Heavy Lifting - thoughts and web finds by an economist
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Thursday, April 05, 2007

After Barcelona and Athens (not to mention Montreal 1976), it is becoming more apparent that the Summer (and Winter) Olympics are more likely a winner's curse. The cities that are awarded the games end up in considerable debt and suffer even more disruption while hosting the events. Some short-run tourism spikes might occur, but how many people now go to Montreal because of the 1976 Olympics?

Next year is Beijing's turn to host the Summer games. China is spending a lot of money for its "coming out" party, and it is not obvious that such spending is welfare enhancing. On the one hand, the country's nationalism might justify the expenditures in the minds of the local population and politicians. On the other hand, when the country has 1 billion people in poverty, perhaps an Olympics shouldn't be that high one the priority list.

In the developed West can the billions of dollars spent on such mega-events still be justified? Several cities in the United States bid for the 2012 Olympics, and most of the proposals claimed all sorts of wonderful benefits that would arise from hosting the events. In my opinion, it is a good thing that none of the U.S. cities won their bids because the amount that must be spent to host the Olympics continues to increase.

The 2012 games will be hosted by London in a relatively unique combination of urban reclamation project melded with the summer games. However, things are not as wonderful as they seemed this time last year.

Specifically, the cost of the games has increased almost 300% from original predictions. This in itself is not terribly surprising - cost overruns are a commonplace when it comes to hosting big events. What is shocking is that the Brits will spend 9-11 billion pounds for the event (17.75-22 billion dollars at current exchange rates)!! Can any city in the United States justify that type of spending to host the games? I don't think so and I wonder if cities in the U.S. might get the point and stop bidding on the games.

This this report by the Institute for Public Policy Research in the UK offers more details as to why the cost of the games is increasing so dramatically:
The Government has just announced the new budget for preparing the 2012 Olympic Games. It’s over £9bn, more than double the initial estimates. Why has the budget gone up, who should pay, and what we will get for our money? This briefing provides a brief overview of Olympic costs, the likely legacy and future risks.

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