In February 2014, Russia hosted the 22nd Winter Olympic Games in Sochi. The country had emerged
from its Soviet era shadow and had overcome the economic shock therapy of the 1990s to become an
increasingly wealthy and well integrated global economy. The country still had its controversies,
but this was going to be an opportunity for it to show off its success on the world stage through
the unifying power of sportsmanship. Unfortunately, just four days after the game's closing ceremonies,
Russia annexed the Crimean Peninsula, kicking off a slow but steady regression from one of
the fastest growing major economies in the world into what it is today, which is a petro-state
crippled by intense global sanctions and an expensive ongoing conflict.
Then there is China. In 2022, it hosted the Winter Olympic Games at the same time as its economy
was recording its first year of stagnant economic growth since opening up to global trade and private
industry in the 1980s. This marked the end of the single most intense period of economic growth in
human history. Many economists predict that China's rapid growth and plateau have many of the same
characteristics as Japan in the 1980s and 1990s when it became the global manufacturing hub before
its own real estate market bubble popped, its workers became less globally competitive,
and the aging population became a national burden. One of the other less obvious similarities is that
Japan hosted the 1998 Winter Olympics at the same time as its economy was dealing with the Asian
financial crisis, a downturn that now, almost three decades later, it hasn't recovered from.
Looking further back in history, there were of course the 1936 Olympic Games in Berlin,
which well, obviously had their problems. Later this month, the French Olympics are
going to be held at the same time as the heightened tensions in the country over a stagnating economy
and quality of life sacrifices that are coming because of it. And since my own home of Australia
is slated to host the Olympic Games in 2032, it sounds like a good time to ask if the Olympics
are a predictor of economic downturns. So, is there a reason that economic challenges line up
with the Olympic Games, or is this just an odd coincidence? What lessons could economies learn
from these challenges? And finally, if there is a connection here, are these multi-billion dollar
national vanity events really worth it? Every year the number and size of data breaches goes up.
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an annual plan. Of course, the original Olympic Games were technically first held in Olympia
Greece between 776 BC and 393 CE. Suffice to say, the ancient model that the Olympic Games
once represented almost 2000 years ago scarcely resembled a modern event held every four years
today. These games were jump-started in 1896 by a French aristocrat named Pierre de Coubertine.
He felt this revival would serve a greater purpose in the realm of cultural representation,
and with the help of the International Olympic Committee, which Coubertine co-founded,
the dream quickly became a reality. 14 nations participated in Athens when it was reintroduced.
Now, the IOC recognises 206 countries and their respective national committees that participate
in the quadrennial event where rivalries can be settled in a variety of different competitions.
In a way, the Olympics serve a mostly non-lethal battleground promoting healthy competition amongst
those choosing to flaunt their achievements and potential of their most skilled athletes.
But as always, there are other motives behind this expanding array of festivities and the value it
all represents. Basically, the Olympics has arguably become the most lavish spectacle for
bragging rights on the planet, with opening ceremonies and facilities becoming more and
more elaborate over time. In fact, from the very moment the IOC was founded, one of the ultimate
goals was to find ways to radically monetise such a massive global celebration, though this wasn't
an easy task at first. For most countries, the Olympics looked like a tremendous liability.
A good example would be the chaos that followed Montreal's failure in 1976. The lazing construction
and cost overruns for a new stadium resulted in $1.5 billion worth of debt for the Canadian
taxpayer, which is a huge burden for any government, but especially significant in 1976 dollars,
and it took over 30 years to pay off. At the time, it was an expensive public service that most
taxpayers just weren't that interested in. But this will arguably change when Los Angeles
stood as the lone bidder for the summer of 1984. Not only was the US city able to leverage its
position for better terms with the IOC, but its pre-existing stadiums and developed transit
systems gave it a considerable leg up when compared to other hosts in the past. Corporate
sponsors, principally US-based multinationals, were allowed to put Olympic symbols on their products,
which were then marketed as the official such product of the Olympics. For LA,
it was a great chance to embrace the new media and branding opportunities. So then what exactly
continues to encourage countries to participate in the present day, and why does the arrival of
the Olympics often coincide with crashes? Well, for the first time since 1932, LA proved that the
Olympic Games had the potential to be a profit engine and as a way to promote their metropolitan
legacy with a $215 million operating surplus. After this monumental achievement, cities all
over started to make considerable bids to show the world how successful they were as well,
even if said success was founded on false notions propagated by misleading figures.
Using this hubris, the Olympic Committee tapped into the growing competition to host the Games,
and they now know they can ask for more and more impressive resources for their games,
generating billions of dollars with each campaign. They do everything they can to show
collaborative benefits. One of the most significant examples would be how the IOC and host cities
often advertise a large number of temporary jobs for locals. In the case of Paris, the 2024 event
has produced approximately 78,300 organisational roles and 60,000 tourism jobs and has employed
11,700 construction workers for the infrastructure developments required to host the Olympic Games.
