The 2016 Olympics begin Friday, although they technically kick off today with a women’s soccer match. They’re being greeted with headlines like this:
- Rio Olympics Athletes Advised to Not Put Their Heads Under Water (because of the high concentrations of viruses and bacteria in some of its venues)
- Rio’s Traffic Jams Force Last-Minute Holiday for Olympics (the mayor is literally telling people to stay home for their jobs on Thursday so the Olympic torch can be on time)
- Transportation Poses Ordeal for Rio Games (the city’s big transportation investment in the Games is late, over-budget, just connects one rich neighborhood to another, and might not work in time)
- The Broken Promise of the Rio Olympics (investments and tax breaks have benefited the rich and the places they live, while tens of thousands of poor families have been evicted)
- The Trouble With Rio’s Police (there’s an increase in police killings and a likely decline in police presence in Rio’s most dangerous neighborhoods during the Olympics)
OK, it could be bad. Maybe 2020 in Tokyo will be better?
- Organizers Face More Cost Increases for 2020 Tokyo Olympics (from $690 million to two point six billion for seven temporary venues, which is quite an increase)
- New Tokyo Governor Pledges Olympic Cost Probe (the original estimate of $7 billion could double or triple)
- Tokyo Olympics Games Corruption Claims Bring Scandal Back to the IOC (bribery, as opposed to the usual extremely expensive courting)
The good news? “World Health Organization Chief Says Zika Risk Is Low at Rio Olympics.” So they probably won’t touch off a worldwide pandemic.
The portents of disaster in Rio have caused some reflection of late over Chicago’s failed bid for the 2016 Olympics. In truth, Rio is probably unrealistic even as a worst-case scenario; Chicago’s problems with pollution, violence, poverty, economic stagnation, and fiscal troubles don’t compare to Rio’s issues.
The better comparison is to Olympics in developed countries, which have avoided disaster but sunk excessive amounts of money into unneeded infrastructure for, at best, modest gains. And that evidence was overwhelming long before Rio.
Take the work of Robert Baade, an economist at Lake Forest College, who, along with Holy Cross’s Victor Matheson, studied the economic impacts of the 1984 Games in Los Angeles and the 1996 Games in Atlanta. They’re two very good examples to compare.
The Los Angeles Olympics are famous as the only modern Olympics universally acknowledged to have turned a profit, but they were also a significant outlier going in. Montreal was such an economic disaster—it took 30 years to pay off the debt—that Los Angeles was the only city to bid on the Games. This gave the city tremendous leverage with the monopolistic International Olympics Committee, and they used it. For example, they forced the IOC to back down on its Rule 4, which puts the host city on the hook for operating expenses. Voters passed a measure that no public funds would be spent on the games (though a small hotel tax was passed). The IOC waved its requirement for an Olympic Village, and Los Angeles housed athletes in college dorms (the Soviet boycott also meant a decreased need for housing). The Los Angeles organizing committee basically commandeered the negotiations over television rights, likely extracting more money out of that deal.
All of this was immensely controversial at the time; in 1978, Sports Illustrated’s William Oscar Johnson reported that Los Angeles’s hardball mentality could cause them to lose the Games entirely. But L.A. was the only viable option, and the IOC was reeling from the Montreal morass and the terrorist tragedy in Munich. They got the games; they ran them on the cheap, using mostly pre-existing infrastructure; they pioneered the commercialization of the Games; they made money. Their hardball approach probably benefited the IOC in the long run by lessening the perceived risk of hosting the Games for decades.
Atlanta, by contrast, went in under the old rules, and under the typical approach, using the Games as a catalyst (or excuse) to build new venues and infrastructure. How’d it go? According to Baade and Matheson:
Those who championed public subsidies for the Atlanta Olympics contend that the impact of the Games endures. Our evidence, however, indicates that the Olympic legacy is likely to be small. In other words, the evidence suggests that the economic impact of the Olympics is transitory, one-time changes rather than a “steady state” change. This outcome is likely to be true unless great care is taken to insure that the Olympic infrastructure is compatible with the resident economy. If the infrastructure for the Games lacks synergy, or worse, if it displaces or competes with resident or established capital and labor, then the job gains are likely to be short-lived.
