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Mega-Events in Developing Nations

2010 March 17
by Victor Matheson

South Africa has spent at least $6 billion in preparations for this summer’s World Cup. How can a poor but developing country like South Africa afford to host such an extravagant party? Simply put, it can’t.

This line from an article in today’s New York Times pretty well sums it up.

The people who live nearby [the new stadium in Nelspruit], proud as they are to host soccer’s greatest event, also wonder: How could there be money for a 46,000-seat stadium while many of them still fetch water from dirty puddles and live without electricity or toilets?

Of course, this is familiar territory for economists. Six years ago, I wrote an article that appeared in the South African Journal of Economics about mega-events in developing nations. In that article I wrote,

The Nigerian government recently spent $330 million on a new national soccer stadium, more than the annual national government expenditures on health or education. The intense criticism of this project is not directed at the cost of the stadium, but rather the cost of the stadium in the face of other pressing needs in a country like Nigeria.

Substitute the Nigerian national stadium for the new $137 milllion stadium in Nelspruit that will host a grand total of 6 hours of soccer this summer, and there is perfect foreshadowing of the type of misallocation of scarce resources that has come to fruition in South Africa.

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