In total, the Paris 2024 Olympic Games have created approximately 150,000 jobs worldwide.
Some of these infrastructure investments often boast lasting benefits to the country's residents,
and the IOC often alludes to these on its website. One of them being the train route
built during the 1964 Japan Games that reduced travel time to and from Tokyo,
that or various public amenities such as housing that's built for visiting athletes.
In 2014, Sochi Russia diverted $44.3 billion for the construction of non-sports related
infrastructure. This is why, when looking at it from another perspective, the Olympics is a game
in and of itself, focused on PR. Countries tend to host the Olympics when they are doing very well,
like during periods of economic boons. They do their best to use the Olympics as a sign that
their country is prospering. But this has made their situation almost poetic because they fall
into the classic Icarian trap flying too close to the sun. In other words, if a country is doing
better than it ever has been before, it doesn't really have anywhere to go but down, especially
if that economic growth has been predicated on unstable industries like natural resources or
real estate speculation. A similar statistical phenomenon happens with other public pissing
contests like the Forbes 30 under 30 list. To get that successful at such a young age,
you need to take some major risks and be prepared to bend the rules, which is why so many Forbes
30 under 30 people end up in prison for fraud. It's also hard to get much more successful
than being a billionaire at 30, hence the old adage, there's nowhere left to go but down.
And this fall, when it comes to hosting the Olympic Games, is dangerously steep,
often not helped by the sheer investment required to host the games,
and they don't usually pay off like the IOC narrative would have the participants believe.
Unlike the LA success story, getting the attention of the IOC these days involves a very expensive
bidding war. In 2012, London spent about $15 billion to host the Olympics, as well as the
Paralympics, and when a government spends money, its people spend money. $4.4 billion was covered
by taxes to be exact when the London event underdelivered. Much of this is in the aforementioned
construction side of things. The majority of venue costs for the 2022 Beijing Winter Olympic Games
went towards the Beijing Olympic Village, which ended up costing China about $3.16 billion US dollars.
The competition venues alone in Yangqing, including the Bobsled, Skeleton, Luzhen,
and Alpine skiing venues amounted to a staggering cost of approximately $442 million US dollars.
For China, this was a major loss, but to be fair, the event was held in the COVID years when the
country was still implementing very strict nationwide lockdowns and travel was heavily
restricted. So, a more generous case study would be the 2008 Beijing Summer Olympic Games,
which generated $3.6 billion in revenue, but when one discovers that the cost of running
the event amounted to about $40 billion, the image becomes far more bleak.
Of course, the standard disclaimer here is that budget figures from China are often
unreliable, especially if it would make the government look bad or wasteful,
so it's possible these estimates are on the conservative end.
Then there's the argument the IOC and embarrassed government institutions make regarding the new
living spaces for athletes. Their media strategy is to promote the idea that these structures will
be left behind for long-lasting benefits, but what the IOC fails to publicly mention is that
they require a mandatory minimum of 40,000 hotel rooms. That was a tall order for the Rio
Olympics in Brazil, which had to build 15,000 new rooms, plus they ended up destroying homes
and pushing residents out of the designated property, which was explored in a recent video.
And although Russia devoted $44.3 billion for construction of non-sports-related infrastructure
that continues to be in use, their 2014 bid and construction costs far outweigh the supposed
benefits. The debt and maintenance fees alone will cost the Russian taxpayer almost a billion
dollars a year, which is far from affordable when their current geopolitical conflict is taken
into consideration. So why not just make the games cheaper? The games used to be a fairly
modest affair, the focus leaned on the traditional value of countries coming together to admire
athletic performance far more than the marketing strategy. But as the Olympics has morphed into
a major promotional spectacle, the pressure to one-up other countries on the global stage has
slowly turned it into what it is today. The IOC likes to make the argument that aside from
infrastructure that tourism revenue is so great that the games practically pay for themselves.
But again, this is a small contributor to the reported revenue, if not completely non-existent.
In fact, there is the argument that the Olympic games actually have an
adverse effect on the tourism industry. The Council of Foreign Relations or CFR found that
security, crowding and higher prices that the Olympics bring dissuade many visitors.
And while Barcelona, Sydney and Vancouver also saw slight tourism increases, London,
Beijing and Salt Lake City also saw decreases in tourism the years of their Olympics.
