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More Circuses, Please

Mar 30, 2015 Politics

Major events are good for New Zealand because they’re fun, not because they make money.

This column was first published in the April 2015 issue of Metro, on sale now.


At the time of writing, I don’t know if the Black Caps have triumphed at the MCG, crashed out at Eden Park or something in between.

I do know that the Cricket World Cup has been an outstanding success: Christchurch’s return as an international venue; the destruction of England at Wellington; the Auckland nail-biter against Australia; Ireland’s triumph over the West Indies at Nelson; Martin Guptill topping the batting with his 237 not out and Tim Southee the bowling with 7/33. The International Cricket Council must be bonkers to stick to its plan to cut the number of teams from 14 to 10 for 2019.

I also know we will soon be inundated with “studies” that the tournament has delivered a huge boost to the economy. The Ministry of Business, Innovation and Employment will be at the forefront. But what has been obvious anecdotally for a long while has been confirmed more systematically by Professor Andrew Zimbalist in his new book Circus Maximus, reviewed in the Economist a couple of weeks ago: it’s all crap.

He shows that perhaps the one thing economists have proven beyond any doubt over the past hundred years is that major events never deliver any but the most fleeting economic benefits, if any at all. The overwhelming majority of events are a drain on GDP. The same is true of sports teams and new stadiums: none has ever delivered an improvement to employment or GDP. It would be remarkable were it any different for concerts, arts exhibitions, sculpture walks and the rest.

Oh, yes, there are plenty of analyses that show otherwise: those commissioned by the sports or arts associations who want the honour of hosting the event, the politicians and bureaucrats who want the front-row seats and tourism lobbyists who perceive they will gain financially, but even they’re usually wrong too.

It’s easy to commission an economist to show an event will deliver a big win: just instruct them to focus on the benefits and ignore the costs, in particular opportunity cost. It’s even more important your economist doesn’t consider geographical or temporal displacement. During the Rugby World Cup, for example, you want them to count the extra profits made by restaurant and bar owners around the Viaduct, but not the losses made by those in Ponsonby. They must tally up every tourist who might watch even a single match but never ask whether they would have been here anyway or what they might have done otherwise. You certainly never examine the drop-off the following years.

Zimbalist reports, for example, that after the 2000 Sydney Olympics tourist numbers fell the following three years. It wasn’t a regional trend: over the same period, New Zealand tourism soared 17 per cent after the launch of 100% Pure. It’s not even always true that tourism numbers increase during an event. During the last two Olympic Games, he says, tourism numbers were lower in Beijing and London, even taking into account the athletes, media and spectators who poured in.

In New Zealand’s case, of course, tourist numbers are largely fixed in the short term by the number of airline seats. Sending the transport minister overseas to negotiate an air services agreement will always be worth more to New Zealand than the sports or arts ministers winning a big event.

In any case, even with all the bullshit, the claimed returns from a major event are always largely irrelevant. Not even the most swivel-eyed economic analysis suggested the Rugby World Cup was worth more than a one-off $600 million boost to New Zealand, but even that is just 0.25 per cent of an annual $240,000 million economy. It’s a rounding error.

None of this, though, is an argument against major sports or arts events — it’s just a plea for more maturity in how we talk about them. You don’t need to be Marilyn Waring or Bhutanese to recognise there’s more to life than GDP. It remains the best way to measure national wellbeing because it indicates the extent to which we can afford health and education systems, social welfare, holidays in Fiji, aid to Vanuatu, cricket tournaments and so forth — but GDP is the generator of those things not the justification.

On average, we’re all probably financially poorer as a result of the Black Caps playing the semi-final on a Tuesday, but no doubt by only a very small amount in the context of a $240 billion economy. Next time there’s talk of a major event in New Zealand, could our politicians, bureaucrats and sports administrators please treat us with a bit of respect and sell it to us on the only grounds for which they have evidence: that it’ll be a great deal of fun. New Zealand is a First World country with sufficient bread. There’s nothing wrong with the occasional circus. Isn’t that enough of a reason for the Cricket World Cup or the Rugby World Cup to swing by once a quarter century.


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