It is a common misconception that a country’s economic situation is improved by hosting the FIFA World Cup.
Sports economist Dennis Coates presented conclusive evidence in his recent paper “World Cup Economics: What Americans need to know about a World Cup bid” that the US lost $9.6 billion from hosting the World Cup in 1994, a $13 billion difference between the $4 billion profit that was predicted before the tournament. Likewise Germany broke even despite a flawless 2006 tournament and South Africa are expected to be in the red after figures from 2010 emerge.
The general assumption is that hosting a World Cup has to be good for a country: it provides an increase in tourism, creates thousands of jobs and pumps billions of dollars into the country via ticket sales and sponsorship.
But the reality is that this is simply not true. The money spent on hosting the tournament, both the direct cost of setting up the infrastructure (stadiums and security for example) and the opportunity costs (money spend on hosting the tournament that could be used to boost the economy elsewhere) cancel out the revenue. In short, host nations who do an efficient job will be lucky to break even or make a small profit while inefficient or developing nations, such as South Africa, are likely to lose out.
What makes these figures even more astonishing is the fact that FIFA make a lot of money for putting on the World Cup. Indeed, figures from South Africa 2010 show that FIFA gave the insufficient figure of $482 million to assist with their hosting and left the tournament with a $1.9 billion profit, primarily made via from sponsorship. So while South Africa are likely to be counting the costs of hosting a tournament that was supposed to help their economy, FIFA came away from Africa with their pockets full.
That FIFA should be allowed to profit is another issue entirely but it all leads to the question: why do countries even want to host the World Cup?
To be frank and rather bleak, the answer to this question relates to the motives of each nation’s bidding committee. Accepting Coates’ reliable conclusion that hosting the World Cup does not improve the economy of the host nation, the people in that nation who can benefit financially are those in power with a vested interest in football. In other words, the members of each nation’s World Cup bidding committee.
In Coates’ paper he cleverly points out the fact that the 2018/2022 US World Cup bidding committee is made up of many people who will profit financially if the bid is successful. He points out that the committee is a combination of “…former and current national team players, owners or partial owners of three Major League Soccer franchises, the Commissioner of Major League Soccer, both the U.S. Soccer president and that organization’s CEO, and the president of the U.S. Soccer Foundation.” If the US’ bid is successful and the profile of the sport is raised in the country, then those are the people who will benefit the most.
Of course, there would be no problem if these men benefited from hosting the World Cup if the average tax payer also saw some benefit. But the figures show that this is simply not the case, despite blatantly exaggerated claims from every World Cup bidding committee from Australia to Russia to Qatar that hosting the World Cup will improve the economy. Yet if you asked the average football fan in each of the prospective host nations whether they would like to host the World Cup, the answer would be an emphatic ‘yes!’.
But why is this the case?
South Africa’s example is arguably the best, both because of its status as a developing nation and the fact that I was at the tournament and able to view the impact of the World Cup first-hand. While the figures show that 2010 World Cup is unlikely to bring with it the economic benefits that were incorrectly promised pre-tournament what cannot be denied is that it made the average football fan happy. Talking extensively with the locals, the impression I got was that they couldn’t care less about the economic benefits: they only cared about debunking the myths about the security issues in the country and enjoying the party that had been granted to them.
Whether the World Cup improved their economy was unimportant. Whether the street vendors who usually sold delicious local food for the equivalent of $2 and local beer for $1 were told to make way for FIFA-sponsored vendors who sold hot dogs and tournament-sponsored beer, Budweiser, did not matter. What mattered was for at least a month the people were happy that their country was the centre of the football world and as a result, essentially the centre of the world.
So while Russia’s major bidding committee member for the 2018/2022 World Cup, First Deputy Prime Minister Igor Shuvalov is blatantly wrong when he says that “…intensive development of football infrastructure will act as a huge boost to both regional and national economic development…” he’s right on the money when he says “…football can help to unite the people of Russia, raise their national pride and from that point of view, its importance to the country’s development is difficult to overstate.”
It is perhaps fortunate that the average tax-payer is happy to ignore the lies that are fed to them about the economical benefits of hosting a World Cup, otherwise we may never have another nation willing to host the tournament. That, for all of FIFA and the World Cup bidding committees’ money-grubbing, would be the biggest shame.