What Is The World Cup Worth?

The world’s biggest sporting event, the FIFA World Cup, is now upon us. Hosted on this occasion by Russia, the event promises to attract billions of viewers worldwide and billions of dollars to the host nation.

But just how valuable is the World Cup? And what impact does the event have culturally and socially on the host nation?

Host Nations
More often than not, the World Cup is hosted by traditional soccer nations.

Since 1930, the World Cup has been held 12 times in a country that either had already won or would eventually go on to win the entire thing (Uruguay, 1938; Italy, 1934; France, 1938; Brazil, 1950; England, 1966; Germany, 1974; Argentina, 1978; Spain, 1982; Italy, 1990; France 1998; Germany, 2006; Brazil, 2014).

Contrast that with only nine hosting instances in which the host country has never lifted the trophy (Switzerland, 1954; Sweden, 1958; Chile, 1962; Mexico, 1970; Mexico, 1986; United States, 1994; Japan/South Korea, 2002; South Africa, 2010; Russia, 2018).

What is more, from those nine instances, several of those countries have a deep soccer history—see, for example, Mexico.

Even if a host country does not have a strong soccer past, they prepare themselves—infrastructure and otherwise—as though they were a traditional soccer giant.

In the five World Cups from 1990 to 2006, the hosts were, in order, Italy, the United States, France, Japan/South Korea, and Germany. Of these, three are soccer powerhouses, and the other two boast remarkable athletic infrastructure.

All five are also relatively wealthy nations, who can afford the upfront costs associated with hosting an event of this scale. This is important — after all, since FIFA does not provide much in the way of financial assistance or investment for nations who win hosting rights, the set of potential host nations is somewhat narrowed.

More recent hosting nations, such as South Africa, Brazil, Russia, and, in 2022, Qatar, either didn’t (and still don’t) have a notable soccer past (Russia) or didn’t have the infrastructure FIFA demands of host nations (Brazil), or both (South Africa and Qatar).

Sometimes mere financial capacity is not enough. The decision to hold the 2014 tournament in Brazil, for example, infamously had impacts — economic, cultural, and sociological — on Brazil’s underprivileged populations that will reverberate for a long time.

For Russia, the chance to host the tournament comes at an opportune time politically. Russia is currently sanctioned by much of the international community, for, among other things, its 2014 annexation of Crimea, alleged interference in the 2016 U.S. election, and the poisoning of a spy in Britain.

In March, British foreign minister Boris Johnson famously compared their hosting of the tournament to that of Nazi Germany hosting the 1936 Olympics. Russia’s international reputation, in other words, has been severely compromised. Hosting the World Cup therefore provides a welcome PR boost. As a result of the sanctions imposed on the nation, the potential economic windfall will also provide relief for an economy that is not so strong.

Economic Benefits
A recent report commissioned by the Russian government finds they are set to reap the benefits of hosting the World Cup to the tune of $31 billion. Deputy Russian Prime Minister Arkady Dvorkovich predicts “a considerable economic impact” on the country. According to Dvorkovich, over 200,000 jobs have been created as a result of investment.

Calculating an exact monetary figure of economic impact for hosting a World Cup is a difficult endeavor. There are myriad factors and inputs in an economy at any one time, so separating a one-time event — even one the size of the World Cup — from the broader economy is tricky.

In a paper entitled “Hosting The FIFA World Cup: Economic Boon or Winner’s Curse,” economists Brian Sturgess and Chris Brady explain the issues with these studies. One problem, Sturgess and Brady point out, is that many studies on the issue are ex ante, or prior to the event. As these studies are commissioned by the event hosts or by other groups who have a vested interest in promoting the economic benefits, there is a possibility of positivity bias and selective reporting of the event’s economic impact.

On the other side of the issue, ex post studies are those conducted after the event. These reports, in contrast to ex ante studies, are usually conducted by academics and other disinterested parties.

According to Andrew Zimbalist, author of Circus Maximus, an analysis of more than two dozen studies showed a variety of outcomes. In approximately two-thirds of the studies conducted, no statistically significant effect on employment or income was provided by hosting a significant event such as the World Cup. Seven studies showed a moderate positive effect, and three studies showed a slight negative effect on employment and income.

At first, these results seem counterintuitive. The World Cup is seen by billions, and tourists from across the world stream into the host country to watch the tournament and spend lots of money. Surely this activity alone should result in a significant economic impact for the host country.

Yet a closer look at the figures show why this is not the case. In Circus Maximus, Zimbalist uses the examples of the Brazil and South Africa World Cups to illustrate his point. The 2014 tournament in Brazil generated $4.5 billion in revenue, with Brazil taking home around $2 billion from that larger pie. This sounds like an impressive figure, but consider that Brazil’s GDP is around $2.5 trillion. The World Cup, therefore, accounts for a fraction of 1 percent of Brazil’s overall GDP for 2014. Seen in this context, even a $2 billion increase in revenue is not significant in light of the larger economic picture.

