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Money matters

Faster, higher, costlier

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SIZE MATTERS: (Above) Usain Bolt of Jamaica leads the field in the 200m final at Beijing's National Stadium in 2008;

The last two decades have seen dramatic increases in the size of the Summer and Winter Olympic Games. This has only ended up making the Games increasingly difficult to stage, and greatly reduced the number of cities capable of hosting them. The United Kingdom, grappling with an economic crisis and its government's experiments with austerity, is clearly struggling with London 2012. Greece, currently Europe's poster child for economic distress, attributes part of its colossal debt to Athens 2004, while the new Italian Prime Minister has cancelled Rome's 2020 bid.

Yet, questions about the size of the Games were already being asked in 1972, when I went to my first Olympics, in Munich. "Gigantism" was the term the Germans used to describe those Games, and the expression has become part of the Olympic lexicon.

Immediately after his election in 2001, the IOC's current president set up an Olympic Games study commission. Presented two years later, the commission's 117 recommendations for reducing the size of the Games have been applied progressively but to no significant effect. The problem has, in fact, become worse, with the number of 'accredited persons' at the Games increasing from 196, 000 at Sydney 2000 to 349, 000 at Beijing 2008.

Although the number of athletes has remained stable since 2000 (around 10, 500), the number of journalists, radiotelevision personnel and sponsors has exploded, as has each organising committee's workforce (mostly volunteers). But the number of Olympic sports (28) has remained relatively stable since 2000 (even if that's actually come down to 26 for London 2012, as baseball and softball have been dropped, but will be replaced by golf and rugby 7s at Rio 2016).

In any case, it is the sophistication and complexity of installations for a few sports that is a more critical factor in determining the size and the cost of the Games than just the number of sports. For instance, it is much more expensive to create an artificial canoe slalom course or a harbour for sailing than it is to build gymnasiums for taekwondo or fencing. Besides, canoe courses and harbours are less likely to be regularly used after the Games.

MONEY MATTERS


Revenues generated by the Summer and Winter Games may have increased by more than 40 per cent from one Olympiad to the next, but still don't cover all costs. Consider the math. Revenues of almost US$5. 5 billion for the period 2005-2008 (Turin 2006 and Beijing 2008) have jumped to over US$8 billion for 2009-2012 (Vancouver 2010 and London 2012). In order of importance, the revenues from these later Olympiads are composed of broadcasting rights paid by television networks ($3. 9 billion), commercial rights paid by domestic and worldwide sponsors ($2. 5 billion and $1 billion respectively), ticket sales ($800 million) and licenses awarded to Olympic souvenir manufacturers ($185 million). Over half of these revenues go to the IOC, which distributes most of this sum to national Olympic committees, international sports federations, the World Anti-Doping Agency and the Court of Arbitration for Sport.

The remainder goes to the local Organising Committees for the Olympic Games (OCOGs). These revenues enable OCOGs to cover their operating budgets but are by no means sufficient to finance the construction of the infrastructure needed. The balance comes from the public purse. The total budget for London 2012 has been estimated at $14. 7 billion (£9. 3 billion), most of which will be provided by the British government. To make matters worse, some observers believe that this sum does not reflect the true cost of the Games, and part of this extra expenditure - especially the security budget - is an operational cost that leaves little by way of a cost-effective legacy.

Naysayers have always been told that the physical and spiritual legacy of the Olympics is supposed to compensate for the enormous cost of staging them. The London OCOG and the British government have set themselves ambitious objectives in this respect, most notably in terms of regenerating East London and increasing participation in sport in Britain. Yet there's no evidence that hosting a major sporting event increases participation in sport.

On the other hand, the new Olympic Park in East London appears to have transformed the area, even though plans for the subsequent use of installations such as the Olympic stadium have still not been finalised. In marked contrast to Athens 2004, the physical legacy situation for London 2012 seems more positive, as it was for Sydney 2000.

LEAPS OF OLYMPIC FAITH


The effect of the image of London 2012 - which is part of the Games' intangible legacy - will largely depend on how well the Olympics are staged. Public opinion is a huge factor, and Great Britain is playing for high stakes here. Although local public opinion is less negative than it was for Athens, it only remains lukewarm, and is even slightly hostile in some quarters. In addition, for the first time in Olympic history, some Games sponsors have been seriously criticised. Dow Chemicals and its link to the Bhopal Gas Tragedy is the most prominent example, while critics have also slammed Coca Cola and McDonald's (for exposing their customers to the risk of obesity), Rio Tinto (for bad working conditions in the mines that produce the metal for Olympic medals), and British Petroleum (for its shoddy environmental record).

A common argument in favour of staging the Olympics is its perceived economic impact. But all experts point to its negligible impact on a host country's GDP. The ratings agency Moody's recently confirmed this assessment for the London Games, even though the event will boost tourism. In fact, cost-benefit analyses for the Games would be more appropriate than economic impact studies. We would get better answers by asking if the total cost is lower than the total benefits, including intangible benefits (which economists are now able to monetise). Or, more perniciously, would the money have been better spent on other things? Or, even, who has really benefited from the Games?

BREAD AND CIRCUSES


However, the success of a Games is often measured more in political terms than in economic ones. Many countries see hosting the Olympics as a way of marking their arrival on - or, in some cases, a return to - the international scene. This was the case with Japan in 1964, Germany in 1972 and Korea in 1988. Today, it is the case for the BRICS countries. After China, with Beijing 2008, Russia will host Sochi 2014, and Brazil will stage Rio 2016. South Africa and India may join these ranks for 2024, while Turkey seems interested in staging 2020.

Due to their strong economic growth these countries have substantial financial resources, which may be enough to keep the Olympic fire stoked for a number of years to come. However, as history has shown, the bar often gets placed so high, it's difficult to step back. London 2012 will inevitably be compared with Beijing 2008, for which the Chinese government provided an unlimited budget (although they came close to a media fiasco over the issues of human rights and Tibet).

Only three cities bid to host the 2018 Winter Olympics and similar reticence is being shown in bids for 2022. Switzerland, a country with a strong economy, is only prepared to host the Olympic Games at Davos and St-Moritz if they are reduced to a more manageable scale. In contrast, six cities have bid for the 2018 Summer Youth Olympics, which are much easier to stage.

Clearly, size does matter in the politics of the Olympics. Unless their scale is reduced, and soon, it might turn out that only wealthy authoritarian regimes may be keen to host them. This would seriously damage the Olympic ideal.

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