Thursday, February 8, 2018

An Olympic Expense

An Olympic Expense
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?




Works Cited
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.

34 comments:

  1. Very good article, good work Jaden!The main question of "Is hosting the Olympic games worth it?" is one to ponder on. I could identify the negative and positives to hosting the very very popular games. For instance, the negative side affects to hosting the games are the costs from building facilities, building hotels, building restaurants, having lots of security and simply making sure they have everything for the games; which is a lot! Some positives to the games relates to all the profit they bring in from them, in that case that's the Olympic game tickets, hotel room purchases, food purchases, merchandises purchases, all the flights coming in for the games and of course more! Like stated above, the facilities used for the games will be used for museums after the games in Korea, but what museums? I feel as stated above there's not really a stance to if it is beneficial or not beneficial to host them. I believe it is worth it and beneficial to host the Olympic games. It will bring in lots of profit and tourists!

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  2. I was surprised that hosting the Olympics costed that much. I knew it was expensive to construct all new facilities and buildings to host, but didn't realize it totaled up to billions of dollars. You brought up another interesting point that the entire city has to be ready for mass amounts of tourists so hotel accommodations, restaurants and public transport have to all be prepared. I wonder based on the cost of hosting, monetarily how do the rewards compare? South Korea be making money off of the Olympics, but how much? Cool topic.

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  3. I think that this is a very interesting topic, especially since the Olympics started this week! I see both sides to hosting the Olympics: while it makes a country's GDP look especially good, it is a very short time window for profits. I kind of disagree with the part that the facilities will not get used. We have the Petit center which is an Olympic facility, but still use it all the time for skating, track, and hockey games. I think that the people living in PyeongChang will appreciate the new facilities for recreational purposes along with training for future Olympics.

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  4. With the Winter Olympics starting, many people are amazed by the facilities that have been constructed but, I agree that these profits will likely only last for the duration of the events. Profits spike due to the countless athletes and spectators but once the games are over, they drastically decrease. As you mentioned, Rio exemplifies this. Many of the facilities from the 2016 Summer Olympics have fallen into disrepair, and increased media coverage has shown that hosting such a large event may not be so glamorous after all. Perhaps this will impact future bids for Olympic sites, and how South Korea and Tokyo (in 2020) plan to use facilities following the games.

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  5. I always figured that hosting the Olympics is a money maker but I didn't think of the costs of running the facilities. Also I didn't think of the costs of transportation and how that effected the residents. With all the costs this hurts the residents and the countries. On the positive side though, is that the GDP increases. This is a good thing and although it costs the country, it can help a country.

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  6. With the big bill of the Olympics, it's hard to imagine the hosting country to be happy with having to host the games. The GDP will grow in the country for a short amount of time. The increased labor of building the stadium was good because it gave jobs to people. The increased tourism is also good for the economy of the host country, but it allows the country to get profits for hotels, transportation, tickets to the events, food. It will only last a short amount of time and will probably end up hurting the economy more in the long run, but good for the short term.

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  7. It surprises me that the Olympics could have a potential negative effect on a country's economy. Not long ago was it that hosting the Olympics could jump start a country into a state of economic stability, but base off of the information on this post it appears that might be over. Now I feel like it only makes sense for a country with adequate infrastructure to host the Olympics, as the extreme upfront cost that comes with improving overall infrastructure can be voided, and the positives that come with the Olympics such as tourism can be seen.

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  8. Similar to your examples, China suffered similarly after the 2008 Beijing Olympics. At the outset it seemed like a great way to increase GDP and tourism, boosting the economy, but it is a very temporary situation that turns sour shortly after. China also attempted to re-service their buildings after the Olympics to attempt to help them keep relevance, but within a few years it had already caused more loss to pay for upkeep on the buildings.

