As the Olympics are the largest event in the sporting world, there have been many studies attempting to quantify the finances associated with this mega-event. Cities pay millions of dollars in advance for a mere shot at the glory of being the host. An abundance of new players and tourists means immediate financial gains. However, creating an efficacious infrastructure to help the games run smoothly remains a hefty cost. For these reasons and many more, it is nearly impossible to talk of the financial processes involved throughout the Olympic Games. The following passage offers insight into why this might be the case:
´There is a vigorous scholarly debate over the correct method of evaluating the economic impact of “mega-events,” such as the Olympics.3 It is difficult to disentangle changes in economic growth, employment, inflation, tourism, and other possible effects caused by the mega-event from changes caused by other factors (currency appreciation, fiscal and monetary policy changes, etc.). In addition, certain types of investments related to mega-events, such as the construction of new stadiums, often fail to generate significant economic benefits after the mega-event is over. Plus, it is uncertain if economic activities undertaken as part of the preparation for the mega-event (for example, the construction of new mass transit lines) might not have taken place even if the megaevent had not occurred. Also, impact assessments of mega-events frequently ignore the “opportunity costs” associated with investments made before the event. For example, assessments often do not consider the possibility that the money spent on the new Olympic stadium might have generated greater economic benefits if spent on hospitals or schools. Finally, while the economic gains associated with the construction of new infrastructure are generally calculated, the economic costs associated with the displacement of people and business (for example, in the demolition and construction of new housing for the mega-events) often are not.´´
The passage goes on to admit that there are also benefits to over-exaggerating the potential gains and underestimating costs while trying to secure the Olympic games in your country. However, at this point all we know is why it is difficult to grasp the extent of Olympic Games finances. For example, the total costs for venue would be underestimated initially due to the rise in the price of steel after the bid process. In addition, the Department for Media, Culture, and Sport (DCMS) stated that they would secure finances from the private sector for £738m, which they later state would be inhibited by a ´´lack of identifiable revenue stream´´ (Berman 6). These two instances are two of many that attribute to the difficulties in accurately naming the financial transactions involved in the Olympic Games. The comparison of the pre-games potentials and post-games reality of the Chinese experience in 2008 will hopefully provide a correlation with the London Games in 2012.
2 Articles: Michael F. Martin-”China’s Economy and the Beijing Olympics”
“China Still Paying for the 2008 Beijing Olympics”
Research shows that Chinese economic gains are doomed!
The post-Olympic economic records of past host cities shows evidence that many times, economic success fail to meet pre-Olympics expectations. A study by the Bank of China shows that 9 out of 12 cities that have hosted the Olympics in the last 60 years experienced declines in average GDP growth rates in the eight years after the Olympics than in the eight years prior. (See graph above for visuals!)
2. However, China still expects short-term and long-term benefits
Short Term:
Attract more tourism, businesses, and investors to China
Counteract potential negative publicity about labor and environmental conditions
Long Term:
Foster economic development
3. Predictions:
New labour laws and promotion of environmentally safe measures to create a “Green Olympics” will enhance China’s image.
Original estimated cost for venue expenses=$1.65 billion
Official venue cost prior to the opening ceremonies= $2 billion
Estimated Cost for all Olympics=Over $40 billion
Olympics will increase Beijing’s economic growth by 5% b/n 2003 and 2009 (seems a little bit ridiculous
Tourism in Beijing will increase to 500,000
Good or bad...The choice is yours?
Reality Pre-Games:
China has invested billions of dollars (over $40 billion!) in sports facilities, housing, roads, mass transit systems, and other infrastructure (water resources, energy, and urban environment.
Specifically...
200 miles of roads were refurbished, two additional ring roads completed, and more than 90 miles of subway and light rail lines were added. Olympic village also to be converted into a modern apartment complex. In addition, the efforts to reduce pollution have a resonating effect.
*With that being said, improving the cities is still a cost the government must pay, which could have been used more efficiently or on other sectors of society such as education. In addition, the Chinese economy is huge and the potential impact of the Olympics is, in fact, very small and may even be a deterrent. Oh and there was a new projection of tourism that it could fall as low as 400,00 during the month of the Olympics, or about the same as the august one year prior.
Reality Post-Games:
Total cost for Olympic games=$70 billion (WHoOoOAAA)
And...China cannot repay its investors.
To help their problem they issued Government bonds. Unfortunately inflation has raised yields and have made matters worse.
The simple reality of the situation is that China, who gravely underestimated the total costs are now indebted to many local governments and infrastructural organizations (e.g. Beijing Capital Highway Development Group co.)
One last point...Remember those 2004 Olympics. They were held in Greece, and we all know how Greece is doing these days. Both Athens and Beijing now have grandiose Olympic stadiums that are bigger than necessary and unused to their potential.
In conclusion, the Olympics surely impacted the public image, prestige and soft power of China, at least briefly. Economically, no substantial gains were made and the inability to effectively harness the infrastructure capabilities have proven to set China back. Such has been the case throughout Olympics in the past.
Will the London 2012 games be different?
What do you think?
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