Do not think about, write about or deal with human behavior without determining the effects of incentives. It’s not their money, of course they’ll waste it.
Canada hosted the Summer Olympics in 1976. The mayor of Montreal, the host city, said, “The Olympics can no more have a deficit than a man can have a baby.” Thirty years later, the debt was paid off although, with government finances, one never knows, does one?
Research shows Olympic bid an economic gamble
Since 1980 the average cost overruns for the summer Olympics have been 252%. It’s one of the more alarming facts Andrew Zimbalist has to share with Canadians and taxpayers across the country thinking over whether Toronto should bid for the 2024 summer Olympics.
Zimbalist, an economics professor at Smith College in Massachussets, is one of the world’s leading sports economists and author of the new book Circus Maximus: The Economic Gamble Behind Hosting the Olympics and the World Cup.
His research presents many inconvenient truths for backers of a Toronto bid, but it’s important people hear them now – well in advance of the Sept. 15 deadline for Mayor John Tory and the Canadian Olympic Committee to send their letter of interest to the International Olympic Committee.
It’s detrimental that any city seeking a bid has residents on board. The reason the United States Olympic Committee withdrew Boston as their proposed bid city on Monday was resistance among residents.
Right now support for a Toronto bid is high – at least in the city itself. A Forum Research poll released Tuesday showed 61% of residents support the bid. But will that number stay the same once more hard questions are asked? Likely not.
The second most troubling piece of evidence, behind the cost overruns, is the truth on tourism and trade. Zimbalist uses the London 2012 games as an example. They spent over $18 billion (all figures in USD). They took in $5 billion in Olympic revenues, leaving a deficit of $13 billion.
As they say in government, “You have our guarantee we will make money.”
If this isn’t bad enough, the shortfall wasn’t made up by broader revenues. Not only did London not increase tourism, research found. Tourism in fact went down. "It’s hard to identify what, if any, long-term gains there were," Zimbalist tells me in a phone interview.
This rule doesn’t just apply to London. The combined economic studies into previous summer games leads Zimbalist to conclude "there is no empirical evidence that says there are hard gains for the local economy as a result of hosting."
Some may argue that Toronto will benefit from economies of scale – the idea that because we’ve shelled out for Pan Am facilities they can be used or modified for the 2024 Olympics, saving us costs.
But Zimbalist points out that Rio de Janeiro will be spending $20 billion on the 2016 games – greater than London spent – and they not only hosted the Pan Am Games in 2007 but the World Cup in 2014. If there are any economies of scale to hosting more than one such event, they certainly didn’t materialize in Rio.
Toronto will also need to start from scratch with its athletes’ village. The one used for the Pan Am Games is made up of new residential buildings that were used by the games prior to the buyers getting ownership.
Besides, the Pan Am village hosted 10,000. An Olympic village will need to accommodate around 17,000. In Boston’s aborted bid, they had budgeted $2.8 billion for their village – and that’s before the inevitable cost overruns.
It’s understandable, given all of the above, why Zimbalist’s main advice to potential bidders is to not make the choice lightly.
The evidence tells us this much: There will be no hard benefits to hosting the 2024 Olympics.
So this is the question Canadians and taxpayers need to ask themselves: Do you want to shell out billions of dollars for the fun of it? For the sake of winning a few medals? For national pride? For glory?
Because that’s likely all you’re going to get out of it.
Government spending doesn’t have a multiplier effect? I’m shocked, shocked. Hosting the Olympics is not a gamble. It’s a sure thing they’ll lose money.
Government Job or Respect–Which’ll It Be?
Cheerio and ttfn,
Grant Coulson, Ph.D.
Author, “Days of Songs and Mirrors: A Jacobite in the ‘45.”
Cui Bono–Cherchez les Contingencies