Why The Olympics Are A Bad Investment, But Also A Good One
The winter Olympics are upon us. Even before the opening ceremony, Russia had set a few records, these games notably taking over as the most expensive in history. Coming in over $50 billion, it is the most expensive Olympics ever, more than $5 billion more than the Beijing games of 2008. The ridiculousness of this price tag is largely attributed to the allegedly corrupt nature of the Russian state. Though the original cost estimate was $12 billion, contracts were given to those with ties to the Kremlin, and costs overran. The International Olympic Committee believes over one-third of the $50 billion has been stolen.
But why would a country invest so much to host a sporting event? Is there actually an economic boost that comes from hosting the Games?
Let’s look at some recent cases.
In 2004, Athens hosted the Summer Games. With an initial allocated budget of $6 billion, the final operating costs were over $15 billion. That is one of the nice things about being contracted by the government for an extremely public event: deep pockets. But while the Greek government invested all of this money into hosting the Olympics, did it get anything out of it? Sadly, no. It lost nearly all of the $15 billion. This event is largely cited as a leading cause of the Greek government-debt crisis that kicked of the global economic recession in 2008.
A few years later, the Olympics were hosted in Beijing. At this point, the Beijing Olympics were the most expensive in history, coming in at between $42 and $45 billion, widely missing the target price of $16 billion. According to researchers at Oxford University, the costs of the Olympic games “overrun with 100 per cent consistency”.
It seems the best you can hope for economically as an Olympic host is to break even. In 2010, Vancouver hosted the winter Olympics. With an initial budget of $165 million, and final operating costs of $1.7 billion, it too overshot its estimate....