Nations

Nations

A short note on passion-fueled sustainable economics…not for Brazil, but for the future

Mr Ulrich Keller

Posted: June 20, 2014

Tagged: economy / fans / nations / teams

On Thursday, June 12, 2014, 32 teams started into the FIFA World Cup in Brazil. Germany, with its most-valuable squad yet, is about to start against Portugal at the brand new, purpose-built Arena Fonte Nova, Salvador. 51,900 spectators will witness World Cup history live. Brand new. Purpose-built – music to my ears.

As economists we’re trained to look at a situation and analyze it, identify issues, explain, and provide detailed solutions. When it comes to football, such a clear approach is often not possible. Sports in general, and football in particular, have to be overoptimistic. So, let’s move away from econ and take a moment to look at what has happened so far.

A Spielplan hangs in my office. My Danish and British colleagues have brought their flags. We’re ready: let the beautiful game begin for all of us. Yes, we are concerned with the issues surrounding the WC 2014; but at this very moment, we, as Germans, hope that the German squad breaks the Weltmeisterschafts-deadlock of not having won the Cup since 1990.

Passion…

What have we witnessed so far? A few minor Schiedsrichterskandale. Brazil-Croatia, 1-1. A penalty in this situation? Ja, zät is a game changer. Mexico-Cameroon? Two (zwei?!)) goals in favor of Mexico not given? Surprising. A Costa Schwalbe, or dive, and a clear foul against Casillas? Na klar! And the conspiracy theorists head out. But at least the goal-line technology seems to be working. And then, fortunately, there are Robben and van Persie, supported by an amazing and passionate Dutch team (at least after match 1). And Colombia’s joyful 3-1 victory over Greece, Chile’s 3-1 win against Australia, and, finally, underdog Costa Rica’s triumph over Uruguay.

But even as a die-hard football fan it’s hard to not – at least a little – protest against the 2014 World Cup. When Germany hosted the WC 2006, the nation was transformed into “summer’s (fairy) tale”. Germany’s, and also most of the international media decided to focus on the good, and against giving hooligans and other questionable individuals an open and public stage. When the Nationalelf travelled to the arenas in 2006, hundreds, if not thousands of people lined the streets – to cheer and support their team. What do we remember about South Africa? Vuvuzela’s, a card-intensive Spanish-Dutch final and a third place for Germany. And, in addition to a priceless nation-feel-good-factor, Germany saw a positive economic impact of around EUR 9 billion, South Africa of ca. EUR 4 billion. Note: a positive economic impact is confronted with the massive cost to built or renovate Brazilian arenas; Brazilian arenas cost nearly twice as much Germany’s 2006 arenas and are considerably more expensive than South Africa’s 2010 stadia. However, Brazilian (economic) benefits are reachable.

What’s happening in Brazil? At least until now, thousands line the streets when the Seleção travels. A lot cheer; and a lot protest. Against corruption, misinvestment, money laundering and grossly overpriced arenas mirroring Berlin’s massively over-budget and much behind-schedule BER airport. Amazing arenas have been built. What happens to those arenas, especially to those in towns that don’t have clubs to use them after the World Cup? Where is the sustainability? This is nothing new and we’re not revealing rocket-science.

But, as Brazil advances, the protests and hopefully also costly civil unrest (easy for us to say) should die down. Stand together Brazil. What a host you can be. The people. The culture. The landscape. Passion. The Seleção. What a great name. Yet, as a German, you are still torn: you love ze game, you love ze people, but, ze inner-German in all of us zinks zät doubts and protests are justifiable.

World Cup and sustainability…

Germans love sustainability (cp. “The Green Goal”). And sustainability could be the key for Brazil and even more importantly future World Cups. Let’s ignore the fashion in which the Brazilian arenas are built, and that of the Qatari ones. We’re also assuming that the 2014 Brazil WC did or does not suffer from extraordinary economic inefficiency, WC-related capital spending has at least some beneficial social and economic impact, and leads to an overall positive domino effect. The WC brings massive opportunities to Brazil in terms of nation branding, and, to a lesser degree also in terms of infrastructure and social gains. The WC should inject an additional X R$ billion into Brazil’s economy. Brazil’s GDP will temporarily increase. Direct WC effects may be short-lived, but in the long-run Brazil might benefit form additional civil construction (e.g. highway re- and new constructions), tourism, transport and hospitality, food and beverage consumption and extra business deals. Especially the increased tourist inflow impacts the country positively.

The 2014 WC still has the potential to positively impact Brazil for years to come – if Brazil manages with transparency, re-directs funds to where they are most needed, and overcomes various WC-associated risks (e.g. poor public safety, negative image in international media, price increases).

And now…

What is important now is to enjoy the next few weeks, and especially a (likely?) Brazil-Germany final. And then look at Brazil 2014, Russia 2018 and Qatar 2022, how Blatter’s FIFA is run, and how FIFA makes decisions. Companies are always under review and change constantly. Could FIFA not change for the love of the game? For instance, without being disrespectful or discriminatory, should the casting of the 25 World Cup referees maybe be changed? Could maybe the world’s 25 best refs judge the matches? Yes, this would be ‘unfair’ to referees from less-football intense nations, for instance from Australasia or some Africa. But could the match quality improve? Or, when thinking of a more far-reaching structural change: could the competitive tendering procedure be changed? Whatever happens: at least Franz Beckenbauer – the Kaiser– will have answered the questions of the FIFA Ethics Committee by June 27th.

Some of Germany’s economic wise men argue that the WC is bad for business and efficiency: tired employees, missed meetings, lower overall output, increased beer consumption (N.B. good for, e.g. Carlsberg, if the British team remains in the Cup for a while).

But, for now, let’s be a little economically less wise, and be more World Cup-oriented. Let’s make the most out of this beautiful time. Companies are doing it – they are using the branding opportunity 2014. So should Brazil. So should the fans. Then, let’s make the next tournaments better – for everyone: FIFA, the sponsors, the teams, and most importantly, the host-nation. How? By improving FIFA decision-making and by stopping the massive national waste of money.

About Ulrich Keller

Ulrich Keller (MSc and LLM) is a Research Coordinator and Project Manager for a multiparty industrial pricing excellence project. He holds Elite and Excellence degrees and is a Doctoral Candidate. Ulrich’s expertise centers on sports economics, managerial economics, branding, marketing and (dynamic) pricing. He has consulted on various high-profile international pricing, sports and event projects.