Olympic bids show conflict between rulers and subjects

Upon hearing about Chicago’s failure to secure the 2016 Olympics, a young friend asked if the Olympics would have been profitable. I said that they would have cost billions of taxpayer dollars and that Greece spent over $1 billion on security alone for the post-9/11 Athens contest (even the very successful pre-9/11 Sydney Olympics 2000 punched a $2 billion hole in Australians’ collective pocket (source)). There was no way to recover that in ticket sales, television rights, or temporary boosts to the economy. My friend then asked if the Olympics were guaranteed to lose money, how come any city would bid on them? My response was that bidding for the Olympics highlights the conflict between rulers and subjects, or “politicians” and “taxpayers” as we might refer to these groups in the U.S. The mayor of a U.S. city wants to get the Olympics so that he or she can be in the national and international spotlight for a few months, which might result in being able to obtain a more powerful job. The mayor has the ability to spend taxpayers’ money, and borrow billions more on their behalf through construction bonds, for personal advancement. The taxpayers would have a tough time organizing to stop the commitment to an Olympics.

The taxpayers of Chicago dodged a bullet this time, though no thanks to any of the politicians who supposedly represent their interests. If we assume a modest amount of inflation since the 2000 Olympics, a reasonable dose of Illinois corruption, most of the work being done by mob-controlled unions, and the American systems of dealing with vague security threats, it seems reasonable to assume that the Olympics would have cost at least $5 billion. That would be enough to finance a great engineering college, an online university serving tens of thousands of students, an electric car manufacturer, a bunch of high-tech businesses, a free wireless Internet covering the entire city, and still have a lot left over. Unless taxpayer dollars were truly unlimited, could anyone minding the long-term best interests of citizens choose to spend that money on a two-week spectacle?

Update: http://www.nytimes.com/2005/07/10/opinion/nyregionopinions/10CImatheson.html

17 Comments

  1. Jeff

    October 4, 2009 @ 11:11 am

    1

    Philip,
    Agreed, the profitability question has always been an interesting one for the Olympics in my mind. It’s a fun bar conversation topic, too!

    Though for a second, I thought I was reading Michael Moore’s blog :-)

  2. philg

    October 4, 2009 @ 10:27 pm

    2

    Jeff: Ouch! Does Michael Moore have a blog? The last that I checked, everything that he produced was restricted to paying customers. He had a site, but it existed only to encourage people to purchase his hardcopy books and movies on physical media. Some friends tonight mentioned that Greece was still struggling to pay back debt incurred for its 2004 games. http://www.csmonitor.com/2008/0721/p04s01-wogn.html is an article on the aftermath of the Athens Olympics.

  3. Jeffrey Friedl

    October 5, 2009 @ 6:17 am

    3

    Sure, most of the value in what is spent evaporates when The Games end, but your shortsighted analysis fails to recognize the enduring value of plush mascot toys and collectible pins. Really, is any price too high when creating a heritage for our children and generations to come (especially when spending other people’s money)?

    (Do you like how I made it about the children? I should be a politician :-)

  4. Stephen

    October 5, 2009 @ 9:04 am

    4

    As a resident of London I was anything but happy that we won last time. I still think the mayor should phone Paris and see if they still want it.

  5. karakfa

    October 5, 2009 @ 9:07 am

    5

    here is a master’s thesis on the very same topic.

    http://www.econ.queensu.ca/working_papers/papers/qed_wp_1097.pdf

  6. Hubbert

    October 5, 2009 @ 9:14 am

    6

    In addition to the money, each Olympics leaves behind the long-term urban planning / real estate / environmental issues of salvaging or repurposing dozens of large, permanent buildings which are only used as intended for 2 weeks and are usually designed with little concern for the city’s normal long-term needs.

  7. Rob

    October 5, 2009 @ 2:01 pm

    7

    Another point in favor of the winter Olympics. Still “The Olympics”, but the order of magnitude of money lost is much smaller

    http://www.voanews.com/english/archive/2007-02/2007-02-08-voa49.cfm?moddate=2007-02-08

    We should support USA bids for every Winter Olympics to reduce the likelihood of ever landing the Summer Olympics. The events are way better too. Skiing combined with target practice? Come on!

  8. Bob Oppenheimer

    October 6, 2009 @ 2:01 pm

    8

    >>The taxpayers would have a tough time organizing to stop the commitment to an Olympics.
    But those taxpayers who are sufficiently motivated/pissed-off can punish the politician pushing for the Olympics by voting him out of office. Phil, I think in order for this whole Olympics-at-Taxpayers’-Expense scheme to work, voters/taxpayers also have to be sufficiently uninformed/misinformed/indifferent.

    Equally important, while the taxpayers as a whole might suffer, there will be certain groups within the taxpayers(construction contractors, public/private sector security, etc) who will actually benefit from events like the Olympics. Sufficiently vocal support from these groups might allow the politicians to hijack public coffers while appearing to advance the public interest.

    On the other hand, emerging nations like China and Brazil winning the chance to host the Olympics does open up a whole new world of possibilities for wealth transfer. The desire of politicians in those countries to raise their profile at the expense of their taxpayers might allow sufficiently skilled/well connected US contractors to go in, provide services, and leave with enough profit to pay taxes back here in the US.

    So what needs to be done is for the US to push for the Olympics to be hosted in a cash-rich(Middle Eastern, some African, some Central Asian, some South American, etc) country that is US-friendly, sufficiently corrupt, and lacking in infrastructure and technical know-how. This will allow US contractors like Steven Spielberg, Cisco, Halliburton, and Xe Services LLC(known until recently as Blackwater) to make a handsome profit and help finance the deficit back home.

