Yesterday, I had an interesting conversation with a colleague I just met here at the LSE concerning London hosting the 2012 Olympics. She is from our urban studies department and is performing research on the (unstated) costs borne by various councils in dealing with an upsurge of visitors passing through. Once you're familiar with one social science, all others tend to sound familiar--political science, human geography, social policy, urban planning, etc. Anyway, this conversation inevitably led to the discussion of whether Olympic events are inevitably money losers for their hosts.
As with many things, "it depends." Some cities are already blessed with an abundance of existing sports facilities while others must build costly new ones that will not be used in any significant capacity in the future. Some cities see hosting these events as showcasing to the world that they've arrived on the world stage--think South Korea and China in recent years--and do not necessarily apply short-term cost-benefit analyses so prevalent in the West.
Today's story, however, returns us to Greece's current financial troubles. Martin Wolf raises economistic concerns about what its troubles mean for the Eurozone with a side helping of his well-known Euroscepticism. While it has gotten by cooking its books for EU authorities for many, many years, it seems this trick has run its course. Importantly for this discussion, there is good reason to trace Greece's woes back to it (very unprofitably) hosting the 2004 Summer Olympics. Enamoured with the thought of reemerging on the global stage after being below the radar for so long, the Greeks splurged on new facilities, racking up gargantuan debts in the process that have yet to be fully repaid. Also, Greece was egged on by the International Olympic Committee to build state-of-the-art facilities. The end result has been, well, higher, stronger, faster deficits that have helped sink its financial fortunes ever since and put the Eurozone under duress.
Looking around, I came across this interesting online article expressing this very idea from Evan Wiener of the Examiner. A tad overstated perhaps, but the kernel of the idea is there:
Is the International Olympic Committee to blame for the December decline in the Euro? It may not be that much of a stretch to blame the International Olympic Committee demands on Greece to make certain that the 2004 Athens Olympics opened on time with state of the art facilities which in turn cost Greece taxpayers’ billions upon billions of dollars.These points are cause for concern for anyone considering hosting the Games that doesn't have money raining down like manna from heaven like the PRC. Wiener rightly castigates the paleoconservative crowd that wishes US President Obama fail in everything he does by making the now-obvious point that Chicago being put out of the running for the 2016 Games was a blessing in disguise: cash-strapped America was not hit with the tab for an event.
Greece is still paying for the Olympics and the Olympics may have partially helped nudged Greece into a financial abyss that is causing trouble for Europe and the euro. Greece may not be able to borrow any more money to pay down the country’s debts, some of which can directly be traced to overspending on the 2004 Athens Olympics.
Greece has not exhibited much discipline in spending over the years. Greece won the 2004 Olympic bid in 1997 and the project was in immediate trouble. Construction of the facilities and infrastructure was slow and costs mounted. Costs soared and Greece was on the hook for the billions of euros or dollars or pounds or whatever other currency you could name...
The 2004 Athens Olympics is not the only financial burden on the Greece’s government but it certainly has not helped the Greece’s bottom line. The International Olympic Committee promises the world to host cities and it usually ends up in a bad financial experience for host cities such as Montreal, Sydney, Athens, Turin and the same thing is happening right now in Vancouver, Canada who host of the 2010 Winter Olympics, and in London, England, the host of the 2012 Summer Olympics [we should cast doubt on some of the others].
In the United States, General Electric’s NBC-Universal division could lose as much as $200 million (US) because advertiser revenues are not going into the Vancouver Olympics telecasts.
The Olympics experience has become a money pit. Most people going after the Olympics know that the International Olympic Committee is a scourge but cities still throw themselves at the IOC’s feet hoping to get chosen. The lure seems to be nothing more than let’s feel good about hosting the event and that we will get some positive publicity out of the event that might eventually draw tourists to the city.
I tend to believe that US cities make for ideal venues for Olympics insofar as major towns already have many sports facilities hosting NFL, NHL, NBA, and MLB events. The 1984 LA Olympics were a financial success thanks to the management acumen of Peter Ueberroth (who was subsequently named TIME Person of the Year for 1984). The Atlanta event of 1996 wasn't too shabby in the financial department, either, compared to some of the financial fiascoes other countries and cities have experienced. Montreal's 1976 Olympics remains infamous. Still, America's current state of decrepitude probably means it's better off "losing" despite Obama's support:
Remember how the Republicans and Conservatives in the United States mocked President Barack Obama when Chicago did not receive the nod from the International Olympic Committee to host the 2016 Games after Obama went to Copenhagen, Denmark to speak before the IOC? Remember how American radio talk show hosts were gleeful that Obama failed to get the Games and how America failed.It's the winner's curse indeed as far as Greece is concerned. The country overbid for the rights to host an event which cost more to stage than what it earned. Certainly, poor project management didn't help cost containment matters. I can only hope the same doesn't hold for London. And for the record, I was rooting for Paris to host the Olympics. In this regard, I remain a Europhile unlike Wolf.
Needless to say the politicians and the noise crowd were really ignorant of the whole Olympics process and how it really is a drag on countries and local and provincial governments. The noise and ignorance radio carnival barkers crowd, led by Rush Limbaugh, didn’t bother to do any homework and see how tax rates in Montreal and Quebec rose between 1976 and 2006 to pay off the 1976 Montreal summer games.
The Montreal Games ended up costing about one billion dollars US. But that was nothing compared to what happened in Athens. The radio know-it-alls failed to notice just how much money the 2004 Athens games cost. But the Obama is failed carried the day for the know-it-alls on crow on radio daily.
Did Greece spend 10 billion euros or more on the Games? The true answer may never be determined. Whatever was spent, Greece lost billions of euros on the two week sports event. By 2008, 21 of the 22 venues built for the 2004 Games were unused and were in various state of disrepair yet Greece taxpayers were paying for some sort of maintenance at the venues and that too was very costly. It seems that the Olympics did very little for Athens and Greece and that 10 billion euro expenditure was a waste and probably in some way has led to Greece’s financial meltdown.