The World Cup and...Economics?: What Italy has to Expect
With Italy's socking win to become the world's best soccer team, it seems prudent to discuss something that is not usually connected with soccer: the economy.
It may seem strange, but many say it is true, that the outcome of this super sports event dictates the economic future of the participating teams and in turn, the world. It has been researched, and evidence has been found, to hypothesize the winners of the World Cup can expect to have a small boost in their finances as a result of the win. In Soccer and the Economy: March 2006 Edition, Ruben van Leeuwen and Charles Kalshoven discussed this phenomenon. In their document van Leeuween and Kalshoven look to a study conducted to the Algemene Bank Nederland (ABN) and the Amsterdamsche-Rotterdamsche Bank (AMRO) showing that the winning countries tend to see a 0.7% increase in their market. Most of this increase is contributed to the positive energy generated in a country from a win. A win at the World Cup causes a whole country to feel pride and happiness, and happy people just love to buy. Plus, parties to celebrate the win will generate revenue and work, especially in bars and supermarkets. Another means of economic growth come from the sale of souvenirs commemorating the big win. Finally, a country that wins the World Cup is recognized by the whole world because of its achievement. This recognition may open up new trade opportunities and make businesses more inclined to invest in the country (Kalshoven and Van Leeuwen).
In 2002, .3 billion people watched the World Cup Final in Japan, and this number is predicted to be much higher in Berlin (Unknown). This amount of publicity certainly helps stimulate the economy in general, but past wins reflect that the theory that economic growth and World Cup champions go hand in hand. According to van Leeuween and Kalshoven, there have only been two exceptions to this theory since 1970: in 1974 and 1978. In these two years, the German ('74) and Argentine ('78) economy declined, however the economy of the losing finalist both years, the Netherlands, had a far greater loss. However, in 1988 the Netherlands finally had its victory and its economic growth. IN this year the Amsterdam stock market gained 29% more than it did the previous year. Van Leeuween and Kalshoven have seen a gain of about 10% for the World Cup champions and a loss of about 25% on average for the losing team. This growth is not uncommon, says van Leeuween and Kalshhoven as they have seen on averaged a 10% gain for the World Cup champions and 25% loss for the losing team (Kalshoven and Van Leeuwen).
Before the beginning of the Cup, Brazil and England were the favorites, but with these two already out it is hard to tell who will be gaining that economic boost. Germany, as the host country, has put more than $350 million into transportation improvements for the Cup and in total $1.7 billion to improve stadiums (Higginson). Since they have put so much in, it may be safe to say Germany deserves this win. Also, Germany has fallen on economic hard times, making a win highly beneficial to not only the economic state of the country but the psychological state as well. However, on Sunday Germany's dreams were dashed by a stellar overtime performance by the Italian team. However, Germany is not totally discouraged as it expects at least a 1.6% increase in its GNP due only to the revenue generated from being a host country. Plus, the new jobs created by this opportunity have led to an 11% increase in Germany's unemployment rate (Drew).
It shall remain to be seen whether or not Italy has the economic golden egg hidden under the title of World Cup Champion, but at least it is sure they have the respect of the world (a maybe a bruised sternum). The next World Cup is not set to be played until summer 2010, when it will be hosted by South Africa.
Drew, Catherine. "German Businesses Await Economic Effects of World Cup." YoursDaily.com. 8 June 2006.
Kalshoven, Charles, and Ruben Van Leeuwen. Netherlands, ABN AMRO, Soccernomics 2006: Soccer and the Economy , 22 Mar. 2006.
Unknown."World Cup 2006-Private Sector Development- the World Bank Group." Private Sector Development Home. Summer 2006. The World Bank Group. 28 June 2006.