The high cost of sporting glory

Events such as the World Cup and the Olympics are not the economic juggernauts that their promoters

There is no doubt that the World Cup has been a joyous party for those lucky enough to attend. There is also no doubt that it has been a bon­anza for Fifa, football's governing body. The commercial income accruing to Fifa will come to about £2.2bn for TV rights, sponsorship and merchandising, while an estimated £800m has been spent on organising the tournament and £700m on local development projects.

Fifa, therefore, generates a tidy profit of £700m, which it either retains to promote its own pet projects or disburses to national football associations: a significant bargaining chip in the hands of its 24-man executive committee. In 2004, the projected cost to the South African taxpayer for hosting the finals was R2.3bn, or £200m (the bid book was lost for years until the Mail and Guardian posted it online in June); the current figure is said to be R33bn (£3bn). Fifa does not pay for the stadiums, but gets to put its brand all over development projects in the host country. And what does South Africa get in return for its investment?

The organisers claim that the event will produce an economic stimulus of R55bn (£4.8bn), generating in excess of 300,000 additional foreign tourists and promoting growth across the economy. Similar claims have been made for previous World Cups and other major sporting events, especially the summer Olympic Games. Politicians seem especially fond of claiming that major events bring significant economic benefits. This case rests on two foundations: first, that the building of stadiums and related infrastructure will boost the construction industry, with knock-on effects into the wider economy; second, that there will be a large influx of foreign visitors.

Eye candy

The problem with the first claim is that it is predicated on the assumption that the resources required for construction are lying around idle, waiting for something to do. In reality, modern infrastructure construction requires skilled labour and expensive resources. The question is not whether construction generates income; it is whether this particular form of construction puts resources to best use. It is not difficult to see that the needs of a developing country such as South Africa would be better met by building roads, houses and related infrastructure in the townships rather than building big stadiums. As with the Olympics, facilities for the World Cup are likely to be little used after the event. It's like building a bridge that is going to be used only once.

Take the development of Green Point in Cape Town at a cost of R4.5bn (£400m): the stadium will have hosted just eight games by the end of the tournament. It does offer spectacular views of Table Mountain, but remember just how much this eye candy cost. The original plan was to upgrade the existing stadium in Athlone, at an estimated cost about R1.7bn (£150m). The Athlone redevelopment was attractive because the facility is located in the poor Cape Flats and could have triggered public-sector spending in an underdeveloped area while providing a long-term facility for football fans.

Green Point, by contrast, is located in an affluent area and the mostly white sports fans there are already well provided for in the sports that interest them: rugby and cricket. The local authority had developed the Athlone plan with the South African government. It came into question when Fifa's president, Sepp Blatter, visited the Cape, after an advance delegation realised what a superb TV image a stadium at Green Point would provide. A dubious case was made that Athlone would not provide enough seats, and the semi-final promise was dangled in front of the organising committee. The result: £400m for a few TV shots.

It is questionable whether developing stadiums is a good use of South African government revenue, but the absurdity of the Green Point white elephant seems beyond doubt. Similar questions were raised about the Moses Mabhida Stadium in Durban, which cost R3.1bn (£270m). Local housing activists have bemoaned the waste of resources when so many ordinary people remain without basic facilities. The question of visitor numbers is similarly problematic. It sounds as if the event ought to bring a tourist bonanza, but the records from previous tournaments provide little evidence of any. Take Germany, for example. In June 2006, hotel bookings for overnight stays increased by 1.4 million compared to the previous June - which sounds impressive, until you realise that stays were significantly down on the previous year in May and August 2006, and that 2005 overall was a bad year. The entire 2006 overnight stay figure was only slightly higher than that recorded in 2001. Thus, the World Cup did little to boost German tourism that had stagnated after the 11 September 2001 attacks.

