President Barack Obama and will give new pride to a still divided nation.
    “With all the negative things that are taking place in Africa, this is a superb moment for us. If we are going to have white elephants, so be it,” he said.

    http://www.nytimes.com/reuters/2009/12/29/sports/sports-us-soccer-world-stadiums.html

  3. CBC Radio 1 had a debate between two South Africans the other morning on the costs and benefits of the World Cup. The writer Andile Mngxitama was up against a FIFA spokesman, Rich Mkhondo, and completely, but politely, mauled him. All Mkhondo could come up with in defence of spending $10 Billion (CDN) on this circus was that he personally knows a crane driver who never drove a crane before FIFA chose South Africa as a worthy host.

    You can listen to the debate here:

    http://www.cbc.ca/thecurrent/2010/201001/20100105.html

  4. And with the US not having to build 1 new stadium in order to host a World Cup, and rennovations would be minor, if applicable. $$$ windfall.

  5. And here in Santa Clara the World Cup is listed as one of the events that would come to a new 49ers stadium here should voters approve spending $114 million in a direct subsidy and $330 million more in risky fundraising from a Stadium Authority. And the Super Bowl is listed as another ‘money making’ event, although apparently Glendale AZ lost a couple of million when they hosted the Super Bowl. We are being fed pie in the sky promises by our city council who has bent over backwards to give the 49ers everything they want at the expense of taxpayers here.

  6. “really starts to put South Africa on the map.”

    That is the similar argument being made by many Santa Clara city officials, and stadium supporters, who want millions of taxpayer dollars, and risky debt instruments, to finance a stadium project for the San Francisco 49ers, who will be fiscally insulated from the most risky elements of the funding components, while the city’s taxpayers will likely shoulder the burden of the stadium’s costs.

  7. “really starts to put South Africa on the map.”

    That is the similar argument being made by many Santa Clara city officials, and stadium supporters, who want millions of taxpayer dollars, and risky debt instruments, to finance a stadium project for the San Francisco 49ers, who will be fiscally insulated from the most risky elements of the funding components, while the city’s taxpayers will likely shoulder the burden of the stadium’s costs.

  8. Even if you do not build stadiums if you take a wide enough (and correct) view you will see that “mega events” often have a lot of negatives that make them net small or at a loss. The last World Cup lost money for a lot of cities simply by losing normal visitors while not gaining enough visitors. That and there also considerable other (non-stadium costs). It is OK I guess if you realize that you are not going to make money (it is fun) but any grand and dishonestly argued claims about making money are best avoided.

    This is a side note, but related (South Africa and Angola are very different places but the false promises of $$$ with sporting events are universal). Angola bid for and won the African Cup of Nations because it was going to generate money. If only this was not a joke as this country is going to lose lots of money and receive a lot of negative press. The choice of siting games in Cabinda, Angola was made to deflect from perception of corruption in Luanda, Angola (if all the games were played in one city it might be great for visiting fans but only one city would benefit from the infrastructure changes and short-lived tourism). So they chose Cabinda that has lots of people who do not like the government in it. The Chinese company that built the stadium made lots of money and the people of Cabinda end up with a black eye (I will not say any more as this is not a political site but intelligent people should look at who funds and benefits from rebellion in Cabinda).

  9. *sigh*

    I think of the Cup in South Africa with decidely mixed emotions. On the one hand, obviously, this is a seriously expensive projects with dubious or non existant benefits for the South African people. BUT…..I wonder if there isn’t a sort of implication here of “oh, poor benighted brown people! How ever will you catch up to the wealthy white man!” OK< maybe putting on a big expensive show when many are starving ain’t the way to do it….though that doesn’t seem to be stopping certain American cities. Can’t win, seems like.

  10. One way South Africa could catch up to – and surpass – the wealthy white man would be to actually provide quality housing to all of its people, as the ANC has been promising just about since the day Mandela was released from prison. That would set a more impressive example to me than building a bunch of stadiums.

    This is an oversimplification, sure – it’s not like the government directly raided the housing budget to build stadiums. But it is an indication of where the government has decided its priorities lie, which is why I think you’re seeing such angry protests.

  11. Let’s not forget some history of the events leading to the World Cup in South Africa.

    When South Africa was competing against Germany for the rights to the World Cup of ’06, they lost by just one vote (and the controversy surround one NZ was supposed to vote but didn’t). That created a lot of anger in South Africa. There was a feeling that FIFA shafted them just like apartheid shafted the African black man. So FIFA made moves to rectify the situation by allowing only African countries to bid for the ’10 Cup. Of course, there was rampant political opportunity related to that decision. FIFA, meaning Sepp Blatter, finds a way of winning over the loyalty of African and Asian nations that helped Blatter win a new term as the head of the organization. Him and Jack Warner are quite a pair!

    Still, it’s worth noting that the power baseball, football and basketball leagues have in the United States is NOTHING compared to the power soccer (FIFA being the representative) has all over the rest of the world. Only the IOC can match that power. In many European countries, it is the true religion, not Christianity or any other godhead faith. Diego Maradona has a “church” named after him. You can imagine the status Pele has when compared. When even the United States has to recognize the power that futbol has, you know you’re dealing with a supremely powerful body.

    South Africa, being one of those downtrodden nations, looked at the World Cup as a way of getting known for something other than negative. It has been an exercise in self-esteem, a way of them saying that they are a worthy nation in the international system. We here can sit and criticize their decisions on this issue but we also have to understand the emotions that go into it. As for Desmond Tutu, nice guy but clueless on political and economic issues.

  12. Yeah, so why are stadiums still built and supported by the masses? Think about it.

  13. A bit OT but along the same point about soccer stadia:

    http://www.bloomberg.com/apps/news?pid=20601109&sid=awSfYB6pE3fY&pos=15