Hosting sports extravaganzas – A boost to the economy or the boost is just a myth.
Brazil, a nation which is the fifth largest – both by area and population, co-incidentally has five stars on its national football kit, each for every world cup they have won. The game of football has found numerous admirers, fans and players in this Latin American nation, and each time the game was played on its soil, Brazilians have never disappointed. They have turned up in huge numbers and have unanimously supported and loved the game. Therefore, it was no surprise that Brazil would paint itself yellow and green all over again in June-July 2014, when the world’s greatest sporting extravaganza was about to reach the shores of Sao Paulo. However, the world looked on with utter disbelief when the whole country went into a denial; according to a survey around 60% Brazilians opposed their nation’s decision to host the World Cup. Recently, Vietnam backed out from hosting the Asian Games citing the reason that holding the multi-sport event would not be financially feasible for the nation.
In a country where inflation has hit the poor badly, where the infrastructure is ridiculous at places, economy is growing at less than 2% - hosting the World Cup was supposed to burn a hole into Brazil’s already tottered pockets, a hole as big as $15 billion.
Vietnam’s $155 billion economy is recovering slowly and its annual growth is expected to be more than five percent in the next few years, the nation faces a plethora of issues which include a feeble infrastructure, a worrisome debt and an inefficient and corrupt state sector. To bear an additional cost of anything between $150 million - $500 million, is worth giving a second thought for an economy of that size and in that condition. We will look into the effects of few such extravaganzas on the economy of the host nations so that we can gauge the negativity among the people of Vietnam and Brazil and see whether they are fair or not.
Countries often justify the huge price tag attached to such magnificent events by saying that the investment generally pays off by increased tourism and the business, thereby helping our economy in the long run. Although such words sound good to ears, many doubts linger at the back of our mind. Let us look into a few examples before reaching into a conclusion. We will consider a few examples in order to see whether the fear shown by the people of the host nations is true, or the rosy pictures that the governments paint have an edge over those fears. In order to avoid any deviations, we would consider nations which have hosted similar kind of games, say, the Olympics.
London (present day, 2014) – Two years back London spent a whopping $15 billion in order to host the Olympic Games. These days, the Olympic complex is full of hustle and bustle with shopping malls carved out of the structures in the complex; the quarters that hosted the athletes have been converted into residential flats and condos.
Athens (present day, 2014) – In contrast the city which hosted mankind’s first Olympics is still symbolically regretting the $15 billion investment that it made in 2004 to host the games for the second time. There, the main complex stands like a forlorn structure, the buildings are derelict and in a state of disrepair while the landscape is depressing, to say the least. Athens symbolizes something which every nation should be wary of – what after the Olympics? During the games and right after it, things look promising and everyone is happy ; hop on to a time machine and go 10-15 years ahead, things might well be pathetic, to say the least.
Athens hastened their decision on their investment and the opportunity to present Athens and Greece as a global sports destination. Of course we couldn’t have predicted the crushing impact of the global recession on the Greek economy that followed three years hence. As China hosted the games four years later, Athens was reeling under a huge $800 million bill to maintain its magnificence which was a spectacle four years back. The government often says that the Olympics would bring employment with them which would make a lot of people better off. However, after the games, the employment effect received a tremendous jolt. Merely a quarter after the Olympics, Greek industry lost around 75,000 jobs, most of them in construction. A report published in 2009 that studied the impact of 2004 Olympics on Greek economy, stated that majority of the costs was financed by the taxpayers’ money which appears to reflect the growing significance that the governments have attached towards their fancy and the whim towards the Games. This is applicable for London 2012 as well. The report concluded that although the immediate effect of the Athens Olympics was quite encouraging, with respect to GDP and unemployment, the long term effects turned out to be moderate. This indeed is a word of caution for London as well.
A similar analysis of the Sydney 2000 Olympics showed that the Sydney Olympics had a similar negative effect. Olympics, to some appear as an alien compared to other industries or businesses. Most of the time, the infrastructures that are built go unutilized and stand like a neglected structure. As quoted in a study of Olympic biddings, the economic growth is usually slow if the resources and capital are diverted to the Olympics, even slower than that which could have been realized if they would have stayed away from the Games. The proponents of Olympics often say that these occasions lead to a shift in attitude towards the host nation, thereby helping tourism, foreign investments and hence, better economic prospects. However, according to a study on Sydney Olympics, this claim was weak as well. Moreover, a report from ETOA (European Tour Operators Association) has stated a few facts and figures which totally refute the logic that Olympics promote tourism. According to the report, during Atlanta Olympics’96 the hotel occupancy rates fell by more than 5%. Also, Beijing saw about 40% fewer tourist footfalls at the time of Olympics compared to the same period a year ago. According to the report, regular tourists assume that congestions and increase in prices are the features of the extravaganza, and hence prefer to keep out of such occasions.
A comparative study undertaken by University of Chicago pitted cities that had hosted Olympics against those who did not had that so called 'privilege'. The cities were comparable in population, size, location and tourist attraction. Melbourne against Sydney (2000), Charlotte against Atlanta (1996), Madrid against Barcelona (1992). Over a period of ten years - distributed equally before and after the games, they tried to check the growth in terms of tourism, economy etc. Surprisingly, or may be not that surprisingly, they did not find any difference in terms of the aforementioned parameters.

In 1976, the administrators explained how the Games will help making Montreal a tourist hotspot. The city had to pay the price by being under an enormous debt of $1.5 billion, which they took almost three decades to clear off.
For the record, Los Angeles 1984 was the first Olympic since 1932 to make a profit – but it was also the only nation to bid for the games – hence it did not have to construct anything special and it utilized its already built infrastructure to the fullest.
As we saw, through the annals of history and through the picture presented by the facts, that hosting an extravaganza - be it Olympics or World Cup, is rarely accompanied by the huge profits as presented by the governments or FIFA or IOC. The claims and promises are more like a carrot dangled in front of the nation or public, and more often than not, we fall for it. Hence, it should indeed come as a surprise when I say that Stockholm, Munich and Krakow have withdrawn their bids for hosting the 2022 Winter Olympics. We might finally be getting wise enough to realize the fact that the long term economic gains linked with the games are usually negligible at best.
The above conclusions however, should not stop cities from bidding for the Olympics or the World Cup – but we should be wise enough not to fall for the claims that the games make a big impact on the economic prosperity of a nation.

Sources: http://www.olympic.org/ A Lasting Legacy for London-Assessing the Legacy of the Olympic and Paralympic Games [2007]
Assessing the Impact of the 2004 Olympic Games on the Greek Economy. [2009]
The Sydney Olympics, seven years on.