South Korean President Kim Dae-jung once announced that the 2002 Korea-Japan World Cup would increase South Korea's gross domestic product by 11 trillion won (about 840 million U.S. dollars), bring in 5 trillion won in tax revenue, create 350,000 job opportunities, and 8.8 billion U.S. dollars in associated benefits, and would earn 682.5 billion won from the spending of 400,000 tourists, so that South Korea would eventually make a profit of nearly 1.44 billion dollars after deducting various added values and expenses. benefits, and will earn 682.5 billion won from the spending of 400,000 tourists, so that excluding all kinds of added value and all kinds of expenditures, South Korea will end up with a profit of nearly 1.44 billion dollars.
Japanese Prime Minister Junichiro Koizumi made a similar prediction, but with slightly different figures. According to a January survey by national news organizations in both countries, 82.1 percent of South Koreans and 61.9 percent of Japanese believe the first-ever World Cup soccer tournament in Asia will be an important boost to their economic growth.
Unfortunately, the above figures lack substance because they have too much of a propaganda element and work more like advertisements, or the good intentions of the governments and people (including researchers) of the two host countries. But the magnitude of economic growth is not necessarily driven by people's good intentions, and even the consumer confidence index is for reference only.
Whether the World Cup will achieve the economic benefits claimed by the Japanese and South Korean governments, or whether it will be as pessimistic as the March issue of the Far Eastern Economic Review predicted, requires objective and accurate statistics. In the absence of such data, it's worth taking a look at both the positive and negative economic ripples this World Cup could cast.
Short-term behavior and snowball effect
Before the Far Eastern Economic Review's cover article was published, most people were confident about the economic effects of the World Cup in Japan and South Korea, which were widely seen as a shot in the arm for the slumping Japanese and South Korean economies.
This view is very normal, and there is no lack of historical precedent. During the Great Depression in the United States in the 1930s, businesses were afraid to make new investments, and even the very rich were shrinking, so only the government stepped up to the plate, and through the construction of large-scale public **** projects (such as the Hoover Dam, etc.), employing a large number of workers in order to promote the stagnant economy snowballed.
I once heard a story that the US government hired a large number of workers to dig a ditch in the wilderness and then fill it in again. Why did they have to do such "useless work"? There was only one reason, that is, to find a name to transfer the money to the hands of ordinary people, so that they could have money to buy food and clothing, and those food and clothing stores would also have business, from one vein to another, and fresh blood would flow into the whole economic system. I haven't tested how much truth there is to this story, but the logic of it is no longer unfamiliar to those who have experienced the ups and downs of the economy.
Undoubtedly, the anemic Japanese and South Korean economies need such a transfusion. 800,000 people will come to Japan and South Korea to watch the tournament, each will spend an average of $2,000 to $3,000, and souvenir sales in one part of Japan will reach 100 billion yen. ...... Even if these projected figures are overly optimistic, the fans (and quite a few of them at that) will surely go to the games. ) will certainly go to the games, they will certainly spend quite a lot of money, and their food, accommodation, tickets, souvenirs, etc. will more or less stimulate the economy of the host country.
The question is, do these hormones injected into the local economy actually have any lasting power? The Korea Development Association argues that every dollar spent during the World Cup is worth more than a dollar in circulation, creating a bigger snowball effect. This argument seems illogical. For a tree in a long drought, would that rain be more useful if it came once a year in a downpour or once every few days in a drizzle?
The problem exists for large events such as cultural or sporting events that are not held regularly in the same place. If those 800,000 people could make dozens of trips to Japan and South Korea to watch soccer, it might not be a "cardiac tachycardia" stimulus for the local economy, but it would be like a trickle of water that penetrates a stone. This is the reason why major cities in the United States build high-class stadiums to attract good teams and lease them at a nominal rent (e.g., one dollar per year). It's also why local governments recruit businesses large and small with incentives to settle down, and because of their role in stimulating the local economy over the long term.
One-off events, however, serve no such function. The 800,000 people are gone in a flash, they've stayed in overpriced hotels and bought expensive souvenirs, so what reason do they have to revisit? In fact, the economic characteristics of the World Cup is more like our country's singer concerts, of course, the scale is thousands of times larger - they occasionally appear in a city, attracting a large number of fans, recruiting a number of advertisers and sponsors, selling expensive tickets; but a careful analysis, the organizers do not go through the side road seems to be difficult to make money, because their cost is too high, and this "go through the side road" is not a good idea. But on closer inspection, it seems difficult for the organizers to make money without going off the beaten track, because their costs are too high, and this "walk the talk" mode of operation is unlikely to cultivate a fixed habit of consumption, and therefore unlikely to take root in the local economy.
