When “Winning” Gold Doesn’t Require Stepping on a Field

(Image: Brookings Institution Press)(Image: Brookings Institution Press)Circus Maximus: The Economic Gamble Behind Hosting the Olympics and the World Cup, Andrew Zimbalist, Brookings Institution Press, 2015

Against the backdrop of hundreds of thousands of enthusiastic soccer fans enjoying nonstop action on the pitch as the Women’s World Cup gets underway in Canada, comes more news about the massive corruption scandal involving more than a dozen top-notch FIFA officials.

When Andrew Zimbalist sat down to write Circus Maximus: The Economic Gamble Behind Hosting the Olympics and the World Cup, he was certainly well aware of the corruption endemic to FIFA (the Fédération Internationale de Football Association), soccer’s international governing body, but he probably could not imagine that within months of the book’s publication, 14 high-ranking FIFA officials would be indicted by the US Department of Justice for widespread corruption, and that the organization’s president, the previously untouchable Sepp Blatter, would be forced to resign – a resignation that is still months off.

Zimbalist, the Robert A. Woods professor of economics at Smith College, has been writing about the economics of sports for more than two decades, and is a highly respected figure in the field. During this time, he has focused mostly on the economic impact that sports teams and the building of new stadiums and arenas has on cities, which, according to his research, is not necessarily “positive,” particularly in terms of its “impact on a city’s employment.”

All to often, the World Cup and the Olympics leave behind empty stadiums, a rotting infrastructure and massive debt.

Sometime after 2003, Zimbalist shifted his focus to the economics of two of the most iconic events in sports, the World Cup and the Olympics. That was the year he was approached by Gerry Schoenfeld, chairman of the Shubert Organization, Broadway’s oldest show producer, and asked to look into New York City’s plan to bid for the 2012 Summer Olympic Games. The city’s plan included the “use of scarce land”; the building of a new Olympic stadium in the downtown area, which would later be used by the New York Jets football team; and the spending of more than $1 billion. The International Olympic Committee rejected New York City’s bid, instead awarding the 2012 Olympics to London.

More recently, Zimbalist’s name was proposed for a spot on a commission studying the efficacy of the City of Boston making a bid for the 2024 Olympics, but he was rejected by then-Massachusetts Gov. Deval Patrick. That rejection apparently moved him “to take a cold, hard look at the economics of hosting the Olympics and World Cup that would be accessible to non-economists.”

That “cold hard look” resulted in Circus Maximus, which “refers to an ancient Roman chariot racing stadium and mass entertainment venue.”

The road to winning the rights to host, and then staging, the World Cup or the Olympics is rife with profligate spending, empty economic promises, cronyism and extravagantly staged events. There are winners (corrupt officials, big business, wealthy promoters and select politicians) and losers (the host cities themselves and the majority of the people who live in them). And, all to often, the World Cup and the Olympics leave behind empty stadiums, a rotting infrastructure and massive debt.

The cost of hosting the FIFA World Cup, or the Summer or Winter Olympics, has risen exponentially over the past few decades. According to Zimbalist, the cost of hosting the World Cup “has risen from several hundred million in 1994, … to $5-6 billion in 2010 in South Africa and $15-20 billion in Brazil in 2014.”

“[E]xpenditures on hosting the [Olympic Games] rose to $40 billion for the Beijing Summer Games in 2008 and reportedly topped $50 billion for the 2014 Sochi Winter Games” in Russia.

The estimated cost of the 2022 World Cup in Qatar – a site that has been universally condemned as a most ridiculous place to host such an event – could surpass $200 billion. Regardless of whether the World Cup is held in Qatar, or sounder minds prevail, the hundreds of deaths of immigrant workers – who are continuing to be brought into the country – and the horrendous living and working conditions they suffer under will forever stain Qatar and FIFA’s history.

“While promoters of the games make lofty claims about the economic benefits to be gained from hosting these sporting extravaganzas,” Zimbalist writes, “the local populations seemed unimpressed. Not only were there no evident economic gains, there were social dislocations, and resource diversions away from meeting basic needs. The games may benefit wealthy promoters, but those at the middle and bottom of the income ladder appear to be picking up the tab – and increasingly, they don’t like it.”

In the run-up to the World Cup in Brazil, more than a million Brazilians, facing “woeful transportation services, rising bus fares, deficient medical care, poor schools, and insufficient housing” and a lack of jobs, took to the streets in cities across the country protesting the “government’s spending $15-20 billion on new stadiums and infrastructure (much of which was never finished).”

So who actually benefits from the bidding process? For years, FIFA president Sepp Blatter and FIFA executives were paid handsomely for their services. In addition to their six-figure compensation, gift bags worth tens of thousands were commonly handed out to members of FIFA’s executive committee. Several of those members also apparently managed to squirrel away additional millions of dollars from nations bidding on the World Cup.

Although members of the International Olympic Committee are unpaid, the organization is made up of “the rich, the famous, and others who seem as if they would be as comfortable in a ballroom or boardroom as on an athletic field.”

A World Cup Colossus Grows From Relatively Modest Origins

Although Zimbalist provides a concise and succinct discussion of the history of both FIFA and the modern Olympics, this review, focuses more on FIFA and the World Cup than the Olympics.

FIFA was founded in 1904. Ten years later, the organization was “put in charge of organizing the soccer competition at the Olympics.” Dissatisfied with the way the Olympic organizers were handling the soccer competition, FIFA held its first World Cup competition in Uruguay in 1930, and four years later, it moved on to Benito Mussolini’s Italy.

Interestingly, writes Zimbalist, unlike the Olympics, “The World Cup has not been the target of political movements and has never been boycotted by countries for political reasons.” However, the relative harmony of the World Cup has not reduced the number of “internal leadership struggles” and “corruption scandals.”

Corruption and bribery scandals aside, these days, FIFA’s requirements for holding the World Cup would break the bank of most countries. “In addition to appropriate infrastructure, tax preferences, and various hospitality services, FIFA requires the host country to have eight modern stadiums, each with a minimum capacity of 40,000, to include one stadium for the opening match with at least 60,000 seats and another for the finals of 80,000 capacity.”

Circus Maximus examines both the short-run and long-run economic impacts of countries bidding for and hosting mega-events. “Short-run” costs include the bidding process, the opening and closing ceremonies, the building of additional sports venues and related infrastructure, the disruption of local businesses by an “intense period of construction,” security costs and cost overruns. The benefits tend to be more ephemeral. Zimbalist recognizes that “the mood and spirit of the local population tend to be uplifted,” at least during the run-up to and the event itself.

Long-run economic impacts include countries left with “white elephants” – massive, unused stadiums – which cost billions to build and millions to maintain, and a mountain of debt that must be paid back over a 10- to 30-year period. Zimbalist concludes that, “In both the short and the long run, hosting a mega-sports event is likely to prove a present and future burden rather than a benefit to the host country’s economy.”

The indictments of FIFA officials, and the resignation of its president, open the door to possible reforms. Zimbalist discusses “a variety of options for FIFA and the IOC to lessen the burden on their hosts.” He points out that “It is questionable, however, whether as monopolies, with little competitive challenge in the mega-event marketplace, they will yield much of their market power.” It is wishful thinking to believe that big money interests and politics will not continue to be the deciding factor determining which countries host future World Cups and which host the Winter and Summer Olympics.