Why Hosting the Olympics Makes No Economic Sense

Before the 1990s hosting was usually a low-key affair. Los Angeles was the only bidder for the 1984 Olympics. It funded its games almost entirely with private money, as largely did Atlanta in 1996. Most football World Cups were played in scarcely renovated older stadiums.

But globalisation and new television channels showing sport changed that. Each new host raised the bar, with spiffy new sporting facilities. Politicians, needing to justify the rising cost, claimed that hosting would boost the economy. They invoked hordes of shopaholic visitors, the free advertising of host cities and the long-term benefits of the roads and stadiums that would be built. When Tokyo was named host of the 2020 Olympics, Shinzo Abe, Japan’s prime minister, said: “I want to make the Olympics a trigger for sweeping away 15 years of deflation and economic decline.”

Yet these claims of economic bonanza are false. Most economists agree that hosting big sporting events is an economic strain, says Stefan Szymanski, economics professor at the University of Michigan, with whom I have co-authored a book.

This is largely because the things a country buys for a sports tournament – stadiums, roads to the stadiums, extensive security – are rarely the things it needs for daily life. Often the venues become white elephants the moment the tournament ends. That happened in South Africa after the World Cup of 2010, and is forecast to happen to many Brazilian stadiums after this year’s tournament. London’s Olympic stadium eventually found a tenant, West Ham United Football Club, but the state is paying most of the costs of revamping the venue.

Simon Kuper, in the Financial Times, on the economics of hosting a major world sporting event. Read more on the Olympics.

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Photo: rapidtravelchai, Flickr

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