Are Olympic Games viable?
The debate on the economic impact of Olympics on host countries has become a lot more intense in the past few years. Analysing polarized views regarding the positive and negative aspects of hosting Olympics now seems to be a major concern.
One cannot deny that hosting the Olympics, which is the most prestigious sports event, is indeed a matter of extreme honour and pride. Yet, many countries are beginning to view it as a burden on their economy. Despite the general assumption of Olympics being an economic boon, a closer inspection of former host countries reveals that the huge investment in the Games eventually turns out to be useless and non-beneficial for the countries concerned. Often, due to the hype created about the event, host countries accommodate the influx of tourists on a large scale. Many times this assumption proves to be regrettably wrong.
Many experts argue that the Games stimulate a process of infrastructure development on a macro level. Infrastructure, being the core element that leads to a country’s success, is always welcome but many claim that the games allow the instant development of infrastructure that would otherwise take years to accomplish. The Rio de Janeiro city government recognized the positive outcomes of the event, saying Olympics “have brought a sense of urgency to projects that the city has needed for decades”. However, such investments only cater to those who exist in close proximity to the stadiums. They thereby disturb the balanced distribution of incentives available.
On the other hand, many argue that infrastructure developments preceding the Games often divert attention from other constructive projects. Moreover, Samuel Tomb, an economist, explains that the infrastructure built for the grand event often fails to cater to needs of the host country after the Games have ended. Samuel Tomb claims that the boost in the construction sector is only temporary.
This also leads to the question as to whether the money might have been directed to more crucial sectors such as hospitals and educational institutes. Keeping these diverse views in mind, Rio de Janeiro’s municipal government has announced that the Games should serve the city rather than the city serving the Games.
Another economist, Goldman Sachs believes that the Olympic Games lead to short- term financial gains for the host cities, along with negligible long- term economic benefits. The economic activity indicator easily captures the short- term gains resulting from the games. For instance, the surplus expenditure on the recent Games in London could have increased the UK’s third quarter GDP by approximately 1.2 to 1.6 percent. But long term effects require thorough analyses of tourist venues, promotion of the city, remaining export facilities and areas for potential investment. The collection and analyses of such detailed data is relatively harder to deduce.
Although there is no conclusive evidence available suggesting that the Olympics have helped in boosting tourism, but it is safe to assume that tourism does, in fact, benefit a country in the end. Similarly, the boost in consumer spending in London has also not been as impressive as it was expected to be. It needs to be remembered that higher levels of income and development are directly proportional to the success of the Olympics.