The Olympics: economic nirvana or financial hell?
Words by Cameron Schmidt
Brisbane 2032 should be a time for our politicians to stop empty promises of economic rejuvenation
With the Tokyo 2020 Olympics starting only a year behind schedule and the announcement of Brisbane 2032, there has never been a better time to discuss the economic impacts of hosting the Olympics. Despite what politicians and media figures would have you believe, it’s not quite the economic nirvana that it’s made out to be.
First of all, the Olympics are expensive. The 2000 Sydney Games cost about $6.5 billion. This may be an eye-watering sum, but it pales in comparison to the Sochi 2014 Winter Olympics in Russia, which whopped up a staggering $51 billion USD. Of course, comparing these two Games is like comparing apples to oranges, but it goes to show just how much capital is required to get these events off the ground and into a stadium near you.
Exorbitant price tags aren’t necessarily bad so long as we get a good return on our investment — namely from increased tourism, new infrastructure, and even the sense of pride knowing that the world’s attention is focused on us for a couple of months. In the years leading up to the Olympics, government officials play around with their abacuses and spreadsheets until the numbers line up and we’re making billions from tourists alone. This played out before the Sydney Olympics, when we were told that Australia would experience a 5.6 billion dollar increase in consumption.
So, you’d be stupid not to host the Olympics… right?
Politicians and organisers promise that the economic stimulus will outweigh the cost of infrastructure and the inevitable expansion of just about every public service imaginable, from policing to government administration. This is not the case. Subsequent post-mortems of the Sydney Olympics have shown that many of the promises of economic windfall just never materialised.
In a study by James Giesecke and John Madden on the economic impact of the Sydney Games, they found that the Games caused a consumption loss of $2.1 billion. This huge discrepancy from previous modelling was discovered by comparing a no-Sydney Olympics model to a simulation spanning 1997 to 2006, which accounted for sources of overestimation in economic benefits, contained more realistic elasticity of supply assumptions, and actually treated the increase in public services as a cost, which had not been done in previous reports.
The Olympics are not the economic shot in the arm which our politicians promise they will be. They don’t stimulate the labour market, nor do they leave a legacy of increased tourism; once the sports have gone, so do the spectators.
Perhaps the legacy and vision of hosting the Olympics is what we should be focusing on, rather than the nitty gritty dollars and cents. Although it’s hard to quantify national pride, international recognition, and other abstract notions, surveys conducted throughout the Vancouver and London Games show that the public generally supports hosting the Games.
In Australia, they are also a rare opportunity for our nation comes together in solidarity for something that isn’t a war, a national crisis, or the footy. And, as the IOC promises, a legacy is created; Cathy Freeman is etched onto our national psyche and is wheeled out for interviews like clockwork whenever another Games appears on the horizon.
Still, is social unity and national legacy enough of a boon to overcome the economic shortfall? If you err on the side of caution, then probably not. Australia didn’t reinvent itself like China did during their Olympics, nor did we put ourselves on the map. The best thing to do is to tone down our expectations for Brisbane and look at our successful bid as a national celebration rather than a nation-shaping event, economic or otherwise.
Brisbane 2032 should be a time for our politicians to stop empty promises of economic rejuvenation and come clean about the reality of the situation; costs will blow out and it will not lead to an explosion of tourism. Organisers have already pegged the price tag at $4.5 billion. However, they have failed to mention that this cost does not include the infrastructure required to shuttle spectators up and down the coast.
It doesn’t take a PhD to realise after everything has been added up, including the necessary expansion to public services, this $4.5 billion budget is likely to blow up in excess of the Sydney Games. Not only are the costs being obfuscated, but so are the economic rewards. Scott Morrison has stated that the event would bring in $18 billion in economic activity, a figure even more nebulous than the $5.6 billion increase in consumption promised for the Sydney Games, and not even backed up by publicly-available modelling.
However, it does appear that organisers have learned something: utilising economies of scale. In a study on the economic impact of hosting the Games, Michael Overmyer recommends host countries use existing venues and infrastructure to create economies of scale and achieve a sustainable return on investment. Brisbane will use existing sporting facilities for 2032, though the lack of widespread public transport will wash away any chance for a profit to be made. It’s one step forward, two steps back.
The Olympics are a costly endeavour that do little to stimulate the economy. But here we are. Tokyo 2020, due in no small part to COVID-19, is likely to be the greatest financial loss in Olympic history. More and more countries are looking at the costs of hosting and just saying no. Brisbane 2032 will be an expensive success and we’ll all have a great time, but that’s because as a developed nation we can weather the losses.
If we want the Olympics to be a celebration for every nation, then its economic sustainability must be addressed, or else it risks becoming an event reserved for the wealthy few.
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