Build it well, build it wisely, and build it only once — How investing to create a permanent site for the Olympic Games, ideally in their historic home of Greece, could reduce waste, deliver economic stimulus, and avoid "white elephant" monuments to extravagance.
The jeering of angry taxpayers and frustrated favela-dwellers may drown out some of the cheering of sports enthusiasts this weekend, as the 2016 Olympic Games begin in Rio de Janeiro. The government of Brazil and local officials in Rio have certainly done their best to stage the Games successfully, addressing a range of challenges that include the Zika virus outbreak, the doping scandal among athletes and the country’s prolonged economic slump and political traumas. Yet an enduring scandal in international finance — the chronic design flaw in the way that the Games are planned for and paid for — has again imposed an enormous economic burden on the Olympic host city. Struggling economies can ill afford the extravagance of repeatedly building use-once-throw-away sports facilities.
It was surely startling to see the deep degree of scorn and sarcasm with which many workaday Brazilians, who are now enduring a deep economic downturn, hurled derision at the arrival of the Olympic torch in Rio this week. They evidently saw that Olympic arrival ceremony as a symbol, not just of athletic ambition, but of financial folly.
The anxieties that Brazil has endured on the road to Rio 2016 should underscore a longer-term, Olympic-sized concern: Mismanagement by the Games' promoters has now been thoroughly documented, underscoring the abusive way that the International Olympic Committee (IOC) and the global sports-industrial complex have habitually foisted reckless costs on the taxpayers of hapless host cities.
By goading Olympic-wannabe cities to make ever-more-extravagant financial commitments – stoking their dreams of a media moment of purchased publicity – the mega-event industry has helped shatter the finances of one host city after another. No wonder that so many cities are now shunning the IOC’s bidding process, dreading the deadweight losses that are almost certain to burden any Olympic host.
Welcome as the IOC’s recent “Olympic Agenda 2020” reform proposals may be, it’s long past time to rein in the financial excesses of mega-event promoters. With a claque of financiers and flacks who are ready to manipulate the gullibility of the would-be hosts, the Olympic spirit has fallen victim to the self-interest of construction firms, property developers and publicists who seek to profit from host cities’ overspending.
An invaluable book documenting this Olympic-scale threat – discussed in detail at a World Bank’s InfoShop book-and-author seminar in June 2015 – should be top-of-mind for Olympics-watchers this week, as Rio de Janeiro enjoys its moment in the spotlight. “Circus Maximus: The Economic Gamble Behind Hosting the Olympics and the World Cup” — by Andrew Zimbalist, a professor of economics at Smith College — can help other cities avoid an impulsive rush for momentary Olympic notoriety. A video of Zimbalist’s InfoShop presentation is archived at http://web.worldbank.org/WBSITE/EXTERNAL/PUBLICATION/INFOSHOP1/0,,contentMDK:20289125~pagePK:162350~piPK:165575~theSitePK:225714,00.html
As Zimbalist and others have carefully documented, the city of Montreal remains the saddest symbol of host-city heartbreak: The debt from the 1976 Summer Olympics weighed down that sorry city's finances for 30 years. Yet for decades after Montreal, other credulous sports-crazed cities imagined that they might avoid Montreal’s fate. But they too ended up squandering vast sums by building use-once-throw-away projects for one-shot events like the Olympics and the World Cup soccer tournament.
Zimbalist adds persuasive evidence confirming that staging mega-events, especially those that require newly built infrastructure, just doesn’t generate the promoters' projected revenue gains. Worse, one-off construction projects open the door for “white elephant” projects that may flatter civic vanity but flatten city taxpayers. Zimbalist’s research recently helped the city of Boston steer clear of a threatened bid to become the sucker taking the bait to host the 2024 Summer Games, which would have imposed an enormous cost on New England's long-suffering taxpayers.
The taxpayer tab keeps rising, in city after city. The cost was $40 billion for the 2008 Summer Games in Beijing; it was more than $50 billion for the 2014 Winter Games in Sochi; and it may reach as much as $200 billion in Qatar in 2022. (That almost makes Brazil’s cost of $20 billion to host the final rounds of the 2014 World Cup soccer tournament look like a bargain.) Only two Olympics turned a profit — both of them in Los Angeles, which reduced expenses in 1984 by wisely re-using some of the facilities built for the 1936 Games.
Zimbalist’s logic is certainly catching on, as would-be Olympic venues increasingly recognize the potential toll of winning the dubious host-city honor. An ever-stronger consensus is emerging — and is now embraced by Zimbalist himself — that, instead of building one-shot Olympic facilities that are destined to be discarded, the international community should build just one long-term complex of Olympic facilities, which can be re-used again and again. Build it right, but build it only once: That’s the thriftiest way to invest in cost-effective infrastructure.
In an important boost, that idea was recently applauded by a key figure in global finance: by Christine Lagarde, the managing director of the International Monetary Fund, in a discussion in June at the Aspen Ideas Festival. Agreeing with a questioner that “the Olympic Games [might be] a huge catastrophe for Rio de Janeiro,” Lagarde welcomed the idea that the historically logical place for a permanent Olympic site (at least for the Summer Games) is Greece, the country where the Olympics originated in 776 B.C. and continued until 393 A.D. (before their revival in 1896).
“The marathon was run for the first time even in Greece,” Lagarde reasoned, “and the Olympics is only called ‘the Olympics’ because of [Mount Olympus], which is actually sitting in Greece and which has hosted so many fantastic athletes — which was part of the mens sana in corpore sano principles that the Greeks very much had.”
Readers of this Private Sector Development blog will recall that that very proposal was discussed in this space last summer, in the context of the Eurozone crisis: focusing on the fact that building such a long-term Olympic complex in Greece would provide a welcome stimulus to that country’s hard-pressed economy. Largarde embraced that logic in Aspen, citing the economic boost that such an infrastructure-building project could have for the beleaguered Greek economy.
There might be a touch of a historical irony in such an initiative, since Greece’s current economic woes were intensified (although certainly not created) by the ill-organized preparations and the now-decaying white elephants that marred Athens’ brief 2004 Summer Games, which were a disappointment for the economy for the long term. Yet building a durable and re-usable Olympics site (alomg with all its related transportation and tourism infrastructure) could help jump-start an economy that desperately needs stimulus.
Largarde suggested some sensible next steps, both philosophical and practical, that need to be considered: “How you [would] combine the sort of single location with the multilateral, multi-county, extraordinary sort of appeal that the Olympics can have, to many countries around the world, is something that needs to be thought through.” Such a project, she noted, would need “a good governing body that would actually supervise [and] make sure that there is transparency, there is accountability, there is no funny business (as has occurred in the past in some places).” That's probably an area where the sibling Bretton Woods institutions could work together: The World Bank’s good-governance and anti-corruption watchdogs could suggest the kind of international best practices that would make such an Olympic project a role model for transparency and competitive bidding, thus inspiring the highest standards in investment-climate reform.
A well-managed program to invest in restoring the Olympic Games to their historic home is a “two birds with one stone” solution: a way to help end the Olympic pattern of overspending for duplicative infrastructure in venue after venue, while shoring up the imperiled economy of the country and culture that dreamed up the Games in the first place. That’s an idealistic investment worth contemplating, as the world watches this week’s unfolding Olympic festivities in Rio de Janeiro.