Rio Is Hosting the Olympics—Good for Them?

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The 2016 Summer Olympics are underway, and there is excitement in the host city, Rio de Janeiro. When all is said and done, though, Brazil will still be in the midst of economic and political turmoil, and someone is going to have to pay for these Games. (Photo Credit: Gregory Bull/Associated Press)

The flame has been lit. The participating nations have made their grand entrance. Director Fernando Meirelles of City of God fame has inspired us to “plant a seed” for the world, you know, after initially depressing us with the notion that many of the world’s low-lying areas could be underwater sooner than we think. But yes—the 2016 Summer Olympics from Rio de Janeiro, Brazil is underway, and the city, the country, and the Brazilian people are brimming with pride! Ordem e progresso, and all that jazz! It’s going to be like one big Carnival!

Before we pander to the few things we know about Brazil (“They speak Portuguese there? Since when?”) and get swept up in all the pageantry, and despite the pure love of physical achievement and sentiments of international togetherness and all that crap which the Games promote, let’s approach this historic event with, shall we say, more pragmatic concerns. Though it yet remains to be seen whether or not Rio is truly up to the challenge of officiating the Summer Olympics and adequately providing for the athletes and spectators alike, in the lead-up to the start of the Games, the signs have not been all that promising for a smooth fortnight-and-change in the land of the cocoa and the palm. There have been due concerns about the state of the water in Guanabara Bay where the sailing will take place, as it, um, tends to fill up with untreated human waste. The Russian Federation, after revelations about its state-sponsored doping program, is frankly lucky to have any teams eligible to compete after specific bans on its track and field, and weightlifting, teams.

But, wait—there’s more! Budget cuts have forced organizers to scale back seating and the number of volunteers on hand, not to mention making alterations to transportation schemes, relying on contributions from Olympic sponsors like the Panasonic Corporation to chip in, and—perhaps worst of all—forcing athletes to stay in rooms without television! Michel Temer, acting president of Brazil, has been criticized and protested by his constituents for allegations of corruption and charges of overspending on the Olympic games—and he is filling in only because impeachment proceedings are underway for Dilma Rousseff for her own accusations of impropriety (namely of fudging the numbers of the national budget and of state-run banks) amid an ongoing national economic crisis. And by now, we’re well aware of the threat, however minimal, of the Zika virus, prompting numerous high-profile professional athletes to skip the Olympics completely. In short, there is reason for onlookers to be worried the Games in Rio will meet with difficulties, or in the case of the sailing, to be a literal shit-show.

For all these logistical woes, though, over the long term, the biggest worry may not be something endemic to Brazil or Rio de Janeiro, but rather a more global issue which has faced Olympic host cities. Simply put, it may not pay to host the Olympic games, from an economic standpoint. Craig Dale, in a piece for CNBC, highlights the notion that the Games were a questionable choice for Rio in the first place. To be fair, Dale notes, when Brazil first made and won the bid to host the 2016 Summer Olympics in 2009, its financial situation was different, as indicators like currency strength, economic growth, inflation, and stock market performance were all trending in the right direction. Today? Not so much. To accompany the state of political turmoil facing the country as noted earlier here, Brazil is in the midst of a profound recession, with inflation high and its sovereign credit rating, as Craig Dale puts it, “downgraded to junk.”. Moreover, as economist Andrew Zimbalist argues, Brazil is ill-suited to serve as Olympic host in the first place. To quote Zimbalist:

“It doesn’t have sufficient transportation infrastructure, it doesn’t have sufficient sanitation infrastructure, it doesn’t have sufficient sporting infrastructure, it doesn’t have sufficient telecommunications infrastructure. So there has been an enormous amount of investment that has been required of the city of Rio.”

As Dale notes, Brazil had to even borrow some $850 million to make the Olympic aspirations of an entire continent come to fruition. Which is exactly what a country with a slew of problems needs: more debt.

