The Olympics are the biggest and most prestigious sporting events in the world. Hosting the Olympics almost guarantees lots of public scrutiny (both positive and negative), massive press and a chance to boost the economy. But are Olympics really a boost for the economy or is it bringing home more evil than good? Let’s understand this in this post.
Hosting the Olympics
Even applying to host the Olympics comes at a cost, and a huge one too. A city willing to host the Olympics could spend anywhere between $50 million to $100 million in just fees for event organizers and consultants while applying. In 2012, London hosted the Olympics and Paralympics. It had to pay a total of $14.6 billion for the event. It was nothing as compared to the 2008 Tokyo Olympics which cost a mind numbing $42 billion in 2008. Only a small percentage of this money comes directly from the taxpayers. Rest has to be borne by the country as a whole for the next few years.
Merely the cost of infrastructure here could cost $5 to $50 billion. Remember that when hosting the Olympics, the city has to create new roads, work for better and more advanced airports and provide at least 40,000 hotel rooms plus an Olympic village for housing the athletes and their teams. Even new roads have to be built for this purpose and if the existing infrastructure is not good enough, it has to be created from scratch. Most of this financing is done through debts.
Few pros and many cons
When a city hosts Olympics, it creates temporary employment for hundreds or even thousands of people. In 2014 Olympics, Sochi spent $42.5 billion in creating new infrastructure for nonsports activities. Many workers influx these cities when the infrastructure is being made.
In fact, six months before and after the Olympics, many media persons, sponsors, spectators and athletes may stay in the city. Tourism opportunities and adequate accommodation and transportation facilities are the need of the hour. This helps in building quality infrastructure for the city and make it a popular tourist destination as well.
However, it all comes at a cost. Unemployment statistics may or may not change as jobs could go to workers who are already employed somewhere or are volunteering for the cause. Additionally, local companies hardly get any contracts as they are passed on to top international companies. The games bring in some income for the economy but it is only a fraction of the expenditure. For over $40 billion that Beijing spent in the Olympics, it could only recover $3.6 billion.
Till 2016, only Los Angeles was able to receive a profit from hosting Olympics. The reason was the availability of the necessary infrastructure which lowered the cost of additional expenses. However, for other cities, it has been a road downhill. Under such circumstances, it is vital to ask if it is worth hosting the Olympics spending billions of dollars of taxpayers’ money and accumulating debt.
I set this blog up a couple of years ago now as a way to share my experience that I’ve gained through my school education and my real life education. It sounds geeky, but the economy is something that I’m really passionate about and it’s something that I am actually pretty talented in, so it’s great for me to share these experiences with those that may be struggling a little bit with finance and figuring out how to navigate the economy.