Olympic spending and democratic accountability

The opening ceremony of the Beijing 2008 Summer Olympic Games
Beijing’s 2008 Olympic Games were spectacular, but expensive. The country spent more than $40 billion on hosting them (source: dpa)

Paris will probably host the 2024 Olympic Games, and French decision-makers are rejoicing. Yet Seoul 1988, Barcelona 1992, Sydney 2000, Athens 2004, London 2012 – what do all these Olympic Games have in common? Their projected budget was half or less of the real final cost. Beijing 2008 even cost 12 times the original budget. Taxpayers typically end up paying the largest chunk of the cost. Yet politicians and sports lobbies still sell the idea that the Olympic Games are a great deal for cities and countries, just as they are doing today in the City of Lights.

The age-old but doubtful “stimulus” and “positive spillover” argument is always put forward. But if these mammoth projects stimulate the economy on one hand, they also depress it on the other – and in larger absolute proportions. First, the money could be invested elsewhere, much more productively (think of stadiums left to rot versus a new hospital). Second, the taxes levied and debt accumulated to pay for those investments cripple the economy for years. Grenoble paid for its 1968 winter games until 1992.

Advocates of hosting the games contend that the 1992 Barcelona Olympics were a success despite the cost overruns. Large sections of the city were renovated thanks to the event. But given the city’s fabulous cultural heritage, it is hard to see why it needed the Olympics to invest in renovation. The same goes for Paris today.

Winner’s curse

International Olympic Committee (IOC) auctions typically end in a “winner’s curse,” as competitors try to outbid each other, far exaggerating the economic spillovers and underestimating the costs. The main issue is one of accountability: when cities put the decision to a referendum, popular wisdom rejects the games, as in Hamburg in November 2015. Budapest withdrew its application in February 2017, after a petition for a referendum gained 266,000 signatures. Boston also withdrew from the race in July 2015 after polls showed the majority of citizens were against hosting the Olympics.

As with Barcelona, Paris does not exactly need the Olympics to increase its attractiveness

Officials in Paris refused to hold a referendum, but hearing the organizers’ rhetoric convolutions to justify the decision as “popular” nonetheless was rather entertaining. A recent poll showed 73 percent of French people were “in favor” of hosting the Olympics, but it was a survey of just 1,000 people. Such polls should be taken with a big grain of salt, especially when they infer that 15 million French would be ready to buy a ticket – a simply ridiculous conclusion. Given the colossal sums of money involved, referenda should probably be mandatory.

Paris already has most of the equipment and infrastructure required to host the Olympics, meaning it will probably not be another Sochi or Athens. However, the Olympic village and swimming pool still need to be built – and both the city and country are deep in debt. And as with Barcelona, Paris does not exactly need the Olympics to increase its attractiveness.

Accountability connection

In fact, the games are less and less frequently being organized by rich Western nations, but by countries that are usually democratically immature and corrupt. Think of the 2008 Beijing summer games, with their budget of more than $40 billion, or Sochi’s 2014 winter games, with a record budget of about $51 billion (instead of the $12 billion originally projected!). There is a geopolitical conclusion to be made here. Countries with less freedom and more corruption do not have the levels of accountability that their freer counterparts have. Their leaders are thus more easily tempted to hold extravagant events, since they can offer an opportunity for good “branding,” with the extra advantage of creating a sense of national pride and therefore more public support for the current regime.

The Olympics can have the double inconvenience of not only encouraging wasteful spending but also strengthening more restrictive regimes

In this context, the Olympics can have the double inconvenience of not only encouraging wasteful spending but also strengthening more restrictive regimes. The IOC apparently now takes the risk of “too much” spending and the availability of equipment and infrastructure into account when selecting host cities. But given the scarcity of Western, democratic interest, does it risk sawing off the branch it is sitting on?

Sport is beautiful. International athletic competitions are a great way to unite nations. However, given the waste associated with them, some think it would be a good idea always to hold the Olympics in a single city – for example in Athens, not far from where the games were born.

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