"Pacific Standard"
In April, Russia, the organizer of this year's World Cup, claimed the tournament would generate nearly $ 31bn of Gross Domestic Product growth over the next 10 years. She mentioned tourism, investment in infrastructure and the subsequent effects of these investments as sources of growth anticipated.
But these promises are not always met. In response to Russian government projections, the renowned international rating firm "Moody" published a report that expresses skepticism about the alleged financial benefits.
"Russia will have only short-term benefits from the football world," the report said. "Pacific Standard" addressed a group of sports economists to discuss the real value a world has for the host country, and how the Russian government came to its high economic ratings.
In general, what does the world holding for the economy of the host country mean? Which factors, depending on the country, can affect positively or negatively on it?
John L. Solow (economics professor, University of Ajouas, USA):
In general, economists do not believe that there is much sustainable economic impact from organizing major sports events, as there are winners but also losers. This is the result of
two reactions to these events that are often overlooked - substitution and accumulation. Replacing is the idea that people who spend money for fun in this grand event would have spent them elsewhere.
And so while restaurants and hotels near the event can get more revenue, it happens at the expense of restaurants and other hotels. And the owners and employees of these restaurants and hotels and businesses that experience a decline in incomes, spend less. Therefore, the multiplier effect of successive rounds of spending also applies to these decreases.
John Vrooman (professor of sports economics, Vanderbilt University):
Estimates of the net economic impact of hosting major sports events such as the World Cup in football are exaggerated by the host country. The overall direct impact is probably zero at best, due to the negative costs of blocking and reducing other economic activities.
There are also important distribution factors that fakely give priority to the political agendas of the football industry and hospitality. Consequently, the optimistic and multifaceted effects of the World Cup are clearly designed self-promotion schemes aimed at justifying state subsidies for the private professional football business.
How are the discrepancies between the figures given by the Russian government and "Moody's" explained? Are Moscow gaining economic benefits for any particular reason?
John L. Solow: Even the Winter Games of Sochi were claimed to bring a regional economic development. Sochi was the most expensive Olympics ever realized, but today you can easily find online photo of abandoned and destroyed buildings, as well as empty hotels and looted apartments.
The same goes for the Beijing Olympics - Beijing's excellent "Herzog De Meuron" (Bird's Nest) stadium is still a tourist attraction, but the rest of the facilities are abandoned and degraded. But why do governments make these claims? I'm not very sure, but in general when politicians talk, I see what their special interests are.
Some construction companies have made a lot of money to build these stadiums, and their owners often have political ties. So "pay" the taxpayer for future benefits, make a lot of money with the contracts, and then when the benefits are not shown, and the taxpayers remain finger in the mouth ... I have nevertheless realized my ambitions.
John Vrooman: The usual rule is shifting the decimal point to a left-wing, self-inciting and economic appreciation of politicized events like the football world. So the most accurate estimate would be $ 3.1 billion.
The restraints of the Russian economy and the state of local football limit both of the widely distributed economic impact of the World Cup, as most of the benefits from this tournament will go to the ambitious Russian Premier League. Increasing the economic impact of this great event is self-promotion.
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