Politicians are living in a fantasy land when it comes to the economics of major events, says writer Chris Berg on The Drum. He was writing about The Gold Coast hosting the Commonwealth Games. The comments apply equally to Hawthorn/North Melbourne in Tasmania ...
Poor Gold Coast. Acting Queensland Premier Andrew Fraser told reporters after the city won the right to hold the 2018 Commonwealth Games over the weekend that the economic benefits would be “priceless”.
That’s right: the Queensland Treasurer suggested that the financial gain for the Gold Coast was completely unquantifiable.
Politicians are living in a fantasy land when it comes to the economics of major events.
Evidence that international sporting festivals provide any economic benefit to their host is almost non-existent. The games will discourage as much economic activity in the Gold Coast as they will boost. Probably more.
We have enough serious, scholarly, dispassionate studies of major events to be strident here. Winning the Commonwealth Games is nothing to celebrate. It is bad news for the Gold Coast.
Of course that is not how the Games bid has been pitched to voters.
Anna Bligh has argued the bid is “vitally important for the future of the Gold Coast”. Fraser may believe the benefits are priceless, but the Government and the bid team have been spruiking an economic benefit to the city of between $1.4 billion and $2 billion (naturally, the Government prefers the higher number).
According to comments by the bid chair Mark Stockwell late last year, the Games will also create 24,000 jobs. In Queensland Government press releases, that projection has become a nice round 30,000 jobs. One press release is higher again, and weirdly specific: 33,540 jobs between 2015 and 2020.
These figures are apparently based on a “feasibility study”, which the Government commissioned. The study is not available for public scrutiny.
It doesn’t have to be. We already know it’s wrong.
In their 2008 paper “Do Economists Reach a Conclusion on Subsidies for Sports Franchises, Stadiums, and Mega-Events?”, the economists Dennis Coates and Brad R. Humphreys survey the “large and growing” peer-reviewed literature on major sporting events.
There is an overwhelming consensus among academic economists that no tangible economic benefits from subsidising events, stadiums, or sports franchises exist. None at all. In fact, some papers have found substantial losses from hosting these big national or international sport festivals.
After all, major events are not all economic boom. They are disruptive. Roads are closed. Residents stay away; when locals might have gone out for other entertainment, they stay home fearing crowds. Businesses which cannot take advantage of the visitors see their sales slump.
Major events are not even unambiguously positive for the hospitality industry. One study failed to find any statistically significant relationship between the US Super Bowl – which moves from city to city each year within the same country and provides a convenient natural experiment for major sporting events – and hotel occupancies or retail sales.
Infrastructure gets built, sure, but not necessarily the most useful infrastructure. Events distort spending priorities. Stadiums have only limited uses once the event is over. Transport designed to ferry thousands to an event only held once might not be the most useful transport once fans go home (and why governments don’t do their job and build needed infrastructure until a major event forces them to do so is beyond me).
Add these problems to the large amount of taxpayers’ money used to directly finance major events, and the economic case slips away very quickly.
One academic analysis of the 1994 World Cup in the United States estimated the host cities lost up to $9.3 billion.
But beforehand the boosters were predicting it would increase economic activity by $4 billion.
Every single Commonwealth Games, World Cup or Olympics is matched by a consultancy report forecasting the huge numbers of jobs that will be “created”, the flood of tourism which will be unleashed, and the massive infrastructure investment that will be sparked.
Anna Bligh launched Queensland’s bid for the Commonwealth Games in August 2008. The feasibility study came well after. She told parliament in June 2009 she had “recently” agreed to commission the study, but the Premier was already talking up all the glorious new jobs it would bring. You might say that was jumping the gun. It wasn’t. It was a study commissioned by a Government for a major event. Of course it was going to find a squillion jobs would be created.
Last year the Gold Coast Business News decided the benefits of the Games so concrete, the reverse must be true as well. They titled an article on the bid “Unsuccessful Games bid could cost Gold Coast $2B”. Sounds serious.
What happens from now is all very predictable. Tourism lobbyists will spend the next seven years talking up the event. A few years after the Games have ended, and once it is blindingly obvious the influx of long-term tourism dollars has not arrived, they will blame the Government for “failing to capitalise” on the global goodwill.
Then everybody will move onto bidding for the next event, armed with fresh new consultancy reports and suffering amnesia.
Such is the fantasy world of major events.
Chris Berg is a research fellow with the Institute of Public Affairs. Follow him on Twitter @chrisberg. First run on The Drum. Reproduced here with permission.