The Olympics - benefits and burdens

(Baonghean) - The Olympic Games - the biggest sporting event on the planet - always attracts the attention of sports fans worldwide. However, whether hosting an Olympic Games truly brings economic benefits to the host country is a big question mark. Let's look at some analyses to get a general overview of the economic benefits of an Olympic Games.

A spectacular image from the opening ceremony of the Rio 2016 Olympics. Photo: New York Times.

The cost of bidding to host the Olympic Games is considerable; for example, each participating country must spend at least $20 million to bid for the 2016 Olympics. This doesn't even include the enormous costs, potentially billions of dollars, for organizing the Games. Furthermore, some cities have repeatedly failed in their bids to host the Games, such as Istanbul, Turkey (5 times) or Madrid, Spain (2 times). So what makes hosting the Olympic Games so important?

Economic benefits?

The two economic benefits most anticipated by many host nations of the Olympic Games are likely job creation and tourism development. The Sydney 2000 Olympics can be seen as one of the few recent Games that delivered these benefits.

When selected to host the 2000 Olympics in 1993, Australia spent a total of $4.8 billion to organize the event, with the largest portion of the cost going towards infrastructure development.

The organizers prioritized the construction of permanent structures in the hope of benefiting the local community in the future. And the 2000 Olympics yielded a staggering $3 billion for Australia. The most noticeable effects were the creation of approximately 100,000 new jobs thanks to the Olympic impact, and a 1.6 million increase in tourism to Australia.

The burdens

With costs reaching $11 billion, the Athens Olympics were the most expensive Olympic Games to date. Immediately after hosting the Games, Greece was burdened with a massive debt of €168 billion, or 110.6% of its GDP, more than double the limit of the Eurozone.

This made Greece the first European country to be placed under the financial supervision of the European Commission (EC) in 2005. While hosting the 2004 Olympic Games could not have been the sole cause of Greece's economic crisis, it was a reflection of the government's reckless spending and unsustainable borrowing.

Furthermore, investments in the Greek Olympics did not seem to yield long-term benefits, for example, many stadiums and equipment were no longer used after the Olympics. The tourism industry also did not benefit much from the Games, as in the following years tourists chose other destinations besides Greece, such as Croatia or Türkiye, which offered lower costs and better marketing strategies.

Another example is the 2008 Beijing Olympics. Despite costing $40 billion and being the most expensive Olympic Games on the planet to date, the event was considered to have had an insignificant impact on the Chinese economy.

The 2012 Olympics were held in London.

In the UK, during the London Olympics, the number of visitors to the British Museum dropped to 480,000 compared to 617,000 during the same period the previous year. In the month of the Games, the number of foreign tourists entering the UK decreased by 5% compared to the year before.

At this year's Rio Olympics, despite facing the biggest economic and political crisis in decades, Brazil still spent a total of $12.2 billion to host the Games. This financial pressure even led the Rio city government to declare a budgetary emergency last June and rely on federal bailout funds to pay pensions and civil servant salaries. Furthermore, 60% of Brazilians surveyed believe the Olympics will bring them more costs than benefits.

What does the Olympic Games bring to the host country?

It is evident that the economic benefits from the Olympic Games can hardly offset their costs, due to the infrastructure built for the competitions. Stadiums are considered expensive structures with low economic efficiency.

A woman stands on the rooftop of a demolished house next to the hotel tower built for the 2016 Olympics. Photo: Bloomberg.

That is also the reason why these projects are mostly built with taxpayer money rather than attracting private investment. Similarly, the road network and infrastructure connecting the competition venues, despite being meticulously invested in, are not used effectively after the Olympics because they do not serve the residential areas.

Therefore, a long-term plan is necessary for investments in Olympic construction. This has been considered by recent Olympic host countries, which have focused more on building infrastructure such as highways and airports for long-term benefits.

Thus, the economic benefits of hosting the Olympic Games seem rather ambiguous. Some argue that the Olympics shouldn't be viewed solely from an economic perspective. Author Kuper writes on ESPNFC that we are misunderstanding the nature of a major sporting event; it's not an economic stimulus package. Hosting a sporting event can increase the happiness index for local residents. Meanwhile, economist Matheson from Massachusetts compared the Olympics to a wedding—it doesn't make you rich, but it makes you happy.

Phan Vu