04 Aug 2016 15:52 IST

Rio 2016 and the ‘curse’ of the Olympics

Studies have established that hosting an Olympics is a financially risky megaproject



Absolutely. The Zika virus, now sweeping across Brazil, is an accursed blight.

Of course it is. But Rio, where the blessed Olympic Games open tomorrow, may have more to worry about from the sporting event than a flavivirus transmitted by Aedes mosquitoes.

You mean, like the Rio voodoo practitioner who cast ‘black magic’ spells on teams that played Brazil at the 2014 soccer World Cup?

No, I’m talking about the economic ‘curse’ that befalls virtually every city (and country) that hosts the Olympics. It may sound like ‘voodoo economics’ but is backed up by evidence.

How does the curse play out?

Studies have established that hosting an Olympics (or a Commonwealth Games, as New Delhi did in 2010) is a financially risky megaproject, which does not yield commensurate economic payback. Worse, in some cases, it has pushed economies into crises and into heavy debt. For instance, it was the ‘Olympics binge’ of 2004 in Athens that effectively bankrupted the enfeebled Greek economy.

But doesn’t public spending on infrastructure boost economic activity?

It does in the short term, but it only works like the performance-enhancing drug that athletes and sportspersons are increasingly prone to ingesting. Once the effect of the spending binge wears off, host economies are left with a colossal ‘Olympics hangover’. Indicatively, it took Montreal nearly 30 years to pay off the debt from its hosting of the 1976 Olympics! The problem, as researchers Bent Flyvbjerg and Allison Stewart at the Saïd Business School (University of Oxford) established in a 2012 study of every Olympics from 1960 to 2012, is of cost over-runs.

But, surely, host countries and cities work to a planned budgetary process?

You wish! The Oxford study established that average cost overruns in hosting the Games are 179 per cent in real terms: that’s significantly higher than overruns for other types of megaprojects. Montreal was the worst delinquent: its cost overruns were about 800 per cent! The city’s Mayor had claimed in 1976 that “the Olympics can no more have a deficit than a man can have a baby.” Boy, was he wrong! And in the case of the Delhi Commonwealth Games, the overruns were 36 times the budgeted cost: $9.2 billion, against an estimated $250 million.

But are there no gains from hosting the Games?

Of course there are, but the budgeted economic benefits are almost always overstated.

Why does this happen?

As sports economist Andrew Zimbalist notes in his book Circus Maximus: The Economic Gamble Behind Hosting the Olympics and the World Cup, much of this is because of deliberate deception. The strategy of the entities that typically gain from a city’s hosting of the Games — construction firms, media, hotels — is “to lowball the cost estimates with a bare-bones plan, and then, once it is approved, to add the bells and whistles.” If a realistic estimate of costs were provided, the project would never secure public support, he notes.

What does all this mean for India, where there is a manifest longing to host an Olympics to showcase itself as a developed economy?

It’s a colossally bad idea: it’s of course good to invest in sporting infrastructure and facilities and to enable more of our sportspersons to become Olympic medal-winners. But as for hosting, Flyvbjerg and Stewart counsel that the typical cost overruns should be cause for caution for anyone considering hosting the Games.

The bottomline?

Enjoy the Games over the next month. Perish the thought about hosting them anytime soon.

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