It’s not just Rio de Janeiro that faces a steep price tag, however, and it’s more than just Andrew Zimbalist in dissent. Binyamin Applebaum, in a 2014 piece for The New York Times, weighed in on this issue, addressing the notion that hosting the Olympics brings investment and tourism to a region. As he outlines, there is little evidence to support this idea, with Applebaum suggesting cities failing to address the opportunity cost of building stadiums (thereby rendering the underlying property unusable for real estate) and overstating the revenue directly attributable to hosting the Olympics as factors which can cloud organizers’ judgment. Furthermore, while countries tend to experience a bump in trade after securing a bid to host the Olympic Games, so too do those nations which finish as also-rans, with the same message of “we’re open for business” communicated—and at a much lower cost, to boot. Other analysts have found simply no significant change in economic activity altogether. The biggest benefit, then, and one that is harder to measure, is the sense of happiness and national pride which accompanies hosting the Olympics. How long that lasts, and how much that’s worth to the host nation, is, of course, the fundamental question.

Others report similar findings or make similar appeals to the questionable utility of hosting the Olympics. The Economist points to rising costs entailed in producing the Games as a limiting factor in any theoretical profit which stands to be gained. Not to mention the politicians who like to make these decisions and look good to the voters likely will not be in charge by the time the event is held—and the bill comes time to pay, out of their (the people’s) pockets, no less. Tony Manfred, writing for Business Insider, cites the research of Holy Cross professor Victor Matheson in explaining how countries will incorrectly use normal economic data to make predictions about a non-normal event in the Olympics, or otherwise will emphasize how much money will flow into the local economy without making it clear that most of this cash will flow to the business owners, not the lower-level staff. And that rascal Andrew Zimbalist has more to add on this subject. Writing for The Atlantic, ol’ Zimby enumerates three reasons as to why hosting the Olympic Games is a losing proposition. We’ve already considered the tendency toward overbuilding among hosts, as well as the shaky connection between hosting the Olympics and increased tourism, but a third problem stems from the private interests to which members of organizing committees cater, leading to excessive bids at the public’s expense.

Returning to Zimbalist’s thoughts from the Craig Dale piece, the economist, in stressing the pitfalls of the influence of private interests, shines a spotlight on the International Olympic Committee (IOC) as a bad influence in this regard. In Andrew’s words:

“The problem starts with the fact that the Olympics are organized by the International Olympic Committee. It’s an international monopoly that is unregulated, has an enormous amount of economic power and what it does every four years is that it invites the cities of the world to compete against each other to prove to the IOC that they are the most worthy hosts of the Games. So the cities enter the competition with each other, each one tries to outdo the other, in terms of the lavishness.”

That someone like Andrew Zimbalist would criticize the IOC likely does not surprise those among us who follow sports closely, as the organization is no stranger to allegations and instances of corruption, chief among them the so-called Salt Lake City bid scandal, which resulted in the expulsion of six members for accepting bribes. As with FIFA or any international organization, unchecked power sows the seeds of malfeasance, and the wide latitude afforded the Committee appears to be a key reason why. For Zimbalist’s part, he recommends the IOC’s corporate sponsors “come together and insist on a different model” for the Olympics’ governing body. Then again, as long as everyone at the bargaining table is making money, reform is probably not high on the minds of those involved. Still, there’s no guarantee that more average taxpayers of host cities and nations won’t take notice at the inefficiencies of local and international organizing committees and demand change, or else will just simply review and reject Olympic bids outright. After all, information is power.

Was the opening ceremony for the Summer Olympics enjoyable? Yes, even with NBC’s personalities yammering on throughout the Parade of Nations. Will these Games produce stunning displays of athleticism that can and should make us step back in awed admiration? Undoubtedly so. In acknowledging these merits of the Olympics in Rio, meanwhile, we can still contemplate what will happen in the city and in Brazil at large once the sheen of the Games wears off. The nation, well in advance of August 2016, has faced economic and political turmoil, and these issues will still be there when the Summer Games come to a close. Accordingly, while we see scores of Brazilians in the stands living it up and having a good time, among the protestors outside venues and in the favelas, there is real discord, frustration and worry, something which affects many of us within a global economy. No amount of samba can hide that reality. Thus, while Rio de Janeiro may consider itself lucky for securing its bid to host the Olympics, history suggests it may be more of a curse than a blessing after all.

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