Brazil paying a high price as it prepares for World Cup 2014

Maybe it’s just not worth it. ABr

Perhaps it is a matter of culture, possibly it is something to do with indifference, but sporting mega-events appear to be considerably less popular in Brazil than in the UK. Whereas a majority of the British public politely mumbled about the £10 billion cost of hosting the 2012 Olympic Games, the Brazilian public has felt compelled to flood on to the streets in protest at the cost of their $9 billion 2014 World Cup.

The comparison is, though, an unfair one; Brazil faces a “double-whammy”. The country is not just confronted by the challenges (and cost) of staging the world’s second largest sporting mega-event, it faces the almost immediate financial burden of having to stage its largest sporting mega-event too – the 2016 Olympic Games.

For any nation hosting such highly visible global events, it is inevitable that both the host nation and the event itself will become a conduit for countless disputes, debates and protests.

However, Brazil is especially significant for several reasons. It is the first World Cup since the emergence of the “Occupy” movement revolutionised the tactics and aspirations of protesters worldwide, and the country’s social media usage is vibrant and increasing. Despite a recent slowdown, rapid economic growth has raised issues ranging from equality to the governance and democracy of political processes. These sporting events are no longer just about the sport.

Sport and politics

World Cup winning congressman Romário is now a prominent critic of the 2014 tournament. Ricardo Stuckert/PR

Sport is increasingly hard to separate from politics and economics, such is the economic and financial scale of modern sporting mega-events. For instance, when Brazilian bus travellers discovered that FIFA was exempt from paying tax at the World Cup while at the same time they were being told they would have to pay higher fares, it was always going to cause problems.

These clashes raise some fundamental questions about the financing of sport that few countries around the world are convincingly dealing with. At the heart of the debate is one question: if a country is going to spend $9 billion, what should it spend it on and why?

Unfortunately, politicians (and sometimes whole nations) are easily seduced by the desire to host sporting mega-events. This means that in too many cases, bidding and hosting decisions are not based on rational, economic arguments. Rather, some spurious form of post-hoc rationalisation is typically employed, where economics is used to support decisions motivated more by political whim than anything else.

Doubters and doers

“The economic argument” (some might refer to this as “legacy”) has therefore risen to the forefront of debates around event bidding and hosting decisions. This has rapidly become the stuff of legend: a stand-off between the empire-builders and the naysayers.

Not all Brazilians dislike sporting mega-events. Here’s Pele at the 2012 Olympics, with Henry Kissinger. John Stillwell/PA

The empire-builders are typically those people and organisations that have a vested interest in the success of an event like the World Cup. These can include consultants, sponsors, suppliers, hospitality partners, even some media. For them, the bigger an event looks (at least in economic and financial terms), the better able they are to justify and explain their involvement in it.

This is especially the case if the sustainability of the core business in question depends on securing and successfully hosting sporting mega-events. At times, therefore, such people and organisations can be prone to making rather grandiose claims about the impact that sporting mega-events can have.

In the opposing corner, the naysayers often include academics and disgruntled pressure groups. They typically argue that event impacts are overestimated in the interest of big business, and that there is no compelling science to underpin the investments made in an event like the World Cup in Brazil.

Accurately identifying the economic impact of sporting events would require clear and consistent international standards of measurement. For the time being though, it is left for stakeholders to speculate and prevaricate, which often takes the debate in directions that are neither productive nor helpful.

Economics or finance?

One problem is that research often estimates event impact in financial terms rather than measuring it in more broad economic terms. This might seem like a semantic difference, but it is much more significant than that.

Economic costs, for instance, go far beyond the costs that a business or an accountant would ordinarily factor into an event bidding or hosting decision. Evidence shows that, when sporting mega-events come to town, land values often rise; resource prices increase; local people and organisations are crowded out of markets; crime rates rise; congestion increases, and so forth. Indeed, as the authorities in Brazil grapple with social unrest, it would be entirely worthwhile asking them whether they factored the cost of policing such unrest into their event hosting calculations. One suspects not.

Another area of concern in the economic impact debate is that too many studies emphasise the “economic benefits” of hosting events. In spite of what critics and cynics alike might claim, sporting mega-events do have positive impacts, especially in the form of short-term tourism (proven in several studies).

However, rather than highlighting just the benefits, we actually need to be examining “net economic benefit”. That is, the benefits minus the costs (still notwithstanding, of course, the fact that we should be measuring economic costs and benefits and not simply financial costs and benefits). The lure of benefit is therefore often a disingenuous one, as a statement of benefit without the attendant costs is entirely misleading.

Until such time that a globally determined set of parameters for measuring sporting mega-event impacts has been established, the empire builders, naysayers and others will persist in their jousting. If we could build a common measurement model, then it would make the economics of bidding and hosting a more open, transparent and better governed process. Decisions could be made on a more “like-for-like” basis, while the world’s taxpayers would be clearer in their minds about where the money comes from to fund events, what this money is being spent on, and what return they and their country will get.

For now though, as protesters and police battle in the tear-gas fog of Brazilian cities, policy makers and academics remain mired in the fog of sporting impact measurement, and no one is any the wiser.