Wednesday, July 9, 2014

Soccer is just an illusion and we need to wake up to reality.

Everyone is fan of some kind of sport and football is one of the most popular sports in the world. As for me, I don’t care much for football. My sport of choice has always been economics with a side of politics.

I bet there would have been fewer economically illiterate people in the world if economics had been taught like this.

Anyway, I was on the bus on my way to work when I heard the Brazil-Germany game being announced on the radio. I didn’t pay much attention to it. Honestly, I don’t understand how anyone can be in the mood for anything else besides a strong cup of coffee at half past six in the morning. But I heard the score being announced.

Seven to nothing.”  (The game ended seven to one.)

I might not be a football fan, but even I know that that is not the kind of score that you hear very often. Especially when the losing side is Brazil.

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From what I have seen in the news, Brazilians appear to be in mourning. Although it is doubtful that Brazilians are going to begin to dislike football, it is quite likely that more and more Brazilians will begin to question the wisdom of having hosted the World Cup in the first place.

Brazil is now the seventh largest economy in the world and is one the BRIC economies that is a darling case study of successful developing economics. The problem with GDP rankings, however, is that looking at the GDP alone belies the other smaller, but not less important, economic details that often plague a country.

For example, Brazil has some of the highest tax rates in the world, has 35 pensioners for every 100 contributing workers despite the fact that 62% of Brazilians are under 29 years of age. It has also one of the most corrupt governments in the world. To make matters worse, Brazil will have to face the consequences of holding down government-regulated prices when it faces inflationary pressures in about a year or so. Others seem to take an even dimmer view of Brazil’s persistent rate of inflation.

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Despite all of these economic problems, however, the Brazilian government insisted on hosting the 2014 FIFA World Cup, which is estimated to have cost more than US$11 billion. As frightening as the price tag may be, though it is not reported so much now, even days before the games started, stadiums remained unfinished or did not meet safety standards. However, this doesn’t even begin to count the human costs (more on the human cost here and here) that were involved in hosting the games.

Considering the immense costs of the World Cup, it would seem that the promise of economic development that the World Cup brings to its host countries is a lie. This should not come as a surprise, however. The only reason why governments get involved in hosting the World Cup is that it is not profitable. If it were profitable, there would be no need for massive government subsidies, which these games really are.

However, it’s not just the World Cup that is a drain on the host country’s economy. The Olympics is another financial nightmare. Just ask the Greeks what they think about the 2004 Olympic Games (more about the cost of hosting the Olympics can be found here). It’s for such reasons that the residents of Munich sensibly voted NOT to host the 2022 Winter Olympics.

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The smartest thing that I have heard come out of this World Cup game was from Antonio Hipolito, a Brazilian man who works at a bookstore in a wealthy part of Rio, who said this right after the Brazil-Germany match:

Soccer is just an illusion and we need to wake up to reality.

It is sound advice that Brazilians should heed.

Now, how about that 17th Incheon Asian Games, which apparently has cost US$1.62 billion (whereby the cost of housing North Korean cheerleaders alone is estimated to cost up to ₩1.5 billion), and the 2018 Pyeongchang Winter Olympics?

It seems that Koreans might need to heed Senhor Hipolito’s advice, too.

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