Money fol­lows na­tional pride for World Cup win­ners

The Washington Times Daily - - FRONT PAGE - BY DAVID R. SANDS AND NATALIE MALEK

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.

Pro­duc­tiv­ity prob­lem

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.

AS­SO­CI­ATED PRESS

Croa­t­ian fans cel­e­brated their soc­cer team’s semi­fi­nal vic­tory over Eng­land on Wed­nes­day. If trends con­tinue, a World Cup tro­phy win would co­in­cide with eco­nomic growth.

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