The cost of hosting Olympics and other mega sports events is substantial. These costs have made economist to be quite skeptical of the economic benefit of hosting such events. For example, in 1996 Atlanta spent over $5.1 billion to host the Olympic game. The host government is made to forego planned investment to concentrate on building new stadiums. Besides, the budget deficit swells before hosting the international event. Thus, the willingness of governments to subsidize sporting activities draws criticism and praise from different quarters.
It is widely acknowledged that Olympics promote country’s exports. According to the International Olympic Committee, the sport attracts visitors during and after hosting the games. This encourages sports tourism. According to Andrew &mark (1), countries that host mega games and events like the Olympics and word cup tend to have 30% higher increase in exports than their normal projections. The countries realize economic benefit in the form of large openness.
The increase in the country’s export of goods and services is important in increasing level of investment. Many people who come to the country taste local products develop special preferences for them. Thus, they create a unique market for the countries goods. The investors in the country react to the increased demand by increasing their level of production. The increase in production call for increased volume of factor inputs like labor. Therefore, firms open more job opportunities, and the unemployment level falls (Zimbalist, 1).
The Olympics attract millions of people some of them are investors. They take the chance to enjoy and look for investment opportunities in the host country. Their movement across the country may not be limited, and this gives them unlimited access to various investment opportunities. They also take this chance to network with local investors. It is expected that some potential investors come back to the country and invest at a future date. According to Andrew and Mark (5), it is quite difficult to measure the foreign direct investment resulting from hosting Olympic Games there are several factors affecting foreign direct investment. However, it is agreeable that Olympic Games and major sports events play a critical role in introducing foreign investors in the country. On the other hand, non-investors visiting the country may be attracted to work for local firms. These increase the supply of labor in the country. The benefits of an increase in the supply of skilled labor are high especially in countries with aging population and labor deficit (Zimbalist, 1).
The opponents of hosting the Olympic Games argue that the event does not spur locals to increase their spending. According to Mark & Andrew (4), many local hosts just substitute their spending on other goods and services to spend on sport-related goods and services. Therefore, the economic benefit of increased demand is only attributable to visitors. Thus, after the event demand falls and inventories accumulate.
The main reasons why cities and governments look forward to host the game are purely non-economic. Many people are proud that their city hosting an international event. Thus, political leaders use the events to gain political mileage. This is because the voters who are taxpayers are willing to pay the bills for hosting the event and have a positive perception of leaders who lobby to host the prestigious event. Apart from politics, the Olympic bids have other agendas. For example, Beijing games were made to show off the Chinese prowess in organizing and spending (Zimbalist, 1).
The heavy spending on infrastructure is justified by the long-term returns that accrue beyond hosting the Olympic event. However, these benefits may not be realizable and the revenues realized may never exceed the initial costs incurred. In many cases like in Beijing, a race track that costs the government millions of dollars to construct is currently weed-infested. Besides, the stadiums require periodic upgrading to maintain their appeal and value. The government incurs these costs even when the stadiums are underutilized (Andrew & Mark, 5).
Lastly, the opportunity cost of spending on new stadiums is quite high. In many cases the government has to forego several projects to finance the Olympic Games. This brings discomfort among taxpayers during the spending period. In many cases citizens who supported hosting the event oppose the excessive spending. The opposition resulting from forgone investments brings street demonstrations that negatively affect the forecasted benefits. For example, the overspending during Brazil world cup negatively affected the number of visitors and ticket sales made during the event (Zimbalist, 1).
Hosting Olympic Games has a variety of economic benefits and costs. The benefits are attributable to increased demand for exports and foreign direct investments. Moreover, the more benefit accrues if locals are able to maximize the use of constructed stadiums. On the other hand, hosting the international event has drawn criticism due to the high costs of building stadiums and continues maintaining cost even when the stadiums are underutilized. The main benefit of hosting the even seems to be non-economic especially when the country lacks existing stadiums.
Works cited
Zimbalist, Andrew. "Just Say No." The Economist. The Economist Newspaper, 28 Feb. 2015.
Web. 27 Apr. 2016. <http://www.economist.com/news/books-and-arts/21645114-hosting-olympics-and-world-cup-bad-citys-health-just-say-no>.
Andrew, Rose, and Spiegel Mark. "The Olympic Effect." NBR. N.p., 2009. Web. 27 Apr. 2016.
http://www.nber.org/papers/w14854.pdf
