25 Jul 2016

Why hosting the Olympics is a bad idea

From Jesse Mulligan, 1–4pm, 1:13 pm on 25 July 2016

Hosting the Olympics is prohibitively costly with little benefit even for well-off cities, a sports economist says, but the International Olympic Committee could make it more attractive.

A visitor talks on mobile phone at a fake beach on the entrance of The Olympic Village on Barra da Tijuca neighboorhood, in Rio de Janeiro.

A visitor talks on mobile phone at a fake beach on the entrance of The Olympic Village on Barra da Tijuca neighboorhood, in Rio de Janeiro. Photo: AFP

Professor of Economics at Smith College in Massachusetts, Andrew Zimbalist has consulted in Latin America for the United Nations Development Programme, the United States Agency for International Development and numerous companies, and he has consulted in the sports industry for players' associations, teams, cities, companies and leagues.

"I'm interested in the way the business of the sports industry functions and what are the dynamics that are changing the way the sport industry functions, and I'm also interested in the way sports impacts larger society."

He has also authored twenty three books, including Circus Maximus: The Economic Gamble Behind Hosting the Olympics and the World Cup.

"This is what the modern Olympics and the modern World Cup are really about," he says. "It's the Circus Maximus in the old days of referring to these gigantic stadiums and elaborate facilities, but it's also a Circus Maximus in the sense that it's a circus."

He told Afternoons with Jesse Mulligan the idea that the Olympics could benefit a city was generally untrue.

The summer Olympics generally did not happen in lesser-known cities because they did not have the resources - and it did not pay off even for those that could, Prof Zimbalist said.

"Most cities in fact don't have the resources but the larger cities feel like they do, and some of the larger cities feel like they will put themselves even more on the world stage by hosting the Olympic Games."

However, the effect of the Olympics often negatively affected the city's branding, he said, such as in Rio.

"People historically thought about Rio as a spectacularly gorgeous and interestingly exotic city.

"What people have been learning over the last year or two years about Rio is that there's intense and pervasive political corruption, that the economy is failing, that there's pervasive violence all over the streets here's a dysfunctional water system and sewerage system, that they have terrible transport bottlenecks, that 22,000 families have been evicted from their homes in order to clear the way for the Olympic venues and the bus rapid transit lane.

"What we've learned basically, and I haven't exhausted the list by a long shot, is that Rio is a place you want to avoid, not a place you want to go to.

The Olympic Games in Brazil should moved or postponed because of the threat from Zika, 150 international medical experts say.

Rio de Janiero's image appears to have been tarnished by the Olympics. Photo: AFP

Olympic extortion not just in Rio

In Circus Maximus, Prof Zimbalist argues governments should avoid hosting the Games.

He told Afternoons that arguably the only cities that benefited in the last 50 or 60 years being Barcelona in 1992 and Los Angeles in 1984, but even those were special cases.

"The benefit that Los Angeles had in 1984 was very modest - maybe they generated a surplus of $215 - what happened in Los Angeles was a very special circumstance and won't be repeated.

"And most of the gains that Barcelona had didn't have to do with hosting the Olympics - [they] had to do with the economic plan to undo many of the things that happened, many of the negative things that happened under the Franco government between the 1930s and 1975 when he died."

He said the effect of the 2012 London Olympics had been well documented and all the tourists who had been drawn into the city had not been at all interested in exploring beyond that.

"They spent their time at the olympic park in east london watching olympic events - they didn't go to London to watch theatre.

"Go and interview a restaurateur in central London near Piccadilly or go and interview a theatre manager in central London about how their business was in central London in August of 2012 [during the Summer Olympics] and they'll say 'It was awful. It was like the great depression.'

"If you look at total number of tourists who came to London during July and August it was down 6 percent from what it had been the previous year."

The theory that the investment would provide long-lasting infrastructure did not stand up either, because the infrastructure gained for the amount spent was simply not economic.

In Rio for example, the subway which had been built ran between the beaches and the olympic centre, and would not relieve any of the transport pressures the working class faced in the city every day.

"If you have a state and region that's financially bankrupt and you have very, very scarce resourses and you have massive poverty, is that the best way to spend scarce resources? And the answer is overwhelmingly no."

In London, Olympic Park was being turned into a new mini-city, with a £400 million pricetag.

London's Olympic Village accommodation for athletes has recently been renovated to provide housing for new tenants.

London's Olympic Village accommodation for athletes has recently been renovated to provide housing for new tenants. Photo: AFP

So why do cities bid?

Prof Zimbalist said cities still bid to host the Olympics partly because politicians were self-serving.

"Politicians basically are motivated by getting re-elected and they get re-elected by behaving in ways that are supportive of what is the biggest economic interest in the city," he said.

A city's strongest economic interest and largest employer was typically the construction industry and real estate, which definitely saw benefits from the Games, he said.

"In the case of Rio, the city has given land to developers, they've given low-interest loans to developers, they've given tax breaks to developers, and also in the process of doing that they've despoiled a good portion of their natural environment."

What's the solution?

It was a different story for the International Olympic Committee (IOC), however.

His book explained that over the past few decades, the IOC had taken an increasing share of the proceeds for itself: the most recent public data revealed it took more than 70 percent of Olympic television revenue, compared with less than 4 percent between 1960 and 1980.

"There's no political body that stands over the IOC and says 'you're abusing your customers or your participants or your workers and that has to change', so it hasn't had to change over time and the result is that the host cities get the raw thin end of the stick.

Potential hosts were getting wise to the difficulties and cost of hosting the Games, however.

While 12 different cities had bid to host the 2004 Olympics, only five were seeking to host for 2020.

That could prompt the International Olympics Committee to rethink its approach.

"They make a ton of money - they share about 25 percent of the money they earn internationally ... with the host city, about 75 percent they keep, a large part of what they keep goes to paying their own functionaries and their executives but they also share a large part of it with the international federations of the Olympic sports and the national Olympic committees.

"It would be a lot prettier if they were to say to Rio - or if they had said to Vancouver in 2010 or London in 2012 - 'we're going to share more of this revenue with you because we don't want you to be losing revenue,' but that has not been the operating style.

He also suggested limiting the number of cities bidding, adjusting the television revenue split to favour host cities, making the voting systems more transparent and imposing term limits on members.

Related

  •  http://www.radionz.co.nz/news/national/286220/major-cutbacks-for-rio-olymics