The economic boosts of political conventions are extremely exaggerated. Here's why.
Same goes for the Olympics
The Republican convention has already brought accusations of plagiarism, minor insurrections, and one very angry Rudy Giuliani to Cleveland. But according to its boosters, the convention will also bring between $200 and $400 million to the city's economy when all is said and done. A similar boon of $350 million is predicted to reach the Philadelphia economy with next week's Democratic convention.
This sort talk is now pretty standard fare whenever a city decides to host one of these conventions. Same goes for other big events like sports competitions, Super Bowls, the Olympics, and more.
But Victor Matheson, an economics professor at the College of the Holy Cross in Worcester, Massachusetts, has studied these kinds of events since the late 1990s along with a few colleagues. He told The Week that the anticipated economic boosts usually fail to materialize.
"We could not identify any economic bump at all on average, when we looked at the Democratic and Republican national conventions all the way back to 1970," he said.
Now, the conventions do bring additional spending. Lauren Heller, an economics professor at Berry College in Rome, Georgia, who co-authored with Matheson on one recent working paper, wrote that $22 million in additional hotel revenue can be expected, on average. But as Heller noted, every person staying in Cleveland would have to spend seven times their hotel bill on food an other local activity to bring the boost the GOP convention promoters are advertising. "The smaller gains shown in our paper are probably transitory," Heller explained to The Week. "They also are fairly small," given Cleveland's economy generated $124 billion in 2014.
Here's another thing: To really help out the cities' economies, the money spent at the conventions needs to circulate locally. Hiring extra staff from local workers, or paying Cleveland cops or Philadelphia hotel staff overtime, for instance, does the job. They'll spend those incomes where they live. But if, say, a national hotel chain in Cleveland jacks up prices for the convention, then a lot of that money could get spit out as profits to distant shareholders, which won't help Cleveland. So a lot depends on the structure of the companies that get the business, whether they're locally owned or not, and how they distribute pay and profits.
Then there's the question of outside contractors: A sizable majority of the police officers tasked to guard the GOP convention in Cleveland will come from other cities, for example. So they'll take those incomes back home with them.
Finally, you have to worry about the economic activity the event displaces. Customers who would normally be out spending could be scared off, or businesses near the event could be forced to temporarily close. Political conventions seem to be especially inconvenient in this regard: Cleveland has banned everything from tennis balls to backpacks to umbrellas with metal tips (but not guns!) from the 1.7 square-mile "event zone." The Democratic convention in 2004 shut down Boston's interstate for several days, and Broadway ticket sales plummeted during the GOP convention in New York City that year. Matheson recalled that during the 2008 Democratic convention in Denver, "reporters said it was the lightest regular day of traffic that anyone could remember."
"For an honest assessment, you have to figure what didn't happen because of the event," he continued.
Putting it all together probably explains why the larger study Matheson participated in found essentially no long-term economic gain for cities from political conventions. "By focusing on the 'bright, shiny object' of a political convention, we might be losing focus on the real economic fundamentals that could bring long-term prosperity to [Cleveland]," Heller added.
That said, other events can fare better. "We typically get numbers for the Super Bowl running from $30 to $130 million dollars," Matheson said, as one example of an event that does seem to reliably generate economic gains for host cities. Again, that's a fraction of the many hundreds of millions of dollars Super Bowl promoters usually claim. But it's something. And Matheson surmised that Super Bowls are just a lot less disruptive to the cities' regular economic activity going on parallel to the event.
Another advantage Super Bowls have is they usually occur in stadiums that are already there, and that are already put to regular use. This gets into the potential problems with the Olympics or the World Cup, for instance: They often require the host cities to build massive stadiums and infrastructure projects that then go unused afterwards. A $900 million stadium built for the 2014 World Cup in Brazil is now used to store buses, and the famous Bird's Nest stadium from Beijing's 2008 Olympic games is now an empty tourist attraction.
For the 1992 Olympics, Barcelona escaped this fate by minimizing expenditures and spending to upgrade its entire tourist infrastructure. And Los Angeles ran its 1984 Olympics out of already-built stadiums: "The entire cost of the 1984 Olympics was less than just the cost of the Olympic stadium for the upcoming games in Tokyo in 2020," Matheson explained.
Under certain conditions, the Olympics can also be a great global advertisement for a city — again, that helped Barcelona. But as Rio is showing, publicity can be bad, too.
Ultimately, Barcelona and Los Angeles have proven the exceptions to the rule when it comes to the Olympics. "We're fairly convinced that the amount of money that comes in at least in the short run is nowhere near what is needed to cover the overall cost," Matheson continued.
But life isn't all about money, either. The 2006 World Cup in Germany may not have done much economically, but Matheson said the social science data was pretty clear that Germans were happier while the games were underway. Human beings do all sorts of things — like weddings — knowing they'll be economic losers, because they matter as cultural and social events. So there's a balancing act between the considerations of cold hard cash and the unmeasurable parts of life.
But compared to the Super Bowl or the Olympics or the World Cup, your standard Democratic or Republican political convention is probably a grimmer affair. "The Cleveland area is my hometown and I care very much for the area's future economic success," Heller concluded. "I think there are quite a few things the city could do to encourage economic growth."
"I just think that political conventions aren't one of them."