Effects of FIFA World Cup on the Economy

The FIFA World Cup is an international sporting event. This event is held every four years. However, the host country changes every time. Countries have to bid against each other in order to win the rights to host the next World Cup. Many economists have questioned this practice. However, none have been able to find any conclusive benefit of hosting the World Cup. To most economists as well as to common people, this seems to be a waste of money and resources. However, the trend of holding World Cup’s till continues.

It is true that the game is the chief form of entertainment in many countries across the world. Also, the game provides the host country with a lot of pride and publicity. However, this does not justify the extent of economic costs that have to be incurred to host the World Cup. Several countries have fallen into debt traps after holding the World Cup. South Africa, which held the Football World Cup in 2010, would be a prime example.

It is strange that the economic benefits of the FIFA World Cup are still often cited by the mainstream media. The reality is that the upside, if any, is vastly overstated.

In this article, we will have a closer look at how hosting the FIFA World Cup impacts the local economy.

Alternate Expenses Not Considered

The problem with accounting for the FIFA World Cup is that all the expenses incurred are simply included in the benefit caused by the World Cup. Any economic analysis should always account for opportunity costs. However, the FIFA analysis never takes any opportunity costs into account. The reality is that if the FIFA World Cup were not being hosted, roughly the same amount of money would be spent. People would spend roughly the same amount of money on watching movies, going for dinner, etc. FIFA World Cup merely diverts the expenditure towards football.

Huge Expenses to be Undertaken

FIFA lays down tough conditions for countries who want to host the World Cup. These countries are expected to have high-quality stadiums. Also, there is a need for more hotels and even temporary housing to accommodate the players as well as fans from other countries. These expenses have to be borne by the government. Often a lot of this infrastructure is not used later. There have been countries like Greece, where there are calls to break down the stadiums that were built for the Olympic games. The standards set by FIFA are very high. This becomes a problem since the high standards translate into high expenses for the host country.

Benefits Taken by FIFA

The major chunk of profits in World Cup tournaments is derived from ticket sales as well as selling television rights to the event. The host country gets no part of these profits. These profits belong to FIFA alone! Hence, the money is being by FIFA whereas the expenses are being passed on to the taxpayers of the country. There have been cases in Brazil when FIFA officials asked the Brazil government to stop the small local vendors from selling goods to the people coming to the stadiums. These were poor people trying to make a small income so that they can get by. However, FIFA does not allow this to happen as they want only their sponsors’ goods to be sold in and around the stadium.

Debts vs. Tourism

Tourism is often cited as a major benefit of hosting the FIFA World Cup. The argument is that the World Cup is the reason why people from different parts of the world flock to the host country. As a result, the local hotels and restaurants make money, and the economy is boosted overall.

There are many flaws in this argument. Firstly, it needs to be noted that the rise in tourism is only a temporary event. As soon as the World Cup is over, the tourism goes back to its previous levels. Hence, it doesn’t really boost the economy too much!

It was calculated that an average tourist would have to spend $130000 in Brazil if the government had to recoup the costs of building more infrastructure. Obviously, that was not going to happen. Hence, the taxpayer loses money in the process. The government would lose much less money if it simply gave out money to hotels and restaurants. The tourism activity is no consolation for the humungous amounts of debt that get piled on as a result of FIFA World Cup.

Tax Breaks

Lastly, all the money that FIFA makes during the World Cup is tax-free. Had customers spent the same money in restaurants and movie theaters, the government would have earned a lot of money in taxes. However, FIFA’s monopoly power puts it in a position to negotiate such lopsided deals with other governments.

The problem with FIFA World Cups is that the money is taken from the poorest people. Money spent on building stadiums delays the infrastructure that would have helped the poor. This is the reason why there were protests in both South Africa as well as Brazil. Since protests are not allowed in Russia, we may never know what the Russian public thinks about its government pouring $80 billion into this event.