The economics of the Olympics
The International Olympic Committee hopes to right the ship, starting with the Paris Games: The nongovernmental sports organization is aiming to take a more frugal and greener approach than in years past.
Still, some economists and researchers argue that a truly sustainable Olympics will need to look a lot different than the Games we know today.
Forty years ago, the Olympics were also at a crossroads. After the 1968 Mexico City Games and 1972 Munich games were marked by deadly violence and the 1976 Montreal Games experienced dramatic cost overruns, there were hardly any takers to serve as a host city for the 1984 games.
Los Angeles, the lone city to bid on the 1984 games (after Tehran pulled out), was able to use its existing infrastructure and stadiums, lined up lucrative corporate sponsorships and broadcast rights, and built up the event into the marketing behemoth it is today.
Including Paris, five of the past six Olympics (summer and winter) had inflation-adjusted cost overruns of well over 100%.
By estimates, the games themselves grew increasingly extravagant: Beijing spent more than $40 billion for the 2008 Summer Games, Sochi spent upward of $50 billion for the 2014 Winter Games and Rio’s costs approached $20 billion for the 2016 Summer Olympics.
In late 2019, before the Covid-19 pandemic would shock the global economy and postpone the 2020 Games, Japan’s National Audit Board found that the Tokyo Olympic organizers’ estimates of $12.6 billion did not include $17 billion of direct costs.
Last year, the organizing committee for the 2022 Beijing games reported a surplus of $52 million on $2.24 billion of expenditures. However, a Business Insider investigation found that the overall costs were likely more than 10 times that amount.
What’s often touted alongside extravagant sports events such as this are the intangibles: The short- and long-term economic impacts of the preparation for, the activity during, and the ripple effects in the years to come.
However, most of those costs are ultimately negated by near- and long-term economic losses and debt. The short- and long-term impacts also include invisible costs such as displacement of (typically lower-income) residents, gentrification, and potential environmental harm.
The IOC and host communities hope to make the event more economically, environmentally, and socially sustainable.
For the 2024 Paris Games, organizers have announced a slew of initiatives aimed at reducing the impact of the games. This includes building only one permanent sports facility and relying instead on existing or temporary structures that show off the city’s famous monuments. Paris organizers also touted efforts to minimize the carbon footprint of the games and identifying second lives for the temporary structures and equipment utilized for the games.
Additionally, the Paris Olympic Village will be converted into offices and housing in a historically impoverished neighborhood.
Looking ahead to Los Angeles in 2028, similarly veined efforts are underway for the ‘No Build’ Olympics. The upcoming LA games not only will rely on existing infrastructure, but some events will be held 1,300 miles away in Oklahoma, which has the facilities for softball and canoe slalom.
Still, economists say, it may take more drastic moves in the future for the Olympics to be truly sustainable and economically sound. To ensure true long-term viability of the Olympics, it may come down to designating a single city or rotating through a couple of cities to serve as permanent hosts for the games.