The World Cup is a Win-Win Game

Last month, the current President of FIFA announced that Brazilian President Dilma Rousseff’s speech would be removed from the opening ceremony to calm social unrest during the Brazil World Cup this summer. Protests on the eve of a major global sporting event are becoming an expected component of the overall preparations, first during the 2010 World Cup in South Africa and then during the 2014 Winter Olympics in Sochi. Now, it is Brazil’s turn, on the eve of the 2014 World Cup.The protests in Brazil echo similar demonstrations at the World Cup in South Africa four years ago. The Brazilian government is spending nearly $15 billion for the games around the country while low-and middle-income Brazilians are calling for investment in social services. Though each player in this narrative of domestic struggle, which is playing out on the world stage, presents a compelling argument, their defenses are based on the presumption that the World Cup is a zero-sum game. However, there is little evidence that there are winners and losers in hosting major sporting events.Dilma Rousseff and the Brazilian Government have touted the massive expenditures for the World Cup – and the 2016 Olympics to follow – as a principal investment in infrastructure and jobs that is certain to pay off for Brazil in the long run. The conventional wisdom is that the tournament will attract foreign investors who will be convinced by the allure of shiny new infrastructure and large-scale construction projects to invest multinational revenues in Brazil. Indeed, Ernst & Young estimated 3.6 million jobs will have been created from 2010 to 2014 as a result of the R$4.7 billion (USD $2.1 billion) government spending on stadiums.But President Rousseff’s claim that Brazil’s economy will win as a result of the World Cup is generally incorrect. The report goes on to say that those jobs are almost all temporary. On top of that, the total estimated government investment from 2010-2014 of R$14.5 billion is almost double that of the projected R$7.2 billion impact on Brazil’s GDP. This payout amounts to less than one percent of GDP, which could hardly be classified as a guaranteed return on investment.Low-and middle-income Brazilians are fuming at the realization that their government is squandering billions of reais on an investment that experts already suggest will not pay off in the long run. The protests focus on the low budgets for health and education spending across the country, as well as long-term infrastructure spending. Brazil’s government spends around two percent of its GDP on infrastructure, which is almost half of the developing country average, according to the Economist. (This in addition to productivity levels that have not changed since 1980, has not prevented Brazil’s economy from stagnating.)Given the lack of development, protesters have a right to claim that the working population of Brazil is losing out on the World Cup. However, the Brazilian government has actually delivered quite well on its responsibilities in the last decade. From 2000 to 2010, public spending on education and per capita public spending on health nearly doubled. Brazil’s figures for education are actually quite close to the OECD average for many categories. This is not to say that there is not more work to be done, but it does prove that the extreme statements by many of the protesters are not entirely indicative of Brazil’s fiscal responsibility.It seems then that neither player in this field is set to gain much from their strategies. The Brazilian government’s preparation expenditures are sure to bring little return to the economy in the long run and the protests for higher public spending on social services are not likely to be met with the same improvement seen in the last decade of growth.But there is an alternative outcome that is most likely to play out from this competition between President Rousseff and the Brazilian middle-class. Above all, the World Cup has proven to be a boon to national and regional happiness during and immediately following the event. The economics of emotions cannot be ignored in this context: the two-month long tournament will likely be the largest party the country has ever seen. National attention will be focused on the matches, debates on government spending will subside, and even though businesses will temporarily close their doors, public consumption will undoubtedly spike. In the end, political leaders will surely receive a boost to their approval ratings.The World Cup must be seen as a win-win game for both the working population of Brazil and President Rousseff’s administration if the massive public spending for the event is to have any payout. But at the risk of pandering to game-theorists and sports fans around the world, each team wins only if they work together to deliver a successful World Cup.