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  9. I feel like a lot of people assume that hosting the Olympics will bring in a lot of revenue, but it seems that countries who host lose money, especially looking at the example you gave of the Rio 2016 Olympics. It will bring in a lot of tourism (which also brings in profit to hotels, restaurants, etc.) and having people actually pay to come to the events brings in a lot of money, but once the Olympics are over, then what happens to the venue? Usually the all the buildings used in the Olympics never serve another use. I think it is a good idea for South Korea to turn the Olympic stadiums into museums in hopes that the museums can bring profit also, so the stadiums actually serve a purpose instead of just wasting space.

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  10. I actually went to look at other Olympics as soon as I read this post to see if the conditions in other countries before they began construction played a role in profits, but it really plays no role. Whether in the emerging economy of China or the crumbling economy of Brazil, the Olympics has short term benefits but often leaves the country with some long term struggles. Many countries have taken up the method of turning constructed buildings into museums, but most countries are never able to find a purpose for the roads and basic infrastructure that is produced to support the large crowds at the Olympics.

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  11. I do not think it is worth it for a country to host the Olympics, unless they already have the facilities that are needed to host the events. When smaller countries spend so much money trying to host the Olympics, it is not worth it in the end when they just find themselves in more debt. People should not be focusing on hosting the Olympics when their money could be better spent on the things that actually matter like infrastructure.

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  12. I never thought about the Olympics this way since I always assumed that they would provide a net benefit to the host country. I wonder what could be done to lessen the burden on host countries, although I also wonder if it is necessary to lower the burden since many countries still put in bids to host the Olympic games.

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  13. I never thought about the impact of the Olympics after the games are already over. The window to make profit is very small; yet, many of us believe that hosting the Olympics would be super beneficial to the economy. Even though GDP increases (which can be seen as the economy getting better), many countries are left in major debt. In my personal opinion, if a country has a surplus of workers, goods and money that can go into hosting the Olympics, then they should do so. However, countries who are financially not in a good place, should pass on the opportunity.

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  14. Even though hosting the Olympics is a fun, entertaining event to watch, I think there are some valid points you mentioned. From most of the information given, the overall message so far is that the Olympics is not as worth it, even though the GDP will increase. If Rio struggles with massive amounts of debt, increasing the tax bills, we could at least host the Olympics in longer time periods or intervals than what we have now (I think they return every 4 years), but possible add more years to get out of debt and to keep the event going.

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  15. This is a really interesting topic, because I don’t think when watching the Olympics people really understand or realize the enormous cost invested in each event, each stadium. Having such a huge initial and maintenance cost makes me wonder why countries would even fight to host the games. Especially if they don’t have the resources or infrastructure to house the different events like in Rio de Janeiro. Why would they want to host the games if they knew there would be an enormous cost that comes with it? Why not just let somewhere else hold the games?

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  16. I used to always want the US to host the Olympics because of how fun it sounds to attend it, but now after reading this article, I hope we don't host them anytime in the near future because I don't want to be paying taxes for that, and our economy is already kinda bad, so if we hosted I think it would only have negative impacts on our economy.

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  17. Initially when I read this post, I was surprised at how much it costs to host the Olympics; it was never something I thought about when watching the games on television. I agree with what you have said, though; the Olympics only bring in tourism for a short portion of the year, and after that all the money spent on facilities is gone to waste. Especially in places like Korea, it is not very common that people will travel there at any other time of year. In my opinion, countries should only be hosting the Olympics if they already have the facilities for it, otherwise the long term debt is not worth it. So, to answer the question “is hosting the Olympic games really worth it?” I would say it all depends upon the economic stability of the country, the location of the country and how many visitors they get year round.

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  18. I do not think it is worth it for a country to house the Olympics, it is a large expense. It is already hard to pay taxes as is, I can not even imagine paying taxes in countries that have hosted the Olympics. Maybe it would be easier to start having the Olympics at the facilities that have already been built in the countries that have already hosted. I also agree that making these facilities into museums will absolutely not cover close to the cost that it took to build for the Olympics.

