Soccernomics (34 page)

Half the people you meet in Johannesburg have a scheme for 2010: buying apartments just to rent them out during the tournament, selling sausage and maize pudding outside stadiums, corralling peasant women to weave bead flags in the colors of all the participating teams. Much of South African conversation now is about such schemes, and in newspaper profiles, when a celebrity describes what he is working on, he generally adds, “The key thing is to be ready for 2010.” The year has become a magic number, like the Year of the Beast, or 1927.

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South Africans may sound as if they are on a collective space trip organized by the government and scheduled to end with a bump on July 12, 2010, the day after the final. However, they are merely expressing in extreme form a conventional belief: that hosting a big sports event can make a place rich. Whenever a country bids to host a World Cup or an Olympics, its politicians prophesy an “economic bonanza.” They invoke hordes of shopaholic visitors, the free advertising of host cities to the world’s TV viewers, the long-term benefits of all the roads and stadiums that will get built. No wonder that nowadays almost every country seems to want to host these events. The bidding to stage the World Cup of 2018 is the most competitive ever.

In fact, staging sports tournaments doesn’t make you rich at all. The reason countries are so eager to host is an altogether different one: hosting makes you happy. Strangely, though, the wannabe hosts don’t seem to understand their own motives.

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The 1989 movie
Field of Dreams
is a sentimental redemption story star-ring Kevin Costner as an Iowa farmer. Growing up the son of a baseball nut, the farmer had dreamed of being a baseball star. As an adult, he hears a voice telling him to build a baseball diamond on his cornfield.

“If you build it, he will come” is the film’s catchphrase. The moral: building stadiums where they do not currently exist is uplifting and good for you. This originally American idea has since spread to soccer in Europe.

There is in the US a small industry of “consultants” who exist to provide an economic rationale for “If you build it, he will come.” In almost any city in the US at almost any time, someone is scheming to build a spanking new sports stadium. The big prize for most American cities is to host a major league team, ideally an NFL franchise, but if that can’t be had, then baseball, basketball, or, if nothing else is going, ice hockey or at worst soccer. Hosting an American sports “franchise”

has a lot in common with hosting a World Cup. Both the franchise and the World Cup are mobile beasts. Their owners are generally willing to H A P P I N E S S

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move to whichever city or country offers them the best deal. In the US, owners of sports teams usually demand that the host city’s taxpayers pony up for a stadium, with lucrative parking lots thrown in. All this is then handed over to the franchise owner, who also gets to keep the money he makes from selling tickets. About seventy new major league stadiums and arenas have been built in the US in the past twenty years.

The total cost: $20 billion, about half of which came from the public. In New Orleans, for instance, the taxpayer paid for the Superdome but not for better levees.

In one typical case in 1989, seventy investors, including the son of the then American president, George H. W. Bush, paid $83 million for the Texas Rangers baseball club. The Bush group wanted a bigger stadium. Strangely for a phalanx of right-wing millionaires, it decided that local taxpayers should finance it. If that didn’t happen, the new owners threatened to move the Rangers elsewhere. The people of the local town of Arlington duly voted to increase the local sales tax by half a percent, raising the $191 million needed for the ballpark.

The president’s son George W. became the Rangers’ managing director. Mostly, this just meant being the official face of the club. He would sit in the stands during games handing out baseball cards with pictures of himself. When he ran for governor of Texas in 1994, he constantly cited his experience in baseball. There wasn’t much else on his CV at the time. He was duly elected, and decorated his Austin office with 250 signed baseballs.

In 1998 the Bush group sold the Rangers to Tom Hicks for $250

million. Most of the value was in the stadium that the taxpayers had built. Bush personally netted $14.9 million. He admitted, “When it is all said and done, I will have made more money than I ever dreamed I would make.” Meanwhile, he was already beginning to parlay his gov-ernorship into a bigger political prize.

So the trick for American club owners is to persuade the taxpayer to cough up for stadiums. This is where economists come in handy. Economists like to say that people respond to incentives. Well, economists certainly respond to incentives. Anyone hoping to persuade taxpayers to 238

pay for a stadium in the US commissioned an economist to write an

“economic impact” study. By a strange coincidence, these studies always showed that the stadium would make taxpayers rich. (One book describing this racket is aptly called
Field of Schemes
.) The argument typically went as follows: building the stadium would create jobs first for construction workers, and later for people who worked in it. Fans would flock in from all around (“If you build it, he will come”), and they would spend money. New businesses would spring up to serve them. As the area around the stadium became populated, more people would want to live there, and even more businesses (and jobs) would spring up. “The building of publicly funded stadiums has become a substitute for anything resembling an urban policy,” notes Dave Zirin in his
People’s History of Sports in the
United States
.

The “economic impact” study then typically clothes this model with some big numbers. If you put your mind to it, you can think up a total in benefits that runs into the billions, whatever currency you happen to be working in. Best of all, no one will ever be able to prove that number wrong. Suppose you promise that a stadium will bring a city economic benefits of $2 billion over ten years. If the city’s income (hard to mea -

sure in the first place) rises by only $1 billion over the decade, then, of course, it was something completely different (the world economy, say) that restricted the income. You could prove the original estimates wrong only if you could estimate how much economic growth there would have been had the stadium never been built—but this “counterfactual”

figure is unknowable, precisely because it is a counterfactual. The same economists soon branched out into writing studies that justified ever more extravagant spending on the Olympics.

It would have seemed rude to derail this industry with anything so inconvenient as the truth. But then along came Rob Baade. The quiet, courteous academic seemed an unlikely figure to be taking on the stadium lobby. After all, he is a former top-class athlete himself: at college, Baade captained the Wisconsin basketball team. When the white coach seemed antagonistic to the majority of black players, Baade found him-H A P P I N E S S

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self championing players against coach in what he describes as one of the most difficult years of his life.

