Written by: Jaden D.
The world’s largest sporting event, the Olympics, boast millions of attendants and thousands of athletes every year. With an event this large, there are fantastic opportunities for tourism, which provides a great incentive for countries to try and host the Olympics. However, despite the glamour, hosting the Olympics is a financially monumental task and raises the question: is hosting the Olympics worth it?
The 2016 summer games in Rio de Janeiro exemplified the downsides to hosting the Olympics. With the games over, Rio struggles with huge debt associated with the initial cost of building Olympic facilities, and the additional cost of maintaining these facilities, even though they are no longer used. On top of that, countries need to make sure that other public goods, such as transportation, are in prime condition to accommodate all the tourists and athletes. The 2018 Olympics are likely to cost Korea roughly $12.9 billion, which is over double what South Korea expected to pay in 2011 when they agreed to host. 12.9 billion dollars isn’t even extraordinarily high: the Sochi Olympics costed an estimated $50 billion in infrastructure.
From a macroeconomic point of view, there are definitely benefits to hosting the Olympics. Creating all of the infrastructure, stadiums, and public goods greatly increases the country’s GDP, which some may interpret as a sign of economic growth. However, from a microeconomic point of view we can realize what’s really going on. The government is being forced to shell out billions of dollars on public goods that will only see value for the short window that the country is hosting the Olympics. When the government makes such a large spending decision, or in the case of Korea, ends up paying double the price they expected, it’s not just the government that is forced to shoulder the expenses, but the people. Taxes will rise to pay off these huge bills, and in 1976 Montreal Olympics, taxpayers were left with 1.5 billion to shoulder over 3 decades.
Korea has recognized these expenses, and they’re taking steps to avoid falling into the same pitfalls as countries before. Instead of letting their Olympic stadiums gather dust after the 2018 Olympics, Korea will reservice these facilities as museums to the games. However, it’s unlikely that this museum will draw in enough tourists to cover all the costs of hosting the Olympics, and the question still remains. Is hosting the Olympics really worth it?
Elkins, Kathleen. “80% of Americans own an unbelievably small portion of the countrys wealth.” Business Insider, Business Insider, 15 June 2015, www.businessinsider.com/inequality-in-the-us-is-much-more-extreme-than-you-think-2015-6.
“The Economics of Hosting the Olympic Games.” Council on Foreign Relations, Council on Foreign Relations, www.cfr.org/backgrounder/economics-hosting-olympic-games.