The decision to attend a World Cup hinges on complex factors. Many people who would have visited a location anyway choose to reschedule their trip to coincide with the event. Worse still, others will avoid visiting the country while the event is on. In 2003, there were 14 million visitors to Greece, but in 2004, when it hosted the Olympics, only 13 million. A better comparison with South Africa is the Japan-South Korea World Cup, which was some distance from the main sources of affluent, travelling fans. Japan had an increase in visitor arrivals in June 2002 of 37,646 over the previous year. South Korea suffered a decline of 56,864. South Africa expected a tourist uplift from Europe and the US; experience suggests disappointment.

In 2004, when South Africa was awarded the World Cup, there was talk of visitor numbers as high as 600,000 from people connected to the bid. By last year, Grant Thornton, as consultant to the organising committee, was still anticipating 483,000 visitors, but down­graded its forecast to 373,000 in the spring. Even this number sounds optimistic; hotels in Durban, Cape Town and elsewhere have been reporting occupancy rates in the region of 10-30 per cent, rather than the expected 65-75 per cent. Journalists have been talking about how quiet it is outside the stadiums. Demand for tickets within South Africa and from the rest of Africa has been particularly disappointing and some of the group matches were played in half-full stadiums, as if to emphasise what a waste of money much of the investment has been.

To put it in perspective, visitor numbers from outside Africa totalled 331,000 in June and July last year, while visitors from other African nations exceeded 1.2 million. So it looks as if numbers of tourists to South Africa will be little different from previous years. This is a financial nightmare for South African commerce, including large numbers of small businesses that invested in facilities to meet a much higher level of demand.Yet none of this should come as much of a surprise: if the South Africans had asked for an objective view backed up by data five years ago, they could easily have got it.

So, why are such inflated and misleading claims presented by governments and organisers? The answer is that Fifa and the International Olympic Committee (IOC) are monopolists selling the rights to the most attractive sports events on the planet and, like any good monopolist, they are not prepared to give their property away cheaply. That is why they organise bidding contests among potential host nations. Setting political rhetoric aside, what wins you the bid is the promise to lay on lavish games to the greater glory of Fifa and the IOC, largely at the public expense. These events could be self-funding, but then they would not be so lavish. Fifa and the IOC demand a government guarantee to underwrite the staggering cost. To justify this extravagance, politicians cover themselves by claiming that there is an economic benefit - a quite breathtaking refusal to face the facts.

Voodoo economics

In many cases, one might say that this does not really matter. There is good evidence that the public at large derives a significant feel-good factor from hosting major events and so is quite willing to subsidise them. Wealthy nations such as Germany and the UK can afford (more or less) to cover the cost if that is what people want. And, in the light of the banking bailouts, the subsidies no longer look so huge. Moreover, there is reason to believe that the public is not fooled by the organisers' voodoo economics. When it was announced in 2007 that the cost of the 2012 Olympic Games in London would be closer to £9bn than the original estimate of £2.4bn, few batted an eyelid.

But with South Africa, the issue is more serious. The UK government spends about £80bn annually on education, whereas South Africa spends about £12bn. The UK is spending a sum equal to just over 10 per cent of its annual education budget on London 2012, South Africa about 25 per cent to host the 2010 World Cup. Scarce resources are being diverted from activities that have much greater value added.

This is just not good enough. Historically, most major sports events have been awarded to wealthy nations that can afford to pay for them. Awarding the World Cup to a developing nation is an important step forward, but this achievement should not be bought by using essential resources to provide VIPs with freebies. There is no doubt that these events could be less lavish and remain equally entertaining. Most of us watch the World Cup on TV - we will be watching what is happening on the grass, and not from the blimp, or even the terraces.

There are many ways in which a more equitable World Cup could be organised, but most reforms require a more open and democratised governance at the top. Both Fifa and the IOC could choose to award their prestigious prizes not on the basis of extravagant public spending, but on sporting merit. For example, the nation that did the most to promote participation in sport could be awarded the right to host these events. Nor need they discriminate against the poor, as the key measure would be growth, not the base level at which countries start. However, such reforms require a commitment to pursuing purely sporting objectives, rather than the current system of rampant commercialism for the good of organisations such as Fifa. Football is meant to be the beautiful game, not the bankrupt game.