  9. Mark

    October 6, 2009 @ 2:15 pm

    9

    By chance I’ve lived in two Olympic cities during their games. Cynicism abounds, but as the games approach and occur, that all dissolves. It’s truly a wonderful experience, memories that don’t fade. You just have to be there, I guess. It’s hard to put a price on it. For weeks after the end of the games you go into a funk. There’s definitely a place for the Olympics, cost overruns and all.

    I suppose you think we should have eliminated poverty rather than sending men to the moon, huh?

    I’m currently living in yet a third city that lost the 2016 Olympics, and I was pretty bummed about it. When Obama won the presidency, my first thoughts were, Crap, they’ll give Chicago the Olympics and we won’t get it. Chicago lost, but so did we.

  10. Chaminda

    October 6, 2009 @ 4:19 pm

    10

    I am living in Vancouver which is home for the 2010 winter Olympics.

    You think people will learn how to manage expenses by listening to other host cities….it is not. All I hear is cost over runs left, right and center. I don’t think anyone ever revile the true cost of the Olympics. Simply put I don’t think anyone ever going to say the true cost of hosting games.

  11. Allen

    October 10, 2009 @ 9:14 am

    11

    I’m surprised you’re not a Michael Moore fan. After all, in his last movie, he sounds off quite loudly against the bailout. He also sides with you by (like the hero of New York, CB Sullenberger) pointing out how badly pilots are paid, and seems to think you should make more money if you’re providing such an important service. I’d think you’d appreciate his efforts to make sure you can provide for your family. Or, as George W. Bush put it, “put food on your family.”

    He also put an entire movie online for free…

  12. Bob Kerns

    October 11, 2009 @ 1:36 am

    12

    On the basis of casual observation, and not hard data, I am somewhat skeptical of the claim that the Olympics don’t *eventually* pay off.

    Tokyo hosted the 1964 Olympics. This drove a large number of infrastructure improvements which heavily benefit them to this day, including the Shinkansen — the “bullet train”, and many other transportation improvements.

    All of the analysis I have seen don’t extend over a sufficient lifetime to account for these benefits — and it is hard to account for the benefit of infrastructure improvements, anyway.

    But even if we assume they EVENTUALLY pay for themselves, it does leave some questions unanswered — like would it have been more economically efficient to simply invest more heavily in the local infrastructure?

    Also, the disruptiveness of hosting the games is significant as well.

    And should we EVER be paying, as taxpayers, for sports facilities in what amounts to a commercial venture? If they’re to be used by the local public, fine, but many of the facilities aren’t suited for that. And the costs of spectacles…lasting for mere hours at most!

    But I don’t think it’s just power-mad politicians that drive it. I think it’s also local greed. I think a lot of people expect they’ll profit from the Olympics — employment, contracts, sales, property values. And they’re right — in the short run. In the long run? It would appear the bond holders are the winners. And maybe the next generation.

    I wonder what would happen, if everyone wised up? Politicians everywhere spent their time on their jobs instead of Olympics bids. Taxpayers weren’t asked for handouts for them. They were run as private enterprises, and expected to show either a modest profit, or a voluntary loss covered by donations.

    We’d have less spectacle. Fewer new facilities. Any short-lived facilities would be done as inexpensively as possible. We might have less capacity for large crowds.

    But would athletes still compete? Would television still cover the events? Would people still watch the competitions? Would tourists still come?

    I think the answer to all of these is yes.

  13. mtraven

    October 11, 2009 @ 2:18 am

    13

    Some fairly tangential reactions may be found here. Executive summary: wasting money is practically the point of the Olympics.

  14. Left Coast Right Winger

    November 1, 2009 @ 7:49 am

    14

    In the United States, we should require that a City that wants to host the Olympics, place the entire cost of financing the Olympics in Escrow prior to allowing them to bid on it. If the city wins, then they spend the Escrow money and no more on Olympics-Related projects. If they don’t win, then they get the money back to spend as they see fit.

    It would force the politicians to do their tax hikes or borrowing up front and allow the taxpayers sufficient time to block it, or, at least include provisions in the escrow account for what will happen to the funds if the bid is rejected. (For example, the taxpayers could demand that it be refunded to them in full.)

    Just a thought.

  15. Juan

    November 2, 2009 @ 11:38 am

    15

    You forgot to add as part of the postive things to do with the money – dealing with teen violence. While they were off trying to lure the Olympics to Chicago, a high school teen was killed by a mob of other kids.

  16. Mihai

    November 3, 2009 @ 11:40 am

    16

    I think you are all missing the point of the Olympics it’s a symbol of honor and peace. It shows the continuity of humanity. You have to look further than the money involved. I am sure the ancient greeks didn’t make a penny for organizing it.

  17. philg

    November 3, 2009 @ 12:14 pm

    17

    Mihai: That’s a lovely sentiment. I’ve been to the site of the ancient Olympics in modern-day Greece. They used the same physical facilities for several hundred years. They certainly did not spend the ancient equivalent of $15 billion on construction for each event. If we accept your premise that the Olympics are a symbol of honor and peace, shouldn’t it be possible to (1) run one at a lower cost, (2) raise money to support them from voluntary donors rather than confiscate the money from taxpayers, and (3) not spend $1 billion or more on security at each event?

    When I see billions of dollars taken from taxpayers who would be imprisoned if they did not pay, and helicopter gunships flying around for security purposes, “honor and peace” are not the first thoughts that come to my mind.

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