Hope for gold: The value of the Olympics

Hosting the Olympic Games is not cheap. The cost of the upcoming games in Paris is estimated at at least nine billion euros (14.5 billion Australian dollars).

Against the cost, supporters of the Olympics and other mass events argue that hosting them brings benefits in the form of economic stimulus, much-needed infrastructure, tourism boosts and soft power. The overall value of the Olympics depends on whether these benefits, some of which are difficult to measure, outweigh the costs. The history of the Olympics shows that the economics rarely add up. So soft power – the warm inner glow of the host city’s citizens, the diplomatic gains from a positive perception of the country – remains as a balancing factor.

How well have the Olympic Games succeeded in creating added value for their hosts?

One argument for hosting the Olympics is that they provide a fiscal incentive for the host city. The long period from bid to event precludes the smoothing effect of public spending to stabilize the economic cycle. The value lies in the fact that the transport and other infrastructure built for the event will continue to provide economic benefits in the future.

The Games provide a boost to tourism, but with the exception of the 1992 Barcelona Games, there is little evidence of a sustained increase in tourist numbers.

The investments in infrastructure at the 1956 Melbourne and 2000 Sydney Olympic Games have paid off in the long term. Sydney, for example, used the event to regenerate run-down areas near the city. London also wanted to use the 2012 Olympic Games to get East London back on its feet.

While these investments add value, as part of an Olympic project they are likely to cost more to build than they would otherwise have, simply because Olympic schedules concentrate demand for construction workers and supply. The event horizon also gives companies and unions more scope to drive up prices, and large, expensive projects offer more scope for corruption. The 1976 Montreal Olympics were a vivid example.

The value of purpose-built facilities, while great for the sports concerned, is less clear. Facilities built for world events tend to be expensive to maintain and difficult to fill with regular events. Likewise, the Games boost tourism, but with the exception of the 1992 Barcelona Games, there is little evidence of a sustained increase in tourist numbers. Hosting usually increases interest in the sport, and the availability of some facilities has enabled sporting success on the world stage. Australia’s Fox family undoubtedly benefited from the whitewater canoeing facility at the 2000 Olympics.

The Olympics are hosted by cities, so the cost calculation for cities depends heavily on how much money they get from higher levels of government and the private sector, and how much they get back through ticket sales. The International Olympic Committee (IOC) owns the broadcast and marketing rights, but these are not a source of revenue to build infrastructure. As governments at all levels face greater financial pressure, it is becoming increasingly difficult to justify hosting very expensive sporting events.

This problem was evident in Australia last year, when the Victorian state government cited rising costs as the reason for its decision not to host the 2026 Commonwealth Games. Even if the IOC scales back its demands somewhat, it is difficult to provide an economic justification unless the Games largely use existing infrastructure, as was the case with the 1984 Los Angeles Olympics.

So what about the soft power argument? Eastern European countries and the Soviet Union boycotted the 1984 Los Angeles Games in retaliation for the US boycott of the 1980 Moscow Olympics. A total of 22 African countries previously boycotted the Montreal Games after New Zealand was allowed to participate despite the All Blacks rugby team violating sports sanctions by touring South Africa.

As long as the world succeeds in bringing together the best athletes from all nations – including those from countries subject to severe sanctions – to encourage them to compete under agreed participation rules, there is hope.

While this wave of political boycotts has not been repeated, the Games provide an opportunity to put pressure on governments, as happened over Indigenous rights in Sydney in 2000 or the treatment of the Uighurs in Beijing in 2008. These protests are usually forgotten during the Games, but when you add in the unrest for indigenous people, corruption scandals and cost overruns, most Games bring governments more bad press than good in the run-up to the Games. However, the attendance of high-level politicians at the Games provides an opportunity to restart dialogue between countries in a neutral setting. The 2018 Winter Olympics in Pyeongchang was a case in point, when South Korea and North Korea used the event to launch another phase of diplomacy.

Despite questionable economics and mixed soft power implications, the idea of ​​hosting the Olympics remains attractive to many city and state governments. Likewise, industrial policies are politically attractive because they can be sold on the basis of creating “good” jobs and improved security. Just as with the Olympics, governments should subject these policies to thorough scrutiny before bidding.

There is one final consideration, beyond the value to the host nation, that perhaps shows why hosting the Olympics has value. As long as the world can bring together the best athletes from all nations, including those from countries under heavy sanctions, to compete under agreed rules of engagement, there is hope. Hope that cooperation can go far enough that disagreements are resolved by peaceful rather than military means. And hope that international organizations will be able to change the rules to allow for ongoing and global cooperation.