Stefan Szymanski is professor of economics at Cass Business School and co-author of “Why England Lose" (HarperSport, £7.99)

This article first appeared in the 05 July 2010 issue of the New Statesman, The cult of the generals

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The English Revolt

Brexit, Euroscepticism and the future of the United Kingdom.

English voters have led – some would say forced – the United Kingdom towards exit from the European Union. Was this an English revolt, the result of an ­upsurge over decades of a more assertive, perhaps resentful, sense of English identity? At one level, clearly so. Surveys indicate that individuals who most often describe themselves as “English”, and regions where this is common, were more inclined to vote Leave on 23 June. Some of these are poorer regions where marginalised people think that their voices are more likely to be heard in a national democracy than in an international trading bloc, and for whom patriotism is a source of self-respect. But it would only make sense to regard Leave as essentially an English reaction if discontent with the EU were confined to England, or specifically linked with feelings of Englishness.

In fact, negative opinions about the EU, and especially about its economic policy, are now more widespread in other countries than they are in England. Polls by the Pew Research Centre last month showed that disapproval of the EU was as high in Germany and the Netherlands as in Britain, and higher in France, Greece and Spain. Though aggravated by the 2007-2008 crash and enforced policies of austerity, a decline in support was clear earlier. France’s referendum of May 2005 gave a 55 per cent No to the proposed EU constitution after thorough debate, and a now familiar pattern emerged: enthusiastic Europeanism was confined to the wealthiest suburbs and quarters of Paris, and the only professional groups that strongly voted Yes were big business, the liberal professions and academics.

Going far beyond the atavistic and incoherent English revolt that some think they discern, our referendum result is partly a consequence of transnational political phenomena across the democratic world: the disaffection of citizens from conventional politics, shown by falling turnouts for elections, shrinking party membership and the rise of new, sometimes extreme political movements; as well as the simultaneous detachment of a professional political class from civil society, and its consequent retreat into a closed world of institutions.

The EU embodies these phenomena in uniquely acute form. In several cases its central bodies have opposed – or, if one prefers, have been forced to deny – democratically expressed wishes. In Greece and Italy, the EU has enforced changes of government and policy, and in Denmark, Ireland and the Netherlands it has pressed countries to ignore or reverse popular referendums. Its own representative body, the European Parliament, has gained neither power nor legitimacy. Crucial decisions are taken in secret, making the EU a hiding place for beleaguered politicians as well as a source of lavish financial reward for insiders. In the words of the historian John Gillingham, Europe is now being governed by neither its peoples nor its ideals, but by a bank board. This is not the “superstate” of Eurosceptic mythology. Though it drains power and legitimacy away from national governments, it is incapable of exercising power effectively itself, whether to cope with short-term emergencies such as an inflow of refugees, or to solve chronic failings such as the creation of mass unemployment in southern Europe. The result is paralysis, the inability either to extricate itself from failing institutions or to make them work.

If popular discontent with the EU continues to increase (and it is hard to see how it could not) sooner or later there will be some unmanageable political or social crisis. The response of too many supporters of the EU is to screw the lid down tighter, including now by promising to make life difficult for the United Kingdom, pour décourager les autres. This is the organisation – unpopular, unaccountable, secretive, often corrupt, and economically failing – from which our decision to depart apparently causes people to weep in the streets.

***

Why this decision? Why in Britain? The simplest and perhaps the best answer is that we have had a referendum. If France, Greece, Italy and some other countries had been given the same choice, they might well have made the same decision. But of course they have not been and will not be given such a choice, barring severe political crisis. This is most obviously because countries that have adopted the euro – even those such as Greece, for which the IMF has predicted high unemployment at least until the 2040s – have no clear way out.

