World Cup winners can expect GDP boost to economy
The winner on the pitch Sunday may be the winner in the marketplace Monday.
As France and Croatia prepare for the final in soccer’s monthlong World Cup extravaganza in Moscow, data suggest that this year’s champion will get a nice boost in the pocketbook back home as well.
Since 1990, the winner of the World Cup has also seen an increase in gross domestic product compared with the year before, with an average increase of 1.6 percent. Even countries in severe economic difficulties got a goose from soccer success: Spain, whose economy shrunk by 3.6 percent during the 2009 global recession, managed to struggle back to a flat growth rate of 0.0 percent in 2010, the year the Spaniards won their first and only World Cup title over the Netherlands.
But there is pain with the gain the year after winning the World Cup tends to be an economic downer. In the past eight World Cups, GDP contracted during the full year after winning or, in the case of Spain (2010) and Germany (2014), made the tiniest of improvements.
Economists, who have spent a surprising amount of time teasing out correlations in the data between sporting events and economic growth, speculate that what John Maynard Keynes once called the economic “animal spirits” affecting consumer and investor decisions produce a wave of national pride after big sporting achievements such as winning the World Cup.
“In the months that follow a Cup win, there seems to be a short-lived boost in productivity ... followed by a gradual letdown as perhaps people realize that even a World Cup win won’t solve all the country’s problems,” Allen St. John wrote in Forbes magazine in 2014. “Think of it as the national equivalent of a sugar rush, with a short-lived energy spike followed by that energy bottoming out.”
English soccer fans, who came agonizingly close to their country’s first finals since winning the Cup in 1966, were already banking on a little extra prosperity had the Three Lions brought home another championship.
Bank of England Gov. Mark Carney told Bloomberg News before this week’s semifinal loss to Croatia that an English victory would be “an unadulterated, unalloyed good” for the British economy as a whole. British pubs were getting midday boosts as crowds gathered to watch the matches, and online betting revenue also was booming.
Esmond Birnie, a senior economist at Ulster University’s Economic Policy Center, said the fixation with the World Cup presents a double-edged sword for worker productivity a key variable in GDP growth.
“In the short run, the effect could even be negative too much distraction from work,” Mr. Birnie wrote this week in The Irish News.
“But,” he added, “there is also the long-term possibility that in the warm glow of any further World Cup wins, work effort and productivity rise.”
The GDP picture is more mixed for the World Cup finals’ loser. In the past eight cups, annual GDP growth for the losing side was up the year of the Cup final four times and down four times. Argentina, which lost to Germany 1-0 in the 2014 finals, was a particularly extreme case, falling from a 2.4 percent growth rate in 2013 to a contraction of 2.5 percent in 2014, only to bounce back into the black with a growth rate of 2.5 percent for 2015.
Equally contentious among economists is the financial wisdom of hosting such mega-events as the World Cup and the Olympic Games. Many argue that the payout rarely matches the subsidies and economic disruption that come with winning the rights and putting on the show.
But Yundong Liu, in a 2013 analysis for the People, Ideas, and Things Journal, argued that the green-eyeshade approach to gauging such events isn’t always the best.
“In my opinion, the World Cup cannot bring profits in the short run, but is beneficial to the host countries in the long run, assuming that different factors are considered in the long-term analysis,” he wrote. “These factors include the novelty effect of new stadiums, the feel-good effect on citizens, and the World Cup’s effect on the international perception of a host country.”
With a largely incident-free tournament and strong reviews for the hospitality of Russian fans, officials from President Vladimir Putin on down have said they believe Russia’s hosting gig will prove economically good for the country as well. More than 700,000 foreign soccer fans have traveled to the 11 Russian cities that have hosted matches, and Deputy Prime Minister Olga Golodets told the Reuters news agency that she expects a 15 percent jump in tourism levels next year solely because of the World Cup.
“It seems to me that the World Cup has allowed us to destroy stereotypes that existed in the world,” she said.