Taylor Swift’s US tour generates sales that are higher than the GDP of many states. Just their presence at Travis Kelce’s NFL games makes tickets more expensive. But how important are superstars actually for the economy?
In perhaps her best-known song “Run the world”, US superstar Beyoncé sings about how strong women are, how independent and self-determined they are. Women rule the world, says the pop singer. And as far as she is concerned, she is by no means grossly wrong. Beyoncé, or more commonly known as Beyoncé Giselle Knowles-Carter, is currently moving entire economies with her mega concerts. Their tour start in Stockholm alone ensured that the Swedish inflation rate only fell by 0.2 percentage points in May instead of 0.4.
Beyoncé is not the only example of how pop stars have recently impressed the economist scene. In the USA, economists are particularly looking at Taylor Swift, whose US tour alone could have triggered consumer spending of an estimated $4.6 billion – more than the economic output of 35 of the 50 US states. Visitors spend an average of $1,300 on tickets, hotels and restaurants – despite rampant inflation. Now even the ticket prices for the NFL games of her alleged new boyfriend and football player Travis Kelce are increasing. Economists speak of “Swiftonomics”. Individual stars move entire economies.
Taylor Swift could soon move the GDP in Germany too. Next year, the US singer will give seven concerts in Germany. And similar developments to those in the USA are already evident: high hotel prices, astronomical ticket prices on the secondary market and the first restaurants that are fully booked – a year in advance.
So is Germany threatened with the same development as Sweden? Is inflation rising because Taylor Swift is coming to the country? Economist Felix Herrmann has a clear answer: “Quite clearly: no,” says the chief economist at asset manager Aramea. The situation in Sweden and Germany cannot be compared at all. “Sweden is much smaller than Germany. Any events such as Beyoncé’s tour start would not be measurable in our numbers.”
Taylor Swift and “Swiftonomics”
In any case, the issue is being made a little bigger than it actually is, says Herrmann. “Swiftonomics” is actually so-called “displacement spending” – a temporal and regional accumulation of consumer spending. People would therefore advance their consumption if they paid several hundred euros for tickets, hotels and restaurants. In return, they would spend less for the rest of the year. Any effect on the inflation rate would therefore be temporary at best and would only create a base effect. In practical terms, this means that inflation in Sweden next May is likely to be exactly the Beyoncé effect of 0.2 percentage points lower over the year.
In order for structurally weak regions such as the Ruhr area – three Swift concerts will take place in Gelsenkirchen – to benefit in the long term, investments would have to be made locally. If Gelsenkirchen residents spend their income on consumption, which is the rule, then nothing is gained. Ultimately, this would just be a regional accumulation of consumer spending – which would then be missing elsewhere. This also applies to foreign visitors, whose consumer spending influences the German foreign trade balance. On the other hand, consumer spending would then be reduced in their home country. Ultimately, from a global perspective, this is a zero-sum game.
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“This temporal and regional relocation of economic effects is not something that you as an economist look at and say: Oh wow, something very special is happening here,” says Hermman. “At best, this is a nice party theme.”
Growth through investment, not consumption
What he and other economists would definitely look at, however, are the effects surrounding the events. For example, if a location manages to attract well-known artists on a long-term basis – or if, for example, a football club is promoted to the Bundesliga and has to enlarge its stadium, investments are necessary. New hotels were being established, roads and train stations were being built, and jobs were being created. All of this leads to more productivity in a region and ultimately to an increasing growth path. “In the long term, growth is not increased through consumption, but through investments,” says Hermann.
The fact that Beyoncé and Taylor Swift concerts generate such significant sales for GDP is also due to an effect that economists call “funflation”. Many people are struggling with rising inflation and losses in real wages. At the same time, a year and a half after the harshest Corona restrictions, they are still sitting on savings from this period. However, they don’t want to spend this on food or rent, but on things they missed during this time – such as concerts or travel. On the secondary market, Beyoncé tickets cost up to $30,000, but there were still buyers. Organizers have long since noticed that customers are more willing to pay and have therefore increased prices. Because the sales volume remains stable at the same time, they achieve higher sales.
Aramea economist Herrmann considers this effect to be real, but also temporary. “The excesses grow over time until the excess savings are used up.” The study situation here is very interesting. Ultimately, the savings simply change hands for a long time until they eventually end up with the richest percent of the population. “They can’t do much with the last thousand euros and are putting the money aside.” Then the funflation will end.
This article first appeared at .
Source: Stern