The tournament also brings significant costs. Brazil shelled out a reported $15 billion to host, with the money going toward building several new stadiums, hotels, airports, and more. This is, by any measure, an enormous sum of taxpayer money to spend on a single month-long sporting event. The figure is exacerbated by the fact that many of the stadiums built by the Brazilian government for the World Cup were delayed and over budget.

In the years leading up to the World Cup, Brazil found itself in the midst of political turmoil and economic hardship. Many Brazilians questioned the value of the tournament, despite soccer being an integral part of the nation’s self-conception. Protests against the Brazilian government and FIFA occured frequently during the lead up, with many denouncing the wasteful spending in the face of rising crime, unemployment, and inequality in the country, as well as the social dislocations the new construction would generate for Brazilian populations.

2010 hosts South Africa faced similar questions regarding their decision to host. Several years on, a majority of the stadiums built specifically for the World Cup go largely unused. Apart from the Soccer City stadium, which hosted the final, the other stadiums built for the South Africa World Cup are now used for local league matches and the occasional concert. As average attendances in South Africa’s soccer league are only a few thousand per game, these stadiums are losing millions per year, proving to be a huge financial burden for the local governments they are located within.

While not having the financial troubles South Africa or Brazil experienced prior to hosting, Qatar has also been heavily scrutinized by international observers. The Human Rights Watch (HRW) organization has repeatedly reported on human-rights abuses during the construction of tournament stadiums. Many migrant workers have died working on World Cup infrastructure, often from cardiac arrest as a result of the extreme heat in Qatar. Thousands more have been exploited and abused in various ways, having their pay withheld, paying excessive fees to work within the country, and more.

These ever-rising costs have led many nations to second-guess the value of bidding. For critics, a clear pattern has emerged in recent bidding cycles. The event is awarded to a country which does not have the infrastructure to properly host the event. To catch up, such a country spends billions of dollars to build the requisite stadiums, hotels, and other facilities required to be up to standard for hosting the tournament.

When the tournament arrives, the games are played and the host country receives a temporary boost to economic growth and its global profile. But the host nation is also left with a legacy of significant debt as well as other political problems stemming from focusing on the FIFA World Cup over other pressing national issues — such as, say, healthcare, education, or unemployment.

FIFA
Arguably the biggest beneficiary of the World Cup is FIFA itself.

Each World Cup, the organization reaps a multi-billion-dollar windfall. In the last World Cup cycle up to the 2014 event in Rio de Janeiro, FIFA made $2.6 billion in profit. As a nonprofit organization, it is able to claim many tax exemptions on its operations, allowing it to retain much of its profits. As a nonprofit, under Swiss law, it pays tax at a rate of around 4 percent, half of what it would otherwise pay as a for-profit entity.

FIFA, of course, is far from faultless in how it enacts its bidding process. In recent years, the organization has been plagued by corruption scandals, including, but not limited to, the bidding processes for the 2018 and 2022 World Cups. Several members of the bidding process have been either criminally charged or accused of illegal behavior.

What this has meant, at least for past hosting decisions, is that nations wishing to hold the tournament in their backyard have had to get their hands dirty and arrange matters with a seriously corrupt bureaucracy.

What does this tell us about the value of the World Cup? On a social and cultural level, the World Cup still clearly has significant allure, especially short-term. The enduring popularity of the event ensures that there will still be nations who bid for the tournament well into the future.

Conclusion
The best data we have shows that hosting the World Cup is by no means an economic boon, especially long term. This issue will only be exacerbated in the future as the World Cup expands to a 48-team tournament (there are 32 teams currently).

One bright spot moving forward is the advent of shared-site bids. Japan/South Korea in 2002 proved the model, and in 2026 a North American powerhouse combo of the United States, Mexico, and Canada will host the prestigious soccer tournament.

Doing it this way means the massive infrastructure costs of hosting the event are divided, while the economic benefits by way of increased tourism, consumption, and so on are maintained. To be sure, the 2026 hosting situation will largely benefit from an infrastructure apparatus already in place: all three nations have significant infrastructural requirements already met. That’s one of the benefits of having hosted the tournament three times in the past (1970, 1986, 1994).

Perhaps, as new economic fair play standards, FIFA should assist first-time host nations with the burdensome costs of hosting the tournament. At the same time, it’s not necessary to spread the tournament to new sites. We currently have a dozen or so hosting locations that boast the necessary infrastructural standards already in place, spanning every continent except for Antarctica. Why the need to find new nations?

If FIFA insists on finding new partner nations to serve as hosts, they should partner up with them financially. FIFA should ensure that the money actually helps the populations—this should be built into the very arrangement. Otherwise, we’ll continue to see human-rights abuses in the build-up a la Qatar, and societal devastation for underprivileged communities a la Brazil, for the foreseeable future.