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Tim Harcourt is a professional economist specialising in international trade and labour economic issues in the Asia Pacific region and in the emerging economies. Tim's passion is Australia's engagement with the global economy and the challenges and opportunities it offers business and the Australian community as a whole.

Tim has broad experience in public policy and in communicating international economic issues widely in the community. He has held senior roles in both the public sector and private sector in Australia and internationally and in the community and education sectors. In Australia he has worked for the Reserve Bank of Australia, Fair Work Australia, the Australian Council of Trade Unions (ACTU and the Australian Trade Commission (Austrade).


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Beyond Our ShoresEssays on Australia and the Global Economy By Tim Harcourt, Chief Economist, Australian Trade Commission
Going The DistanceEssays on Australia and the Global Economy: 2004-2008 By Tim Harcourt, Chief Economist, Australian Trade Commission

Soccernomics – the Economics of the World Cup

Posted by on June 1st, 2014 · Publications

Soccernomics – the Economics of the World Cup

By Tim Harcourt*

The Airport Economist, Australian School of Business, UNSW.

We are just a few days away from the long awaited FIFA World Cup in Brazil – the most watched sporting event in the world. Like the Olympics it happens every four years since it began in 1930 and this time the event has been controversial because of protests against the hosting of the World Cup (and Rio Olympics in 2016) by local Brazilians and most recently by suggestions of corruption in FIFA’s decision to hand the 2022 World Cup to Qatar.

As usual, most economists are soccer fans (soccer is known as football in most countries but soccer in North America, Australia, New Zealand and South Africa) and have been analysing the economic impact of the Cup, especially as they have to justify watching the games on TV over the next four weeks or so at the same time as they are analysing shares and commodity prices. But they needn’t be too sheepish about it, as sport is a big deal in economic terms and the business of the world cup has become one of the most scrutinised set of international transactions you’ll ever see (or not see).

And whilst they call economics the dismal science no one ever said you shouldn’t study an industry like sport (or art, music and entertainment) just because it is pleasurable.

After all soccer football, or ‘the beautiful game’ transcends cultures and national borders, has been the subject of economic diplomacy and the odd dispute, and touches millions of people on this planet, for better or for worse. As the Washington based journalist Franklin Foer explains in his seminal work How Soccer explains the world soccer asthe world game’,  can be used to explore the Jewish question, Hooliganism, Islam, Oligarchs, the American culture wars and many more topics loosely based around globalisation. Sure, he hasn’t mentioned how soccer can explain the fiscal cliff, the budget emergency or global warming but give the guy some time and I am sure he will in his sequel.

But whilst not being as ambitious as Foer’s treatise we can ask some basic questions on the economics of soccer.

First, it is clearly a big deal for Brazil to host the world cup again, for the first time since 1950, to much fanfare and riots, but is there a world cup effect? Is it good for the host country economy? Why are Brazil taking it on, and then the Olympics in Rio in a unique double header? What will the hosting of the World Cup do for Brazil’s global standing?

There’s no doubt that Brazil went for the hosting rights because of the prestige it would bring and would help their claim to be the world’s next economic superpower. After all they are the world’s 5th largest economy by population and the seventh (on a purchasing power parity – or ppp – basis) or sixth (on a US dollar basis) largest country in the world, accounting for between 3 and 3  ½  per cent of world output.

And the world cup is a big deal, according to Goldman Sachs, 250 million people play soccer football regularly in more than 200 countries and since the first FIFA World Cup was hosted in Uruguay in 1930, over 70 countries have participated in various qualifying rounds. But as the protestors point out, if resources are allocated away from health and education to build stadia, or of god forbid, something went wrong,

it could damage Brazil’s prestige just 2 years ahead of the Rio Olympics in 2016.  Brazil had the reputation of being “The country of the future, and always will be,” the successful hosting of the World Cup in 2014 and Olympics in 2016 would do much to bury that (perhaps unfair) perception.

Second, if there is an economic gain from hosting the world cup, how about winning it? Remember, in 1950, 200,000 people jam packed the newly built Maracana stadium in Rio de Janeiro, and Brazil just needed to draw to win the Cup. But they lost, to their neighbour Uruguay on a day that shocked the nation, and ruined the life of the poor Brazilian goal keeper who happened to be custodian of the national team on that day.

