Buying Our Love With Our Money Is Just Not Sporting

The Sunday Age 27th December, 2009

Nothing excites state politicians more than having their government host major sporting events. Over the past decade, the Victorian Government has increased its self-imposed “cap” on subsidising major events from $35 million a year to more than $80 million. Why bother calling it a “cap” at all?

This mega event mania is not limited to the states: Australia’s bid for the 2018 or 2022 soccer World Cup is at $45.6 million. The bid now has its own special Commonwealth taskforce.

Roman politicians knew the most effective way to keep their citizens relaxed and quiet: lots of bread, lots of circuses. The Australian wheat industry has been almost completely deregulated over the past few years. So governments have doubled the circus money.

But politicians don’t like to admit they just buy our love. Instead they give lavish economic reasons why we need to subsidise mega events to the hilt: think of the tourism! The “eyes of the world”! The eleventy-thousand jobs!

The Victorian Events Industry Council believes our state’s mega events strategy is the key reason we have avoided the global recession. Just as helpfully, the Australian Grand Prix Corporation claims its event has singlehandedly provided the Victorian economy with $1.5 billion since 1996. (If so, one wonders why we do anything else at all.)

And federal Sports Minister Kate Ellis has argued that a World Cup in Australia would be an “important catalyst” for investment in needed infrastructure, such as roads, rail and ports” perhaps implicitly admitting that even governments need motivation to do their jobs.

Therefore, we are told, the Government must aggressively compete with other governments around the world to secure these guaranteed money-spinners.

Before it hosted the 2002 World Cup, the Government of South Korea claimed its economy would receive an $8.9 billion boost. It was being modest: its 2002 co-host, Japan, determined that the Japanese economy would be suddenly $24.8 billion richer.

As we know, Germany was the host in 2006. This explains why all Germans are trillionaries.

But here’s the shameful secret: the economic benefits of holding mega events are almost entirely fictitious. A broad survey of the economics literature published in Econ Journal Watch in September last year found an overwhelming consensus that these economic benefits are either insignificant or totally non-existent. In fact, there’s stronger agreement among economists about the uselessness of mega events and sports subsidies than there is about the benefits of free trade or the need to eliminate farm subsidies.

Certainly, the Victorian Government believes its mega events strategy has made this state $1 billion richer. They have studies! But these economic impact studies – machine-produced by pliant consulting firms and uncritically accepted by governments looking to justify their actions – rarely take into account the lost revenue from locals who leave when events come to town, or who avoid going out. Or that some money spent on tickets comes at the expense of other local entertainment. Or that there might be better, more productive ways to use the Government’s limited funds. After all, if one of the reasons we host mega events is to spur government investment in infrastructure, why can’t we just skip the events and build the infrastructure anyway? It would be a lot simpler. And much, much cheaper.

When the United States hosted the World Cup in 1994, its supporters maintained the event would boost the US economy by $4 billion. But a 2004 study published in the economics journal Regional Studies found that the event actually cost the US economy between $5.5 billion and $9 billion.

And an analysis by the German Institute of Economic Research concluded that the country’s 2006 World Cup didn’t budge consumer spending at all.

Even the Sydney Olympics dismally failed to boost tourism, its ostensible purpose. We spent all this money “showcasing” Sydney to the world, yet tourism to NSW actually declined, relative to the rest of Australia.

Of course, there is a more obvious benefit we get from hosting mega events, albeit an intangible one. Having the World Cup played in Australia would be a lot of fun, particularly for people who are really into soccer.

So perhaps, after all the taxpayers’ money we spend on it and the burden it will place on our economy, it might still be worth doing. (Well, maybe: we could put it to a vote.) At the very least, we shouldn’t miss an opportunity to stick it to the Brits, who are also bidding for the next World Cup.