The Duel: Are the Olympics worth the money?

 Why should the most-watched global event ever end? It began in 776 BC, as a unifying sporting and religious event offering a temporary truce between Greek city states. Ever since its relaunch in 1896 in Athens, it has been moving from city to city every four years almost uninterrupted.

But there are negatives. Doping and political propaganda have tainted the Olympic spirit. There have been major financial mishaps. Some cities, fearful of the expense, no longer bid for the opportunity to host them. In 2004, Athens—the first city to host the summer Olympics after 9/11—faced a sharply increased security bill. The total cost of $9bn was substantially more than the $6.6bn Sydney had to find in 2000.

Many blame the cost overruns of the otherwise very successful Athens Olympics for Greece’s subsequent fiscal and economic crisis, but the London Games also overran—by 76 per cent. Lessons have been learned. Today’s operating budgets which cover the cost of staging the games—venue construction, an Olympic village, media facilities, transport, catering, administration, ceremonies—should, if properly managed, be covered by revenues from ticket sales, television rights and sponsors.

But there are also potential long-term benefits which cannot always be monetised—such as a population that takes up more sport and becomes healthier. It is up to the city to see that the Olympic legacy is properly funded and maintained. Athens may have left its stadiums to rot but London hasn’t.

And then there is the extra capital expenditure to upgrade the infrastructure. These costs are in addition to the core budget and shouldn’t figure as part of the overall costs. But their impact on the economy is long lasting. In Athens, the much improved transport links have eased congestion and made it much more attractive for workers and tourists. In London, infrastructure investments for the 2012 Games were crucial for increased connectivity and the regeneration of east London.

Rio may have been a mistake. Greater care in choosing cities may be needed. But there is no reason why the cost-benefit cannot be positive, especially in the long term.

Vicky Pryce is a board member of the Centre for Economics and Business Research, and a former joint Head of the Government Economic Service. Her books include "Greekonomics" and "It's the Economy, Stupid"

 To dismiss Rio 2016 as a mistake overlooks the systemic factors at work and the serious human consequences of hosting the Olympic games. The International Olympic Committee (IOC) is an unregulated international monopoly that every two years invites the cities of the world to bid against each other in an auction to host the summer or winter Olympics. Typically, the bid committees do not represent the government of the prospective city, rather they are a group of business executives, mostly from the construction and related industries, who seek the multiplication of high-priced contracts.

The inevitable result is overbidding. Recent summer games have cost $15-20bn (excluding Beijing’s $44bn) and have brought $4-4.5bn in Olympic revenues—not a very attractive financial balance. You are simply wrong to claim that operating costs include venues, the Olympic village and media facilities. Operating costs are the expenses for the duration of the Games and sometimes include temporary venues. Permanent venues, the Olympic village, the broadcasting and media centre, the ceremonial green space, all transportation, communications and hospitality infrastructure lie outside the operating budget. When the local Organising Committee for the Olympic Games reports a balance or surplus in its budget, it refers only to the operating budget, generally around one-quarter of total costs.

Sometimes there is productive infrastructure investment for the city’s future development, but more often the infrastructure is explicitly for the staging of the games and has little to do with the city’s long-term needs. Witness the $3bn-plus spent on the 11-mile subway from Rio’s tourist beaches to the main Olympic cluster in Barra da Tijuca. After the games, it will serve a few thousand people daily who travel from an upper middle class suburb. Rio needs public transportation desperately, but any sensible city planner would have built subways to the north and west of downtown.

You repeat the IOC mantra of long-term benefits. In fact, independent research shows that these touted gains are illusory. Rio is only atypical in the magnitude of its losses. With the exception of Los Angeles 1984 and Barcelona 1992, hosting the Olympics has proven an imprudent economic investment.

Andrew Zimbalist is a Professor of Economics at Smith College, Massachusetts, and the author of "Circus Maximus: The Economic Gable Behind Hosting the Olympics and the World Cup" 

 The exclusivity rights paid by 205 national broadcasters, sponsors and advertisers, together with ticket sales, cover the €3bn-plus operational expenses of the Games, which include the costs of refurbishing and using stadiums and auxiliary facilities as venues. Yes, construction costs can rise at the last minute as cities are held to ransom by construction firms. But whatever else is spent to make the Olympics work can be considered as planned infrastructure improvements for the long-term benefit of the host city’s residents. Their return on investment doesn’t figure in the Games’s budget. Los Angeles, Seoul, Barcelona, Atlanta, Athens and London can quantify those benefits. On the other hand, Beijing and Sochi’s splurges were politically motivated and less easy to assess. But in general such “overruns” should not be used as an excuse for suggesting that the games are an economic disaster.