Of course, all of this might be a noble sacrifice, right? Sure, general amenities,
hotel rooms, future taxation and large stadiums burn a massive hole in the proverbial bucket,
but isn't there still the opportunity for employment? Well, according to post-game
investigations, the answer to this question is no. Another study cited by CFR found that
only 10% of the 48,000 temporary jobs during the 2012 London Games went to people who were
previously unemployed. The reality is that for a lot of countries, they know that these events
will not be profitable. And let's be honest, not all major government projects are always that
fiscally sound. Sometimes money is wasted on vanity and building up global recognition.
A country like China in 2008 had a lot to prove to the world, and the Olympics was the perfect
way to do that. What this means, though, is that any other country that needs to be a bit more
beholden to its taxpayers needs to realise that it's competing against countries that are
effectively funding a global national advertising campaign. Another thing worth mentioning regarding
the construction projects is that once the games are over, countries and their host cities are left
with the task of maintaining these massive multi-million dollar structures, that is, if they
choose to take care of them at all. Just take a look at Brazil, a massive economy with resources
rivaling many superpowers. Here's a fun game, which is an image of Chernobyl and which is an
image of a less than decade old state-of-the-art Olympic facility. The Olympic Games were held
here in 2016, not too long ago, and yet their stadiums have fallen into a state of disarray.
At this point, it would almost be more expensive to bring them back online than they would be
to build in the first place. And they aren't the only country that has decided to abandon these
expensive venues. Plenty of nations like Germany, Bosnia and Greece, the country holding the
Olympics' origin story, all chose to leave their once-top-of-the-line facilities to the ruins of
time. But this is just the tip of the iceberg when one considers the social ramifications.
The Olympics is a spectacle that is often more costly than it is profitable. This is a measurable
fact. However, there's still the argument that Olympic advocates make about the PR game,
that is, if nothing else, a way to put your country on the map for spectators to see what you
can do. The problem is, exposure isn't always a good thing. Making the choice to embrace the
spotlight reveals everything, the bad as much as the good. The social backlash following the Rio Games
with the troubling contrast between the slums and the stadiums was a total disaster, and the
Sochi Games brought a lot of attention to Russia, right as it was about to invade its neighbour.
The 2022 games in China also coincided with issues like re-education camps, strict lockdowns,
and the protests in Hong Kong. Many of these countries with questionable models for governance
buy the Olympic media bundle with the expectation that the world will see them as a shiny example
of economic triumph with a lasting progressive legacy. However, these cases show that winning the
expensive bid often does quite the opposite. These kinds of soft power manoeuvres can have a real
impact on global perceptions and influence over things like foreign investment, tourism, and
even trade deals or sanctions. And this goes for other major globalised athletic events as well,
like Qatar's controversial Football World Cup. Choosing a country small in the state of
Connecticut came as a surprise to most of the FIFA fanbase for a number of reasons.
They weren't equipped to handle such a massive sporting event, and their presence on the world
stage was largely unknown at the time. Rumours of alleged bribery began circulating through both
western and eastern media. Moreover, the small country with a notoriously hot climate inhospitable
to players actually had to build a new city just to meet the requirements to hold the games,
with hotels, underground transportations, stadiums, railways, ports, and airports. Most
reports indicate that this alone cost US$6.5 billion, with total infrastructure investments
estimated to be US$300 billion. Which might sound like a lot, but it's a lot cheaper than it would
have been if they needed to pay their workers. These huge construction projects required a lot
of manpower which Qatar received from places like India, Bangladesh, and Nepal. This is where
things got a bit shady. To secure a contract to work on Qatar's World Cup construction project,
most of these people had to go into considerable debt. These workers from mostly poor countries
had to pay up front to labour hire agencies to travel to Qatar, or for the right to work in
terrible and hazardous conditions. As a result, labourers were thrown into precarious positions
commonly referred to as Ghafala, or sponsorship. Basically a euphemistic way of saying indentured
servitude, where agencies forced workers to slave away in 51 degree Celsius or 125 Fahrenheit heat
for lower rates than they were originally promised. Now, Qatar didn't host the Olympic games,
however, the desire to be in the spotlight had exactly the same effect of drawing attention to
the country's horrendous human rights abuses. Something that most people around the world
would have been blissfully unaware of, if not for the attention of this global sporting event.
So now knowing the corrosive socioeconomic burden the games bring to their hosts,
is the Olympics some kind of curse, or is it just coincidental that countries that host it often
deal with a crisis during or after the events arrival? Are these multi-billion dollar vanity
projects really worth it? This might be a tricky question to answer, but based on all the evidence,
there appears to be a pattern worth mentioning. Of course, there are plenty of countries that
have hosted the games where nothing went wrong, apart from maybe some government overspending.
But if there are bad things bubbling away under the surface, the upfront cost and critical
international recognition is only going to make bad things even worse. Thanks for watching mate, bye.