Soccernomics (35 page)

A few years later Japanese and Korean government officials were predicting that the World Cup of 2002 could boost their economies by a staggering $26 billion and $9 billion, respectively. Of course, after the event there was little sign of any such boost, and indeed some evidence that tourists had stayed away for fear of soccer hooligans.

Finally, the weight of this research was starting to stack up. It was becoming obvious that even if you build it, he doesn’t necessarily come.

The boosters’ claims of economic benefits were growing muted. The estimates produced for the World Cup in Germany in 2006 were altogether more sober. Even a study sponsored by the German soccer federation suggested a mere $2 billion in new benefits. (Similarly in London now, estimates of the likely economic benefits from the 2012

Olympics are kept studiously vague.)

Perhaps the best estimate we have of how much visitors to soccer tournaments actually spend was done at the German World Cup. This was the biggest media event in history, a monthlong party (except for the boring soccer), yet even here the hosts didn’t make much money.

A team of economists, led by Holger Preuss from the University of Mainz, decided to work out how much “new” money visitors to the World Cup actually spent. In the old days, when boosters estimated economic bonanzas, they simply multiplied the number of seats in stadiums by some imaginary spending number (counting meals, hotels, and transportation as well as tickets) to produce an enormous hypothetical sum.

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The problem with this method, as serious economists pointed out, is that not every visitor to an event really injects extra spending into the economy. Preuss’s team surveyed a large sample of visitors to the World Cup and found that only about one-fifth were foreigners who had traveled to Germany specifically for the soccer. More than half the “visitors”

were in fact Germans. For the most part these Germans would have been in Germany anyway, and had there been no World Cup they would presumably have spent their money on other forms of entertainment (such as going to movies or restaurants). If they spent money at the World Cup, they spent less elsewhere in the German economy, which largely offset any economic benefit from the soccer. Of course, some Germans who might otherwise have been spending their money in Spanish bars stayed home for the soccer. However, their spending was probably offset by other Germans who went abroad precisely in order to avoid the madness of the World Cup.

The remaining foreign visitors to the World Cup—about a quarter of all visitors—were either “time switchers,” who would have come to Germany anyway at some point and simply timed their visit to coincide with the World Cup, or foreigners who would have been in Germany during the World Cup anyway and just decided to go along and see what all the fuss was about. Preuss’s team called this last category “casuals.”

“Time switchers” and “casuals” would have added little to spending, because even without the World Cup they would have spent their money in Germany. Preuss’s team asked their respondents detailed questions about their spending plans. They concluded that the World Cup generated spending by visitors of €2.8 billion. That was negligible beside the Paris Hiltonesque €1,000 billion–plus spent annually by consumers in Germany. It was also much less than the German state spent preparing for the tournament. Remarkably, more than a third of that visitor income came from people who never got inside a stadium but merely watched the games on big screens in public places. In short, even the World Cup was barely a hiccup in the German economy.

Almost all research shows the same thing: hosting sports tournaments doesn’t increase the number of tourists, or of full-time jobs, or 244

total economic growth. The next World Cup will not be an airplane dropping dollars on South Africa. When the country’s finance ministry flew three eminent sports economists to Pretoria for a workshop, the trio argued that the best South Africa could hope for was that the World Cup would
not reduce
economic growth. Even the 500,000 or so expected foreign visitors would not be a bonanza. In 2007, South Africa attracted an average of more than 750,000 foreign visitors a month.

Added to all this are the host’s costs. If the economic benefits of putting on these tournaments are muted, the expenses seldom are.

Economists Brad Humphreys and Szymon Prokopowicz made some rough estimates of the costs to Poland of hosting just half of Euro 2012.

Poland will need to lay on a lot more than just new stadiums, airports, and hotels for fans. UEFA requires, for its own officials and guests, the use of one entire five-star hotel within a forty-five-minute drive of every stadium. The teams need another sixteen hotels, most of them five-star. The referees have to be in five-star hotels near the stadiums.

