Yahoo Finance Why Do Countries Go Into Debt To Host The Olympics?
Of recent, Singapore’s very own wonder boy, Joseph Schooling, has clinched our very first golden glory at Rio, Brazil. What got us thinking other than the cash price that a gold medalist would bring home was why would countries host the Olympics?
Hosting an international event never comes with a low price tag. Looking back at the Youth Olympics that was held in Singapore, we have also overspent at such events. However, did we really make any economic benefits from such events?
Read Also: How Much Would Joseph Schooling Be Getting For His Olympic Gold Medal
How Much Do Countries Spend On The Olympics?
Hosting the Olympics would mean that the country would require state-of-the-art facilities that are fitting of the standards set by Olympics committee. Therefore, the bidding and awarding process have to be done many years ahead so that the host country has sufficient time to build these infrastructures.
To give a perspective, China spent about US$44 billion on the Beijing 2008 Summer Olympics. That is roughly 23% of Singapore’s gross domestic product (GDP) and 154% of the Singapore government’s revenue in 2008.
Never doubt that the Russians will go higher, as they spent a record US$51 billion (17% of SG’s GDP, 111% of SG Govt’s revenue) for the Sochi 2014 Winter Olympics.
Using these two countries as a gauge might not be the best because they do not have the facilities readily available. The United Kingdom only spent US$10.4 billion for the London 2012 Summer Olympics. This can be attributed to the country already having a lot of facilities at the get go.
What Are The Economic Benefits Of Hosting The Olympics?
Calculating the economic benefits of the Olympics is tough and most likely inaccurate as no calculation can consider all costs and benefits in totality.
However, there are very obvious positives that the host country will see within a few year of the development.
1) Transportation – With Olympians traveling to and fro the competing stadiums and Athletes Village, roads and basic transportation are required to be constructed appropriately.
2) Law and Order – This is with regards to the “face value” of the host country. With an impending influx of tourists, the host country would not want people from all over the world to come to their country and return saying that the country has looted them off all their belongings and valuables. More stringent law and order will be implemented in phases to ensure a “cleaner” and safer city.
3) Employment – Construction of infrastructures requires a lot of planning and tends to be labour-intensive. At least for those few years, the government would be creating a lot of jobs for the country to build up what they have promised to the Olympics Committee.
4) Tourism – During the few weeks that the Olympics is held, tourism is expected to soar with people from different countries coming to support their athletes. Hotel bookings, restaurants, and entertainment locations should be filled out during this period.
5) Government revenue – With more spending happening during the Olympics period, the government would also earn more directly through taxes such as the GST (VAT for some countries). Indirectly, as the hotels and other tourism businesses earn more revenue, the government can tax them more.
Read Also: Why Do We Spend More Money Whenever We Are Overseas?
Are The Benefits Worth US$40-50 billion?
This is where the debate starts and ends, largely because no one can come to a conclusion that satisfies everyone.
Instead of looking at the tangible costs and benefits, of recent years – since the Beijing Olympics – international events have been seen as a platform for global marketing.
Using a Singaporean slang, the Chinese in 2008 have “spoilt market”. The opening and closing ceremony easily involved thousands of people. It was truly an act to display that “This Is China, We Are Not To Be Trifled With”. It was simply dazzling and showed the long Chinese history (excluding some uncomfortable ones). Furthermore, with the construction of Beijing’s National Stadium (more commonly known as the Bird’s Nest) and other infrastructures, China is placed on the world map more prominently and with importance.
To borrow from MasterCard –
Beijing 2008 Summer Olympics, US$44 billion.
Sochi 2014 Winter Olympics, US51 billion.
For pride and glory, Priceless.
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