According to Goldman Sachs, a World Cup win does give a country a boost on the stock market. All the winners since 1974, have outperformed in the post final month with the exception of Brazil in 2002, that had been going through a financial crisis as was near neighbour Argentina (see my blog Don’t buy from me, Argentina). The victor outperforms the global market by 3.5 per cent in the first month, then it tails off, and for the host nation out-performance is 2.7 per cent but it tails off too, and can even under-perform in three months. Apart from the stock market, the economic impacts can be positive if the host nation uses the major event to bring forward much needed infrastructure (as in the Sydney Olympics in 2000), provides a legacy to a local area (East London in 2012 via Westfield Stratford and so on) or to showcase its global engagement to the world (Seoul as Olympic host in 1988 signalled it transformation from closed ‘hermit’ economy to advanced North East Asian global ‘hub’ of trade and commerce). In addition, there are networking effects of hosting the games or the Cup, Austrade’s famous ‘Business Club Australia’ model allowed exporting small and medium sized enterprises (SMEs) to get recognition and access to business partners and investors at the Sydney Olympics in 2000 and beyond. A famous example is ‘Rock star’ architect John Bilman, of PTW architects who built the watercube at Beijing in 2008 as a result of contacts made at Sydney 2000.

Third, what will the World Cup do for Brazilian-Australian relations? As we found in our book Great Southern Lands – building ties between Australia and Brazil, we’ve neglected Brazil for some time, as Australia looked to London whilst Brazil looked to Lisbon historically. But now as Brazil has had better economic progress than the ‘lost decades’ of the 1970s and 1980s, and has plenty of economic suitors Australia will need to do more than just woo the Girl from Ipanema if it wants to succeed in Brazil. Areas of potential collaboration include resources and agriculture, transport, better cities (urban renewal), renewable energy, education, arts and popular culture and of course sport!

Will the World Cup help with many Australians going to Brazil for the first time to support the Socceroos? One interesting fact from  the Goldman Sachs report was that amongst foreign buyers of World Cup tickets, Australians bought 41,000 or 41k tickets making it  second only to the USA (154 k), and ahead of football mad England (38 k) and nearby Colombia (33 k). Whether it is the strength of the Aussie dollar or the enthusiasm of Brazilian based Australians like Shannon Powell of the Global Foundation, who has been holding fabulous functions for the Socceroos, that’s an open question. It could be that the majority of Australians saw the World Cup as the perfect reason for a once in a lifetime extended holiday to Brazil. Even the famous committed unionist, the ASU’s Sally McManus is taking a break from her famous industrial and political campaigns to take a holiday in Brazil. It turns out she’s a soccer tragic as well as a committed labour activist.

Fourth, how with the World Cup impact on Australia’s trade and investment ties with the rest of Latin America? Chile, Peru, Colombia, Argentina etc.? As I found in in the just released publication, Latin lessons – Australia and Latin America face the Asia Pacific Century, the Andean countries of Chile, Peru and Colombia have been happy hunting grounds for Australian exporters and investors, particularly in resources, energy and education. The World Cup may draw in a bit of extra business, especially as Qantas flies to South America through Santiago, but I expect that business will go on whatever happens in Brazil this month.

And finally what will the World Cup mean for the business of sport in Australia? As I have been finding in researching my forthcoming book, Footynomics, on the battle of the football codes in Australia, there has been a time when the AFL, NRL and Australian Rugby Union officials were sort of hoping for the Socceroos not to qualify for the World Cup, because it would awaken ‘the sleeping giant’ and they’d lose their talent – on and off the field – to Australia’s fledgling soccer code.  Now given that Australia has made the World Cup three times in a row, Germany in 2006, South Africa in 2010 and now Brazil in 2014, will they be hoping for a quick exit for the Socceroos?

I think we would expect the rival football codes to want the Socceroos to do well at least out of national pride and professional respect. The big question is whether the latest scandal rocking FIFA in handing the 2022 World Cup to Qatar, with accusations of bribes and breaches of occupational health and safety and actual workplace deaths and might shake things up and bring Australia back into the picture as an alternative host. Then we would see a battle of the football codes but following a successful Australia 2022 not Brazil 2014.

*Tim Harcourt is the JW Nevile Fellow in Economics at the Australian School of Business, in Sydney Australia and author seven books on the international economy including the international business bestseller The Airport Economist.

His next book is titled: Footynomics – the business of sport.












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