The doctors who perform the doping controls need five-stars “in the countryside.” Much of the cost of these hotels will come courtesy of the Polish government. It will also have to put up surveillance cameras all over its stadiums and towns.

In all, Humphreys and Prokopowicz estimated that Poland would have to spend about $10 billion on Euro 2012. True, some of the infrastructure the country is buying will have its uses after the tournament.

However, much of it won’t, because the things you need for a soccer tournament are never quite the same as the things you need for daily life, which is why the Japanese stadiums for the World Cup of 2002 are now mostly empty. All those Polish cameras, roads to stadiums, and luxury hotels in provincial towns may never quite pay for themselves.

Ah, say the boosters, but the biggest economic benefits are intangi-ble. Michael Katz is a millionaire Johannesburg lawyer who sits on the organizing committee for the South African World Cup. In his air-conditioned office in the business district of Sandton, he says the World Cup will show that “foreigners can invest here, trade here with confidence.” The tournament will boost South Africa’s brand.

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However, that is true only if things go well. What if three days into the tournament an English fan is carjacked and later an American sponsor who has come to Johannesburg to watch games and schmooze is raped? The news will be repeated nonstop on CNN for days on end.

Statistically, this is quite likely to happen. The armed robbers of Johannesburg have undoubtedly already canceled all leave for June and July 2010.

Katz responds, “On that basis you must never host a World Cup, you must never do anything in business, because something may go wrong.” But we know that hosting a sports tournament can seriously damage your brand. It happened to the Olympic hosts Munich in 1972, Montreal in 1976, and Atlanta in 1996. The 2010 World Cup might persuade people that South Africa is not a poor, corrupt, diseased, crime-ridden country; alternatively, it might persuade them that South Africa is precisely that.

Most economists now agree with Rob Baade: hosting a sports tournament doesn’t make a place rich. The question then is why countries still bother. Why do the US, Russia, Australia, England, Indonesia, Mexico, Japan, Spain and Portugal, Holland and Belgium all want to stage the World Cup of 2018? The answer has nothing to do with money. Rather, it reveals something about the new politics of happiness now emerging in the rich world.

In recent years, social scientists have learned a lot about happiness.

Their best source in Europe is the Eurobarometer research program, which is funded by the European Commission. Each year it asks about a thousand citizens from each European country how happy they are. To quote the exact question: “On the whole, are you very satisfied, fairly satisfied, not very satisfied, or not at all satisfied with the life you lead?”

The survey has been conducted for about forty years. By now, some insights have accumulated. Perhaps the most interesting is that having money in itself doesn’t make you happy. “There is a paradox at the heart of our lives” is how Richard Layard opens his book
Happiness: Lessons
from a New Science
, one of a flood of recent works on the subject. “Most 246

people want more income and strive for it. Yet as Western societies have got richer, their people have become no happier.” Layard (sometimes described as the British government’s “happiness czar”) says that in the US, Britain, and Japan, people have gotten no happier in the past fifty years even as average incomes have more than doubled.

It seems that we humans adapt quickly to our environment. The things we once thought of as luxuries soon become necessities (although, by the same token, our sense of well-being would quickly adapt to losing half our income). What we care about is not our absolute wealth but our rung on the ladder. Ruut Veenhoven, a leading expert on happiness, says, “When we have overtaken the Joneses, our reference drifts upward to the Smiths, and we feel unhappy again.”

Only in countries where income per capita is below about fifteen thousand dollars—countries such as Mexico, the Philippines, or India—has increased wealth brought some happiness. Layard writes,

“The reason is clear—extra income is really valuable when it lifts people away from sheer physical poverty.” But that very rarely happens in Europe anymore.