I make this obvious point to emphasise that the immediate explanation of what has happened lies not only and not mainly in different feelings about the EU in Britain, but in different political opportunities and levels of fear. The contrasting votes in Scotland and Northern Ireland have particular explanations. Scottish nationalists – like their counterparts in Catalonia – see the EU as an indispensable support for independence. Northern Ireland sees the matter primarily as one affecting its own, still tense domestic politics and its relations with the Republic. In a European perspective, Scotland and Northern Ireland are the outliers, not England and Wales. Indeed, Scotland’s vote makes it stand out as one of the most pro-EU countries in Europe. If ever there is another referendum to see whether Scots prefer the EU to the UK, it will show whether this level of support for the EU is solid.

If England is exceptional, it is not in its disaffection from the EU, nor in the political divisions the referendum vote has exposed (if France, for instance, had such a vote, one could expect blood in the streets). Rather, its exceptional characteristic is its long-standing and settled scepticism about the European project in principle, greater than in any other EU country. Every ­member has a specific history that shapes its attitude to the theoretical idea of European integration. As John Gillingham, one of the most perceptive historians of the EU, describes its beginnings: “to the French [supranationalism was] a flag of convenience, to the Italians it was preferable (by definition) to government by Rome, to the Germans a welcome escape route, and to the Benelux nations a better choice than being dominated by powerful neighbours”.

Subsequently, for the eastern European states, it was a decisive step away from communist dictatorship, and for southern Europe a line drawn under a traumatic history of civil conflict. There is also a widespread belief, powerful though fanciful, that the EU prevents war between the European states. All these are important reasons why there remains considerable support for unification as an aspiration. But all these reasons are weaker, and some of them non-existent, in Britain, and especially in England. The simple reason for this is that Britain’s experience of the 20th century was far less traumatic. Moreover, during that time loyalty to the nation was not tarnished with fascism, but was rather the buttress of freedom and democracy. Conversely, the vision of a European “superstate” is seen less as a guarantee of peace and freedom, and rather as the latest in a five-century succession of would-be continental hegemons.

Given all this, an obvious question is why the United Kingdom ever joined in the European project in the first place. The answer helps to explain the country’s subsequent lack of enthusiasm. Its first response to the creation of the European Economic Community in 1957 was not to join, but to agree to establish a separate European Free Trade Association (Efta) in 1959 with Austria, Denmark, Norway, Portugal, Sweden and Switzerland; over the next three decades the seven founder members were joined by Finland, Iceland and Liechtenstein. This worked efficiently, cheaply and amicably, and, in time, Efta and the EEC would doubtless have created trading arrangements and systems of co-operation. But then the historic mistake was made. Efta was considered too small to provide the diplomatic clout craved by Whitehall at a time of severe post-imperial jitters. A cabinet committee warned in 1960 that “if we try to remain aloof from [the EEC] – bearing in mind that this will be happening simultaneously with the contraction of our overseas possessions – we shall run the risk of losing political influence and of ceasing to be able to exercise any real claim to be a world Power”.

Besides, Washington disliked Efta as a barrier to its aim of a federal Europe, and the Americans put heavy pressure on London to apply to accede to the Treaty of Rome, which it duly did in August 1961. “It is only full membership, with the possibility of controlling and dominating Europe,” wrote an optimistic British cabinet official, “that is really attractive.”

As the former US secretary of state Dean Acheson (one of the early backers of European integration) put it, in a now celebrated comment in December 1962: “Great Britain has lost an empire, and has not yet found a role. The attempt to play a separate power role . . . apart from Europe . . . based on a ‘special relationship’ with the United States [or] on being the head of a ‘Commonwealth’ . . . – this role is about played out.”

Acheson’s words long haunted British policymakers; perhaps they still do. And yet Britain remains one of the half-dozen strongest and most assertive states anywhere in the world, just as it has been for the past three centuries.

To fear of diplomatic marginalisation was added fear of economic decline. A government report in 1953 warned of “relegation of the UK to the second division”. Over the next 30 years there was a chorus of dismay about “the sick man of Europe”. Belief that EEC membership at any price was the only cure for Britain’s perceived economic ills became the orthodoxy in official circles: Britain was “the sinking Titanic”, and “Europe” the lifeboat.