Afterward he wanted to do graduate work in public finance, a branch of economics that usually involves many equations and few words. But he also wanted to coach basketball and to apply something of what he had learned while on the Wisconsin team. A colleague told him about a job at Lake Forest College, an idyllic little place just outside Chicago. To the dismay of some of his purist professors, he went to Lake Forest on a temporary appointment and ended up coaching there for eighteen years, while also rising to full professor of economics. He was a good coach, too: the year before he arrived the team had not won a single game, but within four years they were winning 85 percent of their games.

When you start out as an academic you try to write papers that will grab your colleagues’ attention. Baade used his own background to enter the economics of sports, then still almost virgin terrain. At a sem-inar in New York he presented a paper titled “The Sports Tax.” Journalists from the
New York Times
and the
Wall Street Journal
happened to be in the audience, and they zeroed in on what had been almost a throwaway line in his talk: public investment in stadiums does not provide a good return for taxpayers. As a coach himself, Baade might have been expected to join the stadium boosters. Had he done so, he could have earned himself good money in “consulting.” Instead, he went into opposition.

The Heartland Institute, a conservative think tank, asked him to write up his thoughts. There are few issues in American political life where the Right joins with an intellectual liberal like Baade, but the paper he published in 1987 laid out the problem clearly: “Contrary to the claims of city officials, this study has found that sports and stadiums frequently had no significant positive impact on a city’s economy and, in a regional context, may actually contribute to a reduction in a sports-minded city’s share of regional income.”

Baade had asked the awkward questions that stadium boosters always ignored. For instance, where would all the construction workers 240

for the new stadium come from? Wouldn’t they have jobs already, and therefore wouldn’t a shortage arise somewhere else? Worse still, as competition for their skills intensified, wouldn’t costs rise?

Once you start thinking of people as having alternatives rather than just standing around waiting for the stadium to arrive, the economics begin to look less appealing. For every dollar going in, there is probably a dollar going out somewhere else. In particular, if a city has to balance its budget, then spending more on stadiums must mean spending less on parks and schools. These lost jobs have to be counted against the stadium’s benefits. And if the city doesn’t balance its budget, isn’t it stor-ing up future burdens for taxpayers, who will have to forgo something, someday?

That is bad enough, but what if the stadium doesn’t produce the promised benefits? After all, most stadiums are used for only a few hours a week, and barely at all in the off-season. Even allowing for the occasional rock concert (and there is a limit to how many times Elton John can play in your town), most of the time the neighborhood around the stadium will be deserted. Nobody wants to live in a place like that.

The neighborhoods around Yankee Stadium or Shea Stadium hardly became desirable, for instance.

Nor did Baade believe that a stadium would draw in much spending from outside the city. Most out-of-town fans would buy a hot dog and beer, watch the game, and leave—hardly an economic bonanza. A mall, or a Cineplex, or even a hospital would generate more local spending.

Around the end of the 1980s other economists, too, began asking these awkward questions. However, Baade went one better. In order to show that the boosters’ numbers didn’t add up, he generated some numbers of his own. Perhaps he couldn’t measure the counterfactual, but he could get close by comparing economic growth in cities that had major league teams with those that didn’t. After all, he reasoned, if the boosters were right, then over time cities with stadiums must do better than cities without stadiums.

Baade examined data such as income per head and the numbers of new businesses and jobs created in various cities. The more he looked, H A P P I N E S S

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the less difference he found between the economic profiles of cities with and without stadiums. All this spending was evidently producing no benefit.

Gradually, people took notice. Other economists started to replicate Baade’s findings, and to find new ways to test the proposition that stadiums create wealth. “Antistadium movements” began in many American cities.

In the mid-1990s Baade was asked to testify before Congress. On the day of his testimony, Congress was also holding hearings on the Clinton Whitewater affair and on military intervention in Bosnia, but when the stadium hearings started, the other chambers emptied. One of the people in the room was Paul Tagliabue, commissioner of the NFL and someone all the congressmen wanted to be seen with. Powerful people like Tagliabue were getting quite irritated by Baade’s awkward facts.

Academic freedom is a cherished value of American universities, but, as Baade was starting to realize, so is making money. He recalls an old guy coming up to him after one meeting and saying: “You might be right, professor, but if I were you I would watch my back. You’re getting in the way of a whole lotta commercial projects.” A university seldom likes seeing its employees upset local politicians and businesspeople.

Lake Forest College always supported Baade, but at times it would have been convenient had he thought differently.

He kept on telling the truth regardless. Among economists, often not the sportiest of types, he developed a special credibility as a former athlete. This sometimes came in handy, like when a questioner in a public debate asked, “No disrespect, professor, but what does an economist like you know about athletics?”

Eventually, Baade descended on soccer. He and Victor Matheson conducted a study of the impact of hosting the World Cup of 1994 in the US. They looked for evidence of faster economic growth in the host cities, and as usual they found nothing. Yet by now, the old bogus American arguments for hosting sports had spread to other countries.

The raising and dashing of hopes of an “economic bonanza” have since become as integral a part of a modern soccer tournament as the 242

raising and dashing of hopes that England will win it. A few months after England hosted Euro ’96, for instance, a report by a body called Tourism Research & Marketing said that fewer than 100,000 overseas fans had visited England for the tournament, against a forecast—admittedly plucked out of thin air by the FA—of 250,000. Nor had the visitors spent much. Euro ’96 generated about $155 million in direct income for Britain. This was peanuts compared to the $20 billion spent by all overseas visitors to the country in 1996. Meanwhile, a study by Liverpool University and the city council found that the 30,000 visitors to Liverpool during Euro ’96 spent only $1.56 million among them. How many jobs did that create? Thirty, all of them temporary.