Should we all give up on the Olympics?

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Should we all give up on the Olympics?

Study after study go through how detrimental or at best, neutral the impact of hosting the Olympics often is for the host of the events.  Interest over the Olympics has waned with time, and we may be at a point where we must acknowledge that the current format of how Olympics’ host cities are selected and the share of revenue they receive is broken.  A detailed paper on this can be found here.  The IOC hoards all contracts relating to hosting the games, and in many cases receives substantially more money than the host receives.  This is like FIFA’s arrangement for the World Cup.  Such is the largesse, that the IOC even offered to step in and fund Vancouver’s deficit.

One immediate difference is that we believe the success of the Olympics ought to be measured by the impact on the country, rather than the city.  City finances can be complicated, and it often does not encapsulate the benefit to the whole country.  Another consideration is that there ought to be a distinction between the real cost of hosting versus the Olympics being used to justify infrastructure that is sorely needed.  Suggesting that the Olympics necessitated four subway lines in Beijing is a silly perspective.  Infographic summaries about Olympics and cost are usually as meaningless as this one.

Looking at the past 50 years of Olympics events, we have had 27 events across 18 countries.  Of these 18 countries, the United States is eliminated due to the frequency of events.  The US has hosted the game every 13 years, on average, between its first games in 1904 and the upcoming LA Summer Olympics in 2028.  Of the other nations, we have looked at the annualized growth rates, pre, during, and post the Olympics event.  What we found is complete uncertainty around economic benefit and hosting the Olympics.  The chart below illustrates how heavy the skew is post-Olympics towards negative growth.

It should be noted that in many of these countries such as China or the United States the Olympics are not an even of sufficient scale to really impact the country’s economic prospects.  However, in a place like South Korea, Greece, Italy, or Canada the event is sufficiently large in scale to change the country’s economic prospects.

There are material externalities associated with the Olympics, be it the transportation benefits or the negative consequences of all public layers of government focused on hosting an event rather than all the other things they should be focused on.  The research on these topics is everywhere, and this is atypical for a lot of the topics we cover.  As a result, we actually think we can best serve you by pointing you to some of the best research on the topic.  The list is laid out below.  Our conclusion is that the Olympics only make sense for a country in the middle-development spectrum if there are tight controls to weed out corruption and misallocation of funds.  Countries that would benefit the most from holding such events would be places such as Iran, Morocco, Malaysia, Egypt, and the Philippines.  Countries large enough and developed enough to support the infrastructure spend, but also countries that would benefit from the attention that hosting the Olympics would bring.  If the events go off flawlessly it can easily act as a kink in the economic growth trajectory for each country.

List of quality research on the subject:

‘A Cost-benefit Analysis of an Olympics Games’ Queen’s Economic Department

Critical reflections on the economic impact assessment of a mega-event: the case of 2002 FIFA World Cup

The Economic Impact of the Olympic Games: Ex Ante Predictions and Ex Poste Reality

Calculating the regional economic impact of the olympic games

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