So, on 1 January 1973 Britain formally entered the EEC with Denmark and Ireland. Other Efta members remained outside the Community – Switzerland and Norway for good. Harold Wilson’s 1975 referendum on whether to stay in the EEC in effect turned on Europe’s superior economic performance – which, though no one realised it at the time, had just ended.

This memory of apparent British economic weakness half a century ago still seems to weigh with older Remainers. Yet it was based on a fundamental misconception: that European growth rates were permanently higher than in a supposedly outdated and declining Britain. In reality, faster growth on the mainland in the 1950s and 1960s was due to one-off structural modernisation: the large agricultural workforce shifted into more productive industrial employment. From the mid-1940s to the early 1970s this gave several European countries “windfall growth” at a higher rate than was possible in Britain, which since the 19th century had had no large agricultural sector to convert. By the early 1970s, once that catching up was finished, European growth rates became the same as, or slightly lower than, Britain’s. When measured over the whole half-century from 1950 to 2000, Britain’s economic performance was no different from the ­European norm. By the mid-1980s, growth was faster than in France and Germany, and today Britain’s economic fundamentals remain strong.

Slower European growth lessened the perceived attractiveness of EU integration. In 1992, on Black Wednesday (16 September), hesitant participation in the European Exchange Rate Mechanism led to forced devaluations in Finland, Sweden, Italy, Spain and, finally, Britain. This was a huge political shock, though an economic boost.

Black Wednesday subsequently made it politically difficult for Britain to join the eurozone – allowing us a narrow escape, attributable more to circumstance than to policy, as vocal political and economic lobbies urged joining.

Moreover, Britain’s trade with the rest of the EU was declining as a proportion of its global activity: as Gordon Brown observed in 2005, 80 per cent of the UK’s potential trade lay outside the EU. The EU’s single market proved not very effective at increasing trade between its members even before the crash of 2007-2008, and prolonged austerity thereafter made it stagnant. Consequently, in the 2016 referendum campaign, more emphasis was placed on the dangers of leaving the single market than on the precise benefits of being in it.

But the days when Britain seemed the Titanic and Europe the lifeboat were long gone. On the contrary, Britain, with its fluid and largely unregulated labour market, had become the employer of last resort for the depressed countries of the eurozone. The sustained importation of workers since the 1990s had become, for a large part of Britain’s working class, the thing that most obviously outweighed whatever legal or economic advantages the EU might theoretically offer.

***

What galvanised the vote for Brexit, I think, was a core attachment to national democracy: the only sort of democracy that exists in Europe. That is what “getting our country back” essentially means. Granted, the slogan covers a multitude of concerns and wishes, some of them irreconcilable; but that is what pluralist democracy involves. Britain has long been the country most ­resistant to ceding greater powers to the EU: opinion polls in the lead-up to the referendum showed that only 6 per cent of people in the UK (compared to 34 per cent in France, for instance, and 26 per cent in Germany) favoured increased centralisation – a measure of the feebleness of Euro-federalism in Britain.

In contrast, two-thirds wanted powers returned from the EU to the British government, with a majority even among the relatively Europhile young. This suggests a much greater opposition to EU centralisation than shown by the 52 per cent vote for Brexit. The difference may be accounted for by the huge pressure put on the electorate during the campaign. Indeed, arithmetic suggests that half even of Remain voters oppose greater powers being given to the EU. Yet its supporters regard an increase of EU control over economic and financial decisions – the basics of politics – as indispensable if the EU is to survive, because of the strains inherent in the eurozone system. This stark contradiction between the decentralisation that many of the peoples of Europe – and above all the British – want to see and the greater centralisation that the EU as an institution needs is wilfully ignored by Remain supporters. Those who deplore the British electorate’s excessive attachment to self-government as some sort of impertinence should be clear (not least with themselves) about whether they believe that the age of democracy in Europe is over, and that great decisions should be left to professional politicians, bureaucracies and large corporations.

