Should the U.S. Really Try to Host Another World Cup?

DESCRIPTIONPhoto: zoonabar Many of the structures built for the 2004 Athens Olympic Games lie vacant.

There is a good section in the book Soccernomics about the economic impact studies that cities and countries sponsor when they are hoping to host a huge sporting event like the World Cup or the Olympics. The gist of it is that you can make an economic impact study say pretty much whatever you want, since it’s an exercise in speculation, and that the economists hired by bid committees make sure the numbers say yes.

The truth, however, is that most such events don’t provide much economic stimulus, and often turn out to be money losers. This isn’t to say that cities or countries shouldn’t try to host these events — but, as the Soccernomics authors argue, they should at least realize that what they’re doing is paying for the right to host a big party. The same is generally true for public funding of new sports arenas, as the economist Dennis Coates made clear not long ago.

Coates, who teaches economics at University of Maryland, Baltimore County and is the immediate past president of the North American Association of Sports Economists, is back with a stern warning for certain people with soccer fever. As it seems the U.S. is going hellbent for leather trying to land an upcoming World Cup, he wants to get ahead of the cheerleading to make clear how the economics will actually play out. His new paper, “World Cup Economics: What Americans Need to Know about a US World Cup Bid,” is an attempt to challenge “the rosy assumptions being made by U.S. bid leaders, and I hope it will force proponents to be more forthcoming with answers about what we can really expect from a U.S. World Cup.”

Coates’s central claim:

Despite bid organizers’ claims, the World Cup won’t be a boon for the American economy; in fact, it will likely cost the United States billions of dollars in lost economic impact. For example, economic estimates in support of the 1994 U.S. World Cup were later shown by economists to have been off by up to $14 billion. Far from having a positive economic impact, the last World Cup we hosted, a so-called major success, had a negative impact on the average U.S. host city of $712 million. Yet no one is discussing these figures despite the current economic troubles we face. … Few analysts who aren’t in the employ of the event boosters have ever found such events to pay for themselves in a purely dollars and cents view.

The recently completed South Africa World Cup is hardly an exception, with the bulk of the trouble lying in the gap between optimistic projected costs and actual costs:

The proposed budget for the 2010 games was about $225 million for stadiums and $421 million overall. Expenses have far exceeded those numbers. Reported stadium expenses jumped from the planned level of $225 million to $2.13 billion, and overall expenses jumped similarly from $421 million to over $5 billion.

And don’t forget the “ruins of modern Greece” — i.e., the abandoned facilities from the 2004 Summer Olympics in Athens. You think Greece might be feeling a bit of buyer’s remorse about now?

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  1. Drew says:

    The U.S. would build precisely zero stadiums for a World Cup so the comparisons to South Africa or Greece are misleading

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  2. PickMe says:

    If hosting a World Cup in the U.S. means more U.S. citizens become fans of the sport, it is probably worth it. More interest in soccer in the U.S. would likely help the U.S. pro soccer leagues, which would be a nice benefit.

    While the host city/country may post a net loss initially, you can’t argue that cabbies, hotels, restaurants, theaters, museums, etc. would benefit greatly in the short term.

    Chicago has done a great job building up its recreational/tourist infrastructure, beautifying its lakefront, and making they city a more attractive destination than ever. If Chicago were to host a World Cup or an Olympics, the new structures would not be vacant after the games as they are in Greece.

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  3. Chase says:

    Since the U.S. has plenty of stadiums, does it help the case for hosting the WC? Would most of the cost come from security and services to for the teams?

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  4. Q says:

    The real question is, why do events like this need to be geographically concentrated? Travel costs for the teams involved are a lot less than building a new stadium. This line of thinking was summarized well by Frank Deford on NPR a couple of months ago before the start of the World Cup:
    http://www.npr.org/templates/story/story.php?storyId=127347787

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  5. 'stina says:

    My understanding is that US bid assumes that NO stadiums would be built for the World Cup. Each of the 16 cities in the bid already has a stadium that would hold 60,000 or more people (some of the stadiums in South Africa held under 50,000) and can easily be configured to play soccer in. None of those stadiums are in regular use by the NFL during the months the World Cup is going on. Historically, the US has had the best track record for filling those seats as the 1994 World Cup continues to hold the record for the best attended tournament thus far. What other major costs would be associated?

    I don’t think that the city of Houston (the city currently with the most ballots cast on the gousabid.com website) will have too much buyers remorse about Reliant Stadium, at least when it comes to a few World Cup games.

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  6. frankenduf says:

    this reasoning may ironically backfire for a recession- that is, it may be a positive temporary stimulus to the economy to hire all the temp contractors + workers to run the show- surely alot of those workers could be otherwise unemployed, so it would likely benefit the economy via unemployed spending mulitiplier

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  7. Colin says:

    It’s hard for me to figure out how hosting the world cup could be a loser when — unlike South Africa or Greece with the Olympics — we wouldn’t have to shell out a dime for infrastructure.

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  8. Traciatim says:

    But . . . You work so hard, don’t you deserve it?

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