Of course if the Olympic movement wants to remain meaningful, it needs to fix itself. The IOC has encountered its fair share of controversy, not least over the awarding of the 2002 winter games to Salt Lake City.Fifa’s recent corruption crescendo, coupled with the Russian doping concerns, have brought sports leadership to a crisis.

But there are plenty of reasons to fix it. Perhaps a nation, rather than a city, being awarded the Olympics as with the World Cup is an option for the future. Or restrict hosting to developed nations only. Or one country could have it permanently. Greece?

 Well, it’s hard to know where to begin. The notion that expenditures beyond the Games’s operating budget “can be considered as planned infrastructure improvements for the long-term benefit of the host city’s residents” is baffling. The evidence is overwhelmingly to the contrary. While it is true that some infrastructure construction benefits the host city over time, it is also true that the vast bulk of it is planned to meet the IOC’s demands for the Games, not for the city’s development. The Rio golf course, the subway to the wealthy suburb Barra da Tijuca, the $22m gondola to the Complexo do Alemão favela where there is no plumbing—at best, these are very low priority items and a massive waste of money, given the urgency of unmet basic needs in Rio. Rio is hardly unique among Olympic hosts in misallocating scarce public funds for frivolities, marginal infrastructure and white elephants.

I advocate reforming, not abolishing, the Olympics. The problem originates with the unregulated international monopoly, the IOC, and its immense power. Real reform will not come easily. The idea of one city as a permanent Olympic host is worthy of consideration but, its symbolic appeal notwithstanding, Athens should not be that city. It lacks the resources to build and maintain the venues and infrastructure. What would the venues, additional hotels and Olympic village, be used for between the end of one Olympics and the beginning of the next?

 Barcelona and London made wise infrastructure investments when they hosted the Games which continue to benefit all residents. They remain a model of well targeted public works. Sochi’s attempt to turn a summer resort into a winter one and Rio’s questionable projects, are examples of failed efforts which bring about political backlash. The Athens games delivered a subway, an airport, roads, motorways and telecoms the city and the country needed—though inevitably with a couple of white-elephant venues.

The Olympic games is big business. They bring athletes and nations onto a global stage where the Olympic motto of “Faster-Higher-Stronger,” matters to athletes and fans. Despite scandals they have retained their exceptional allure.

They are an economic gamble. Sport, like business, is about risk. Regulation is the answer to the concerns about the IOC and Fifa monopolies. The IOC’s Agenda 2020—a 40-point plan for shaping the future of the Olympic movement—is a good step in that direction. It now judges bids on the measurable legacy for the host and the movement.

The Olympics are an unparalleled travelling spectacle, but should they perhaps go back to a permanent establishment? The original site at Olympia lacks the infrastructure, but Athens posseses both the Olympic symbolism and the infrastructure for quadrennial improvements through global funding. But I also believe that in the near future developing nations may well become Olympic hosts, possibly staging events in many cities, as the World Cup currently does, in order to lighten the pressure on a single city-host.

 The London Games were three-and-a-half times over the initial budget. Ninety per cent of the $18bn-plus spent on the Games came from the public treasury. East London (and West Ham Football Club) got a stadium it did not need that cost over $1bn and a shopping mall which, again, it did not need. The high-speed rail link at Stratford was being built independently of the Olympics. The public housing goal was not met. Tourism in London dropped six per cent during July and August 2012. Taxpayers’ money could have been spent more productively had the Olympics not been pursued.

Barcelona is the only host city that had a detailed, substantial vision and plan to restructure its neighbourhoods and transportation that preceded its Olympic bid. As such, it was able to fold the bid into a wider vision. The typical host city is required to build 35-odd sports venues, an Olympic Village, a media and broadcasting centre and ceremonial green space. It contorts itself to accommodate the IOC’s demands. When this happens, there is vast waste and social dislocation, even if a modest amount of useful infrastructure is built.

You say that the IOC and Fifa need to be regulated. By whom? Unfortunately, as international monopolies, they are not under the jurisdiction of any government. The IOC funds the Court of Arbitration for Sport and provides half the funding for the World Anti-Doping Agency. The Agenda 2020 reforms scratch the surface, providing positive PR for the IOC but no fundamental change. Cities and their citizens need to be educated about the economic folly of hosting. That’s the ticket.