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  19. I agree that hosting the Olympics is risky and it is true that the people are swimming in taxes that they have to pay back due to the facilities. I think that what Korea is doing with the facilities is good thinking compared to how others have dealt with their Olympic structures (they haven’t). In my opinion, it is very cool to host the Olympics in your country but it is not worth it to pay all of those tax dollars back over decades and decades. During the Olympics, the GDP will increase (as you said) but it won’t stay that way when the Olympics are over and done. It is something that would be cool when the Olympics are happening but once they are over, there are just a bunch of buildings and wasted space that could be used for other things not to mention all of our tax dollars going out the door for something that isn’t even happening anymore.

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  20. I think it is amazing that they have the Olympics in a different city every year because I love seeing the different placed and I'm sure it makes it more eventful for the athletes. It is unbelievable to watch them build up a bunch of new stuff for the games but it is not worth it at all. If we have a working facility that is able to host the games, the athletes, and the fans then why make another. It is a waist of time and money to keep rebuilding different versions of the same thing all around the world that will have very minimal use.

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  21. Before reading this I never thought that the Olympics could actually leave a country in dept. I always assumed that the amount of tourism they get would be enough to pay of the cost and building and hosting everything and they would actually get an income from hosting the Olympics. It just leaves the countries that have a bad economy with more debt and a lot of infrastructure sitting there with no purpose.

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  22. I find it interesting about how much it cost a country to host the Olympics. They have to take in not only the cost of building the stadiums but also the mass amount of tourist that comes during the games. Well 12.9 billion dollars is a large amount of money, isn’t the amount of tourism the country get enough to pay off the debt. With a large amount of tourism the olympics is not only creating jobs but it moves the economy forward as the people coming to their country need buildings to stay in and restaurants to eat in. It was stated in the article that Korea is not going to let their olympic stadiums gather dust and make them into museums. Is that what most countries do? Wouldn’t it bring more revenue into the city if they left the stadium open for public use? If the 2018 olympic stadiums were open to the public each year and the government allowed tourist to come and ski on the hills or stake on the rink it could generate large amounts of money each year.

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  23. This article about the Olympics is very interesting. I agree with this individuals article because the Olympics are a great opportunity for a city or country to gain a great deal of growth through tourism and infrastructure. It was said in the article that the Sochi Olympics costed an estimated $50 billion in infrastructure. Although this may be true, many countries that have hosted the Olympics see a good amount of economic growth and revenue come in during this time. People come from all over the world to see the Olympics and during their time at the Olympics and buy goods that other people made and pay for their services.Although the amount of economic growth may increases for the country, the taxes of the people are high so that the country can pay of the cost of the infrastructure that was built But, after the Olympics are over, many of the buildings, arenas, and other structures that were built are left and not used again until later on for a soccer team or a training ground.

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  24. After learning about the true cost of the Olympics, I now understand why many citizens in Boston didn’t want to be a host city. They were fully aware of the consequences that came with hosting the Olympics. It’s still surprising to see how much the winter olympics cost Russia. I think that hosting the Olympics has no financial gain after they are over. Tourism will decrease exponentially and there won’t be as many construction workers employed.

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  25. The things I was interested in were the cost of having the Olympics and that the people were suffering from it.

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  26. Econ Blog writing
    After reading your post it left me with a lot of answers that I had about countries that are hosting the Olympics Towards the Middle you were talking about how much of a struggle it is to host this event because it cost a lot of money that the government have to fork over, and I never realized it took a toll on countries because I always figured that the Olympics had so much money they could turn any place into a nice host country, when the government has to spend so much money what do they have to stop producing, and what effect does it have on public goods, and yes I know you said that the government spends a lot of money of public goods for this event but what about other countries around the host country, to they get affected. You said that It might cost Korea 12.9 Billion dollars and that is a lot of money to set them back, and for what to host the Olympics at the end of they day why go through all that trouble to host a game. If it will set them back so far I personally don't think they should of ever volunteer because that money could go into the people who live in Korea.

