Hosting the Olympics, Is it Worth it?
Every two years, nations around the world unite in celebrating athletics at the Olympic Games. Tourists come flocking to the host city and the games serve as a chance for the hosts to showcase their culture and innovations to the rest of the world. Some economists argue that the jobs, tourism, and TV revenue that the Olympics generate boosts both the local and national economy. However, because the bids are awarded seven years prior to the event, many economic and political shifts can take place making hosting the games difficult. As seen in the case of the 2016 games in Rio de Janeiro, the costs of hosting have the potential to burden an economy. Often, countries take on the project without accurately assessing the costs, opportunity costs, and having a plan to utilize the infrastructure after the games conclude. As such, hosting the Olympic games certainly has its pitfalls but when accurate economic forecasting and planning is done, the event has the potential to boost an economy.
Since the inception of the modern Olympics in 1896, the 1984 summer games in Los Angeles was the only time that a host city has profited from hosting the event. This was made possible by upgrading existing infrastructure rather than investing in new stadiums, hotels, highways, and trains. Conversely, the 2014 Winter Games in Sochi had a net deficit of over 41 billion USD, of which 85 percent was spent on general infrastructure. Sochi, a small resort town, was simply unable to host the millions of tourists and athletes that attend the spectacle and was forced to build a large city as a result. Now, the Olympic village is abandoned and a large portion of the approximately 42.5 billion spent on infrastructure is being severely underutilized. Additionally, hosts are required to spend a significant amount of money constructing extremely specific sports infrastructure. In many cases, these stadiums cannot be transformed to serve alternative purposes after the Games and also become abandoned.
These massive expenses place undue burden on local communities. It took Montréal residents 30 years of increased taxes to pay off their debt, while the costs associated with the 2004 Athens games significant contributed to the Greek debt crisis and ultimately its bankruptcy. Fear of wasted funds has come to light in cities such as Boston and Denver, in which residents voted to officially remove Olympic bids. The opportunity cost of these wasted taxpayer dollars could be used for much more impactful projects such as disease research, education, and healthcare. Despite this, the IOC continue to try to give Olympic bids to developing and financial unstable countries, the very group shown to be most negatively affected by the opportunity costs of hosting the games. However, hosting the games has shown to produce some positives for cities that have a plan to utilize their new infrastructure.
After the 1996 Summer Olympics, Atlanta was able to successfully repurpose many of its venues to create long term value in the initial investments. The Centennial Olympic stadium is used to host Georgia Tech football games. Georgia World Congress Center, in which handball and other sports were played, is now a convention center and Atlanta beach, home to volleyball, was made into a park with an omni theatre and various outdoor activities.
Furthermore, the games create numerous temporary jobs. According to an InterVISAs Consulting report, the 2010 Vacouver games created 244,000 temporary jobs with salaries totaling approximately $10.7 billion CAD (“Going for Gold”, 207). These jobs clearly helped Canada’s Economy as its GDP per capita grew an impressive 16.3% in 2010 despite the global financial crisis. Additionally, consumer spending in Vancouver and Whistler during the events rose 48%. On a micro level, the influx of wealthy tourists willing to spend money certainly helps to stimulate the local economy, especially for small businesses and unemployed individuals. However, not all host cities see this sharp of an uptick in the local economy, and cities in wealthy countries with a positive international image have seen the best economics bumps. Conversely, cities such as Beijing, Moscow, and Mexico City did not benefit as greatly by hosting the games.
The positive economic effects of hosting the Olympics do not simply end when the games do. Being the most televised and well-known sporting spectacle in the world, simply hosting the games generates incredible attention for the host city. Similar to social media marketing, this serves as an inexpensive medium to draw international tourism, development, and corporate interests. The long term economic effects of this are difficult to quantify but certainly have the potential to act as a springboard for a city and country’s economy.
Given the specificity and sheer volume of infrastructure and security needed to accommodate an event as big as the Olympics, hosting the event only makes sense for cities built to withstand mass-tourism with specific plans to utilize infrastructure after the event. Numerous hosts, including Brazil, Greece, and the Soviet Union were economically crippled by the costs of the games and faced political turmoil as a result. In many ways the Olympics are a way for a country to boast its culture and innovation to the word, but often times that comes at a hefty price.
Works Cited
Braade, Robert A, and Victor A Matherson. “Going for Gold: The Economics of the Olympics.” American Economic Association, Journal of Economic Perspectives, 2016, pubs.aeaweb.org/doi/pdfplus/10.1257/jep.30.2.201.
Rathke, Alexander, and Ulrich Woitek. “Economics and the Summer Olympics: An Efficiency Analysis - Alexander Rathke, Ulrich Woitek, 2008.” SAGE Journals, University of Zurich, Oct. 2008, journals.sagepub.com/doi/pdf/10.1177/1527002507313743.