How to absorb fixed assets
The disposable nature of the consumer side creates a lot of confusion on the supply side. For example, if you're a hotelier and you wish you could rent out 10,000 rooms during this time, but normally you only have enough customers for 1,000, should you expand or not? If you don't expand, you will lose a lot of opportunities to make money this time; if you expand, there will be a serious oversupply in the future. Such a dilemma occurs in most businesses that need to invest in fixed assets. After all, human resources can flow, you can go to another city to recruit temporary workers, but the hotel restaurant can not be built today and demolished tomorrow.
But the organizers face the biggest challenge in this regard. Service providers can increase their profits by raising prices, but venues can't coordinate their scheduling with prices, and you can't "squeeze" two stadiums into one place. Japan and South Korea have invested more than $3 billion in 20 new stadiums with a capacity of 40,000 spectators, most of which will hold only 3-4 matches. These venues face the prospect of being "unemployed" immediately after the games are over, and the local demand for sports activities is unlikely to grow to the point where the venues are fully utilized. Can they be saved for the future when the population grows? Impossible, they cost a lot of money to maintain; tear them down? Huge sums of money will be wasted, and if you calculate the average construction cost per visitor, can you make it back by selling T-shirts?
In this regard, the United States is more conservative, but also worthy of reference. 1984 Los Angeles Olympic Games basically did not invest in too many new facilities, but to make full use of the existing conditions, the old refurbishment. Of course, the old U.S. has this condition, they have a large number of sports facilities in each city, but the Asian countries need to start another stove, on the one hand, is a last resort, on the other hand, I hope to use this to give the outside world a good impression. From an economic point of view, this can also stimulate the construction industry to flourish.
It is true that the construction industry and catering and hospitality services are the biggest beneficiaries of the World Cup, in addition to the resale of television broadcasting rights and television advertising companies are also clearly not losing money, but the investment in the construction of the venues of the local government is faced with the crisis of not being able to make ends meet. The likelihood of the World Cup leveling out infrastructure investment is slim to none, and most of that money comes from tax revenues, which don't just fall out of the sky, and when it's spent on project A, it has to be cut back on project B, which is not insignificant and not economically unproductive.
Marginal social benefits
Let's say that money that would have been spent on relief for the poor is spent on building a new stadium because of the World Cup. Of course, that brand new stadium will be on TV screens and widely covered by the world's media, and will therefore have good social benefits, not least in terms of raising the profile of the local area, and perhaps helping the future of local tourism. But the money could also flow into the skin of the local economy if it were spent on programs to relieve the poor, and the long-term benefits would not necessarily be worse than the stadium. (Conclusions in this regard would, of course, require exhaustive projections and arguments.)
Social effects are like image advertising for a business -- some is certainly better than none, but how much to spend to produce the best results (i.e., the highest marginal effect) is a complex issue. Theoretically speaking, when your brand is fully prepared and is about to "take off" but has not yet "taken off", the advertising effect is most significant at that time.
For South Korea, the 1988 Olympics did just that, as the country's economy took wing and the Olympics made it known to the world, and provided an opportunity for the country's citizens to strengthen national unity and improve the moral fiber of its people. Nowadays, Japan and South Korea have passed the point where they can advertise themselves to foreign investors as being "on the sharp end of the curve" (a principle used in calculus for economics), so the World Cup's promotional role, though still intact, is much less effective. In other words, Japan and South Korea for their countries' "image advertising" will pay too high a price.
Many economists have studied in detail the negative post-game impacts of major sporting events on the places that host them, and these studies are not alarmist. Many local governments, when beckoning to investors, will exclude enterprises with greater side effects, such as pollution of the environment, which proves that not every piece of money invested in a place are only to create happiness and not trouble; Similarly, the World Cup may increase the durability of the local economy power, but also may be just a convulsion of the good man after a good drink. The key is how the local government early elimination of hidden dangers, reduce side effects, play the function of the locomotive of the tournament. Stick to emphasize the favorable factors, the adverse factors to take the ostrich policy, and ultimately their own turn to mute.