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  27. Looking at the Olympics economically is very important to whichever country is going to host. As Jaden stated there are many ups and downs to it, and it’s remarkable how so many countries after hosting end up with a high amount of debt. Hosting the Olympics is a big deal, you bring in many tourists, your country is in the spotlight for just over two weeks, and it holds a platform for your country politically. There are so many benefits that come from hosting an Olympic games, but then there are the various repercussions. In the end I would say it comes down to whether or not you think your country can handle it, as well as deal with the aftermath. Looking at this from a global economic standpoint I don't think any country could truly pull of hosting an Olympic games without holding some high amount of debt to it, but then you need to think about if it’s worth the spotlight, worth the recognition, and in most cases if not all I think that all countries who have hosted and are going to host recognize that it will always be worth hosting despite the drawbacks that may come with it.

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  28. I am thankful that The United States has offered to host the Olympics and hope that continues, because the all fun and games are not worth extreme debt and excessive taxes. I would not be pleased with the country if I was forced to pay for additional taxes so that The United States can host a large sports event. I wold rather watch and support my country else where or on TV. Others may argue that it is defiantly worth the expenses to host the Olympics in their country, but from my point of view I disagree and would rather see economic growth rather than digging a whole deeper into debt.

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  29. I find the economic struggles in Rio to be an important aspect of this post as this has greatly influenced the outlook on hosting the Olympic Games. Though Rio’s GDP likely initially increased during the first-ever games hosted in South America, now infrastructure from the 2016 games remains abandoned and deteriorating as Rio lacks the resources and finances to maintain the buildings. Once an honorable undertaking, hosting the Olympic games is now an economic burden for any country. Recently, cities have removed themselves from the bidding process, revealing that Rio’s example of a financial crisis outweighs the honor of hosting this international competition. Due to the disasters in Rio, the International Olympic Committee (IOC) has discussed rotating the Olympic Games between several cities in economically stable countries. Though such a rotation may limit the cultural experience of the games, it would ensure that the facilities are maintained and would result in less debt and despair.

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  30. I think it is interesting how although, the Olympics can provide Economic growth for a city, it can also hurt a city economically due to the effects after the event. Yes, the Olympics can provide jobs and employment it can also be a burden when those jobs cannot be filled. This also plays into my article on "How professional sports effect the economy" so, this was an interesting read.

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  31. Hosting the Olympics is once in a lifetime opportunity. The country can have potential economic growth due to the immense amount of tourism brought in and be able to have the title as one of the hosts for the world games. However, the debt that comes after the games are over may not be worth it. It’s important for a country to account for the “after olympics” time period. They need to make sure they are able to successfully commit to being able to pay off the debt from building.

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  32. As a spectator of the Olympics, you never really notice or pay attention to the economic benefits to the hosting country. But after reading this article, I now understand how hosting the Olympics can truly effect a country. This article made me think about the World Cup. In 2014, Brazil hosted the World Cup and it costed them billions of dollars. All of the expense fell on the tax payers and citizens were very upset. The same thing is happening right now is Qatar. Qatar will host the World cup in 2022, but Qatar does not have any stadiums where the games will be played. Qatar still needs to build the stadiums and the burden will fall on the tax payers. So yes hosting a sporting event has it benefits, but it has disadvantages to go along right with it.

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  33. In they short run I believe that the Olympic expense is well worth the cost as the boom in tourism, revenue made from restaurants, hotels, sporting venues, and many more areas of the host country will undoubtedly cause the GDP to increase during that time. However in the long run you have to be careful, as stated in the article, that after the Olmpics your arenas don't sit there and collect dust. What South Korea is doing is a fine idea as it gives the arenas a purpose after the 2018 Winter Olympics are complete. So in the short run I firmly believe the Olympics are worth hostinb, but without a plan for the post-olympic era, the cost of preparing for the Olympics and the cost of maintaining those buildings could backfire on the country. All in all its worth it but have a solid plan inplace so the venues still bring in some revenue after the Games.

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