Based on 1997 jobs numbers, 40 percent of the jobs created by the Games had disappeared. In the best case scenario, $1.58 billion was spent to create 25,000 jobs, and that’s comparable job growth to other public spending. "It is conceivable that once opportunity costs are considered and the possibility that Olympic venues could compete for limited leisure dollars, the Olympics could actually generate a cumulative long-term job loss,” they wrote. The Games did produce some relatively useful infrastructure—although the Atlanta Braves are bailing on their stadium after a mere 20 years, and many of the remaining venues are underused or abandoned.
In 2009, just after Rio won its bid for the 2016 Games, the New York Times surveyed several experts on whether the event actually benefits cities. The results were generally negative, though one person, an urban planner from Atlanta, praised the effects:
[T]he 1996 Summer Games had a tremendously positive effect on Atlanta’s urban landscape — and even more so on its tax digest. Without the incentive of hosting the Games, who knows if an excellent public space like Centennial Olympic Park would have been constructed in our city center….
The infusion of federal funds leading up to the Summer Games allowed our regional transit authority, MARTA, to construct the new North line…. Because of the new rail line, Lindbergh Center station became a major hub in our transit network and subsequently attracted hundreds of new residential units, as well as hundreds of thousands of square feet of new commercial space….
So yes, the Olympics are very costly, but they can also help create a more sustainable urban environment that facilitates commerce, encourages pedestrianism and transit-use, revitalizes once-neglected urban districts and enhances public amenities.
Which is all true, but doesn’t really require the Olympics to do it. Yet it persists as an incentive. Rio’s mayor literally said that “he has used the Olympics as an excuse to carry out unrelated projects.” This thorough and fascinating piece about the 1964 Olympics in Tokyo lays out how the city genuinely rebuilt itself from its postwar destruction with the Games as a goal—but also led to massive cost overruns and poor urban planning decisions due to the exigencies of planning an urban overhaul around the event.
The other experts interviewed in the Times addressed the effects of the Games themselves, like Baade’s co-author Victor Matheson:
As a path to riches and long-term economic development, most Olympic hosts have been sorely disappointed. For example, while Salt Lake City’s hotels and restaurants were packed during the 2002 Winter Games, other businesses not directly related the event, like department stores, suffered significant losses in sales. Overall, economic activity the region actually fell during the Olympics.
And Smith College economist Andrew Zimbalist:
The Barcelona Organizing Committee in 1992 broke even, but the public debt incurred rose to $6.1 billion. Similarly, the Atlanta Organizing Committee in 1996 broke even, but the bottom line there is not encouraging. An econometric study using monthly data found that there was insignificant change in retail sales, hotel occupancy and airport traffic during the games. The only variable that increased was hotel rates — and most of this money went to headquarters of chain hotels located in other cities.
The Sydney Organizing Committee in 2000 also reports breaking even, but the Australian state auditor estimated that the games true long-term cost was $2.2 billion. In part, this was because it is costing $30 million a year to operate the 90,000-seat Olympic Stadium.
The consensus about the Olympics seems to be that if it’s done well, the benefits are comparable to doing similar, unrelated public investments with the added difficulty of shoehorning the Games’ unique demands into broad-based infrastructure plans that serve the city for more than a couple weeks. (The absolute best-case scenario is that you actually make money, but the circumstances that led to Los Angeles’s substantial profits were specific and unlikely.) The more typical scenario is that you do the above while incurring debt. The worst-case scenario is… well, we may be about to witness it, though for Rio’s sake it hopefully won’t be that much worse than usual.
That consensus, though, was known before the problems in Rio began to mount; it was known when Chicago was bidding for the Olympics in the first place, which is why there was a robust movement against it. Just a month before the selection the city was evenly divided, with just 47 percent in favor of hosting the games versus 45 percent against, in no small part because Mayor Daley decided to put the city on the hook for potential losses at the very end of the years-long process. Rio isn’t the cautionary tale; it’s that the cautionary tales were known, and ignored by so many.