Some have dismissed the Leave vote as an incoherent and anarchic protest against “the establishment”, or as a xenophobic reaction against immigrants. Some of the media in Britain and abroad have been doing their best to propagate this view. Yet xenophobia has not been a significant feature of British politics since the 1960s, and certainly far less so than in many obedient EU member states, including France, Germany, Greece and the Netherlands. As for the anti-establishment “revolt”, this emerged when parts of the establishment began to put organised pressure on the electorate to vote Remain. Would-be opinion-formers have hardly covered themselves in glory in recent weeks. They have been out of touch and out of sympathy with opinion in the country, unwilling or unable to engage in reasoned debate, and resorting to collective proclamations of institutional authority which proved embarrassingly ineffective.

Worst of all, their main argument – whether they were artists, actors, film-makers, university vice-chancellors or prestigious learned societies – was one of unabashed self interest: the EU is our milch-cow, and hence you must feed it. This was a lamentable trahison des clercs. The reaction to the referendum result by some Remain partisans has been a monumental fit of pique that includes talking up economic crisis (which, as Keynes showed, is often self-fulfilling) and smearing 17 million Leave voters as xenophobes. This is both irresponsible and futile, and paves the way to political marginalisation.

The Queen’s call for “deeper, cooler consideration” is much needed. I recall Victor Hugo’s crushing invective against French elitists who rejected the verdict of democracy, when in 1850 he scorned “your ignorance of the country today, the antipathy that you feel for it and that it feels for you”.

This antipathy has reduced English politics to a temporary shambles. It is too early to say whether there will be some realignment of the fragments: One-Nation Toryism, Conservative neoliberalism, “new” and “old” Labour, the hibernating Liberal Democrats and Greens, the various nationalists and, of course, the unpredictable Ukip. When in the past there were similar crises – such as Labour’s rift over the national government in 1931, the Liberals’ split over Irish home rule in 1886, or the Tory fragmentation over the repeal of the Corn Laws in 1846 – the political balance was permanently changed.

***

Many Europeans fear that a breakdown of the EU could slide into a return to the horrors of the mid-20th century. Most people in Britain do not. The fundamental feature of the referendum campaign was that the majority was not frightened out of voting for Leave, either by political or by economic warnings. This is testimony to a significant change since the last referendum in 1975: most people no longer see Britain as a declining country dependent on the EU.

A Eurobarometer poll in 2013 showed that Britain was the only EU member state in which most citizens felt that they could face the future better outside the Union. Last month’s referendum reflected this view, which was not reversed by reiterated predictions of doom.

In retrospect, joining the Common Market in 1973 has proved an immense historic error. It is surely evident that we would not have been applying to join the EU in 2016 had we, like Norway or Switzerland, remained outside it. Yet the political and possibly economic costs of leaving it now are considerable. Even though discontent with the EU across much of Europe has recently overtaken sentiment in Britain, Britain is unique, in that, ever since the 1970s, its public has been consistently far less ­favourable to the idea of European integration than the electorate in any other country. Hence the various “opt-outs” and the critically important decision to remain outside the euro.

Now, by a great historic irony, we are heading towards the sort of associate status with the EU that we had in the late 1960s as the leading member of Efta, and which we could have kept. Instead, this country was led by its political elite, for reasons of prestige and because of exaggerated fears of national decline and marginalisation, into a vain attempt to be “at the heart of Europe”. It has been a dangerous illusion, born of the postwar declinist obsession, that Britain must “punch above its weight” both by following in the footsteps of the United States and by attaching itself to the EU.

For some, money, blood and control over our own policy were sacrifices worth making for a “seat at the top table”. This dual strategy has collapsed. In future we shall have to decide what is the appropriate and desirable role for Britain to play in the world, and we shall have to decide it for ourselves.

Robert Tombs is Professor of French History at Cambridge University. His most recent book is “The English and Their History” (Penguin)

This article first appeared in the 21 July 2016 issue of the New Statesman, The English Revolt