Some other truths emerge from the European data. Scandinavians are very happy; eastern Europeans are not. The Irish both north and south of the border are surprisingly happy. Age, sex, and social status matter, too. In western Europe at least, the average person’s happiness tends to decline with age until he is twenty-six years old, and then starts to rise again. Women seem to be happier than men, which might help account for their much lower rates of suicide. The more educated people are, the happier they tend to be. Married people are generally happier than unmarried ones. What happens around you in society also matters: when unemployment or inflation rises, people tend to grow unhappier. Spending time with friends and family makes people happy.

And, we discovered, so does hosting soccer tournaments. Staging a World Cup won’t make you rich, but it does tend to cheer you up.

The day before the World Cup final of 2006, one of the authors, Simon, visited the street where he used to live in Berlin. Fifteen years H A P P I N E S S

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before, the Hohenfriedbergstrasse had been a dull-brown place with toilets on the stairwells and potentially fatal coal ovens in every apartment. Nobody ever spoke to anyone else. This time, he had to check the street sign to make sure it was the same place. Flags were flying from every house—German flags made in China, but also flags of many other nations—and children were playing everywhere even though they had supposedly gone extinct in Germany. The World Cup seemed to have made a usually gloomy nation happy.

This is typical. Georgios Kavetsos and Stefan Szymanski (with a lot of help from Robert McCulloch, guru of happiness research) took the European Commission’s happiness data for twelve western European countries from 1974 to 2004 and checked whether it correlated at all with sports tournaments. The obvious first question was whether people became happier when their national team did well. It turned out that they didn’t: there was no visible correlation. Then Kavetsos and Stefan looked at hosting and happiness, and here they found a link.

After a country hosts a soccer tournament, its inhabitants report increased happiness.

What Kavetsos and Stefan did was to replicate existing studies of happiness using all the measures researchers usually consider (income, age, marital status, and so on), and then see whether living in a host country made a difference as well. Their data on happiness covered eight separate hosts of tournaments: Italy and France for the World Cups of 1990 and 1998, and for the European championships Italy (1980), France (1984), West Germany (1988), England (1996), and Belgium and the Netherlands (2000). In all but one of these eight host countries, there was a significant uptick in self-reported happiness just after the tournament. The only exception was the UK, where happiness fell slightly just after Euro ’96, but then we all know that the UK

is not England.

This evidence is persuasive. However, given that so many other factors influence happiness, we wanted to test whether this effect could be measured even after allowing for the other factors. To do this, several large databases had to be welded together, and in the process the data 248

from some years were lost. For instance, it turns out that the income of respondents was not surveyed in every single year. That left us with data for five hosts: Italia ’90, and the Euros of 1984, 1988, and 2000, the last of which had two hosts. Admittedly, this is a small sample, but in all five host countries, happiness rose after the tournament, even allowing for all the other effects that influence happiness. The inhabitants reported a higher level of happiness the year after the tournament than they had the year before, and they reported more happiness in the autumn surveys (that is, after the tournament) than in the spring surveys (held before the tournament).

The jump in happiness was quite large. Citizens of wealthy countries like the Netherlands or France would need to make hundreds of dollars more a month to experience a similar leap. One way to express this is that the average person gains twice as much happiness from hosting a soccer tournament as from having higher education. The effect can also be likened to an unexpected increase in income that takes someone from the bottom half of the income distribution to the middle of the top half. It’s not quite winning the lottery, but very satisfying nonetheless. If you calculate this for an entire nation, then the leap in happiness from hosting can easily be worth a few billion dollars.

In general in the host countries, older men gained the most extra happiness, presumably because many of them were sitting in front of their television sets with little else to do. Lesser-educated people gained more happiness than better-educated ones. Of all the subgroups we studied, only one (a significant one) did not get any happier: women.

The gain in happiness lasts at least a couple of months, given that the tournaments are played in midsummer and the survey is carried out in the autumn. For World Cups, the gain was quite persistent: even two and four years after the tournament, every subgroup we looked at was still happier than before the tournament. European championships, though, lifted happiness only briefly. We found no impact on happiness in the host country a year after the Euro.