I’m No Economist But This Doesn’t Add Up

On more than a few occasions, I have wondered aloud why cities and countries go out of their way to host the Olympics. I guess there is some dimension of national pride involved; but unless the city/country doing the hosting is one in serious need of the infrastructure investment that hosting demands, there is no way that it makes economic sense.

Montreal hosted the 1976 Olympics. They just finished paying off the bonds that financed that event. It was not long after the games ended that the city and province had to dip into “general revenues” to service the debt.

Athens/Greece spent somewhere between $16 -19B to host the 2004 games at a time when the Greek economy needed to reduce its debt burden. The Athens games ran in the red.

Depending on how you do the accounting, the Chinese have spent between $42 – 80B on the 2008 games. [Do you count the cost of relocating a manufacturing plant from the Beijing area to a western area of the country as an “Olympic Expense” or part of the “General Economic Restructuring Plan”?] While that is certainly not a trivial sum, the economy of China is large enough to absorb that kind of spending even though the estimated cost for the games when they made their IOC bid was less than $5B.

London estimated that the games would cost them $8B. They are already at $19B and counting with four years to go until the games in 2012.

There is no way that the Olympics pay off those kinds of numbers so the only economically rational way to justify this is to say that the Games generate jobs and wealth during the building phase and that wealth creates more economic opportunity that will ultimately pay off the costs of the games. But when the numbers get to into the multiple tens of billions of dollars, it gets harder and harder to see how the marginal benefit of the construction work for the games can generate that kind of revenue for the governments.

But never fear, the entity that always makes money out of all this chaos is the IOC. For the Winter games in 06 (Torino) plus the Beijing games, the IOC pulled in somewhere in the range of $2.5B for itself and the projection for the 2010 Winter games (Vancouver) plus the 2012 Summer games (London) is that the IOC will take in $3.3-3.5B. That is a lot of money considering they do not have any major construction projects to fund.

Potential host cities spend millions – chump change compared to what the ultimate host city will have to spend – just to entertain the IOC members and hopefully to win their votes as to where to host the games. For the 2016 games, it is estimated that Chicago has a $50M budget devoted entirely to convincing the IOC to have the Olympics in Chicago in 2016. Say what?

I do not pretend to be an expert in macroeconomics, but this continues to amaze me because I have no idea how this makes economic sense…

Now that Brett Favre has reported to camp with the Jets and has practiced and now that Aaron Rodgers has played an exhibition game for Green Bay, I want to take a look at how the soap opera affected various people/entities over the past couple of months:

    Brett Favre: Solidified his image as the biggest diva in the NFL today. He was one play away from the Super Bowl last year and now he goes to a team that was 4-12 last year and has the Patriots in its division. If that is the “great leap forward”, someone will have to explain it to me…

    Aaron Rodgers: If whining were an Olympic event, he would definitely medal there. By the way, replacing an icon rarely works out well. Maybe Rodgers needs to phone up Phil Bengston to see how that plays out in Green Bay, Wisconsin…

    The Packers: Kicked an icon and fan favorite out of town. They were 13-3 last year; if they are 3-13 this year the town residents will be marching on Packer headquarters with pitchforks and torches.

    Ted Thompson: He made this move. If it doesn’t work, he will be out of work.

    The Jets: They get a 39-year old QB who showed last year that he could still play at a very high level. However, by the time the Jets are contenders, Brett Favre may be more than halfway toward his eligibility date for the Hall of Fame. No 39-year old starting QB has made the playoffs since the merger of the NFL and the AFL.

    The NFL: They now have as precedent that the Commissioner will try to mediate team/player disputes involving contracts/playing time/position on the roster. What genius in the NFL executive suite advised the Commish that was a good idea?

    The Fans: Were assaulted and insulted by Brett Favre non-news stories for several months.

Study that list; when you find a “winner” on that list, let me know…

By the way, the Green Bay Packers had an iconic QB back in the 60s and early 70s too. When Bart Starr retired in 1971 – meaning he left the Packers and did not play for them any more – the only thing that happened to the franchise was that it went into a two-decade funk. They only got themselves out of that miasma when Favre arrived in Green Bay and made the roster…

Finally, here is a cogent observation by Dan Daly in the Washington Times:

“Did you see some of our Olympians – cyclists and triathletes – have been wearing black masks over their noses and mouths to ‘combat’ the poor air quality in Beijing? Unfortunately, when they removed their masks, people still didn’t know who they were.”

But don’t get me wrong, I love sports…

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