World Cup of Hockey will have ‘extremely short-lived’ financial benefit: economist

Economist Moshe Lander discusses the likely economic benefit of the World Cup of Hockey.

Economist Moshe Lander joins Alberta Primetime host Michael Higgins to discuss the potential economic impact of Alberta hosting the World Cup of Hockey, as well as the ongoing war in Iran’s effect on the province’s budget.

This interview has been edited for clarity and length.

Michael Higgins: Before we dive into economics, as a sports fan how excited are you for Alberta’s big cities to be hosting hockey on this scale?

Moshe Lander: We saw in the Four Nations Cup how exciting it can be when you have international hockey. Of course we always have it through the Olympics, but why not capitalize on this opportunity? Let’s create these big headline international events and wear the flag with pride. It’s great it’s going to be in Calgary and Edmonton, but it was really covered up that it’s also going to be in Prague. So they’re going to have to square this circle of what teams are going to play over here in Alberta and what teams are going to play in Czechia, and then how are we going to bring everybody together? It’s a little bit of a disparate setup right now.

MH: In terms of being an economic driver, how will hosting this event pump up the economy above and beyond something like the Oilers and Flames selling out arenas during playoff runs?

ML: As a Flames fan I’ve got to tell you there’s not a lot of economic activity going on down here right now. The Oilers have the monopoly on that these days, although I’m not sure how they’re going to end up in the next couple of months.

I think the potential is there to actually make money. I’ve spoken before about how an Olympics bid is a bad idea, and these large- scale events don’t usually generate benefits. This is one that can because the infrastructure is already in place. You don’t have to reinvent an arena. I know that a new arena is going up in Calgary, but once it’s there, it’s there. Even if this event were to take place in the Saddledome, it would still have the capacity to make money.

Where I take objection is with the $375 million [estimate]. I think the decimal is in the wrong spot. If you told me it would generate $37.5 million dollars in economic benefit, I’d buy that. I think 375 is way over- dramatizing what’s going to happen here. But the good news is it will make money for the two host cities.

MH: Is there any way of gauging longer-term tourism impact through international exposure?

ML: I don’t think the long- term benefit is really there. Again, it’s one of those things that’s massively overstated. If you’re going to be watching the World Cup of Hockey then you already know Calgary and Edmonton exist. They have two of 32 franchises in the NHL, and they’ve been around respectively for around 50 to 60 years. They’re not little known secrets that have just emerged. Given the NHL these days is about 25-30 per cent non- Canadian and U.S. players, it’s really impossible to think somebody over in Europe is going to watch this and say, hey, I never knew about these two cities. Even if somehow they become aware Calgary and Edmonton exist in a way they never did before, how many people actually base their travel plans medium to long-term based on who hosted the Olympics 10 to 15 years ago?

I don’t think that’s the type of thing people are saying: “Let’s go to Calgary because they once hosted the Olympics.” Whatever benefit they have is going to be extremely short- lived. If you’re looking to try and put federal and provincial dollars into this, I don’t really think it’s necessary. I think that’s wasted money. But if you wanted to put money into raising the profile for Calgary and Edmonton, there’s probably other ways to do it that would be much more effective.

MH: To follow up on that, Alberta is kicking in $15 million, the federal government $8 million.

Is that funding warranted?

ML: It wasn’t needed. These programs will make money for their host cities because you don’t have that major infrastructure investment. If it required that, there would have to be something new put into place. For example, if the provincial government had said we’re going to try and finish the Blue Line and extend it to the airport so when people arrive in Calgary they can get a train directly into downtown, that’s money well spent. Then you can justify it as part of the investment in hosting the World Cup of Hockey. Cool, but there’s no reason that money needs to be spent at this point.

Edmonton has a fairly new arena. Calgary will have a brand new arena by that point. All of the investment that needs to be made is already there. These two cities host close to 100 games per year between regular season, preseason and postseason. It’s not like they have to reinvent the wheel to make it work for the World Cup of Hockey.

MH: If we could also touch on the economics of the here and now. Despite cooling inflation in February, we’re now contending with oil price shock thanks to the war in the Middle East.

What does that mean where the Canadian economy is tracking?

ML: We are going to probably see an uptick in inflation, even though the inflation numbers that just recently came out show inflation is fairly low. That didn’t include anything since the attacks on Iran. That increase in the oil price, while it’s good for the Alberta government’s coffers, it’s not good for consumers across Canada. Between the higher prices at the pump, and the longer this thing lasts, you could start to see it spill over into heating and cooling your home and your business. Those are going to become more expensive.

Of course, in Alberta, we use natural gas. That means it’s going to be more expensive there. Jet fuel will go up. The transportation sector is hugely important in Canada, 7,000 kilometresers from coast to coast. How many goods are shipped from one port to another? That’s going to be critical as well in dragging inflation up. We could see it in basic things, petrochemicals, plastics, packaging, those are all going to become more expensive as well. It’s going to be really hard to insulate any sector of the economy.

For anybody who thinks the solution is to build more pipelines, unfortunately North American infrastructure is not designed for the same type of oil that comes out of the Middle East. These aren’t necessarily immediate substitutes. Merely going to a bunch of countries in Asia and saying, hey, we’ve got oil for you - that’s like asking them to substitute maple syrup for a McDonald’s McFlurry. Your infrastructure isn’t capable of just bouncing between these two things, so it’s going to be really hard to expand new markets, even if we had the pipelines.

Even if we’re going to get the pipelines like the Memorandum of Understanding says between the provincial and federal governments, that’s probably 5-10 years before you can actually onboard those pipelines even if somebody steps forward and says, I want to build it.

MH: A few short weeks ago the UCP government projected a significant budget deficit.

How would you categorize the swing in Alberta finances that comes with this current increase in oil price?

ML: The budget looks a lot better today than it did a couple of weeks ago. I’m sure the finance minister is kicking himself saying, man, if only I’d waited until mid-March. But that’s the thing in Alberta we live with. We always shrug our shoulders and just say it’s boom and bust and that’s the way it goes out here. But when you’re reliant on non-renewable resource revenue as the major source of government revenue, you’re going to live and die by these things. That’s unfortunate, because it’s nothing within Alberta’s control.

We are a huge part of the Canadian economy but we are a tiddler when it comes to the oil and gas sector globally. Unfortunately forces beyond our control are always going to drive the market. That can be a force for good, as it is right now, and it can be a force for bad, which is what the finance minister presented a couple of weeks ago. The good news is the budget isn’t going to be nearly as bad as it was a couple of weeks ago. But there’s nothing to say that if this goes away, that oil price won’t fall through the floor again.