Aerial view of Christ the Redeemer with Maracana Stadium in the background in preparation for the 2016 Olympic Games in Rio de Janeiro, Brazil, on July 4, 2016.
Matthew Stockman—Getty Images
By Andrew Zimbalist
July 13, 2016
IDEAS
Zimbalist is Robert A. Woods Professor of Economics at Smith College and the author of Circus Maximus: The Economic Gamble Behind Hosting the Olympics and the World Cup

International Olympic Committee President Thomas Bach declared last month that with the renovated port and new hotels Rio would be in better shape for having hosted the Olympics. Sure, and the Oklahoma City Thunder will be better off without Kevin Durant.

Rio is an extreme example of what happens to almost all cities that host the summer Olympics. These days hosting the summer Games runs between $15 billion and $20 billion. With some good fortune, hosting may produce $4.5 billion in revenue—yielding a deficit of $5 billion to $10 billion. Not a favorable financial balance in the short run.

But what about the long run? According to Olympic folklore, hosting the Games puts the city on the map. Once there, a city will experience a boom in tourism, new foreign investment and greater opportunities in international trade—not to mention a myriad of non-quantifiable benefits, such as a healthier population from more exercise, deeper pride, assimilation of efficient management techniques and a modernized sport infrastructure. It all sounds good. The only problem is that the empirical evidence supports none of it.

As Bach’s claim suggests, the host city will have new transportation, communication and hospitality infrastructure. True enough, but why does a city need to spend $20 billion to reap maybe $2 billion of useful infrastructure?

Further, it is not uncommon for the new infrastructure to serve primarily the needs of the Games, not the city’s development. Rio has a new golf course, its third, hardly a high priority in a city deprived of decent schools, health care, sewerage or public transport. This one sits in an environmental reserve, in a city with a water shortage and poor water management. Rio also has a 10-mile subway line (if it is ever finished), that connects Ipanema and Copacabana beaches with the new Olympic Park in Barra Da Tijuca, an upper class suburb. The city will also have Bus Rapid Transit lanes running between Olympic clusters to service IOC executives and athletes. Neither the subway nor the BRT lanes will ease Rio’s impossible traffic or the commute to work for hundreds of thousands of Cariocas, as Rio citizens are called.

In order to make room for this new infrastructure, the city cut a swath through poor neighborhoods, clearing out the favelas (shantytowns) that stood in the way. According to Catalytic Communities, a local organization that works in favelas, there have been 77,200 favela residents evicted since 2009, the year Rio “won” the right to host the 2016 Olympics. Evicted families have mostly been moved to western and northern sections of the city, torn asunder from their communities, left with over an hour’s commute to work, and children seeking new friends and classrooms.

The roughly $20 billion that will be spent on Rio’s Olympics has pushed the city over the edge financially. The state and the city are bankrupt. Teachers are on strike. Public servants are protesting, carrying “Welcome to Hell” signs at the airport to greet incoming tourists. Meanwhile, the economy is in its worst recession in decades, unemployment exceeds 11%, and violence flourishes on the streets.

Brookings Institution Press

Rio’s experience, while more tragic, is not dissimilar to that of other host cities. What else would one expect, given that the enabler is the IOC, an unregulated international monopoly? The IOC squeezes every bit it can out of its market power, inducing cities from around the world to compete against each other every four years by offering more extravagant and lavish venues. Incremental IOC reforms, such as Agenda 2020, have provided a few band-aids, but nothing more.

Christine Lagarde, head of the International Monetary Fund, recently said she would favor having Athens as the permanent host of the summer Olympics. The logic is mostly sound: why not build the required 35 sports venues, the Olympic village and the broadcasting and media center only once, instead of building them anew in a different city every four years? There are three problems with this symbolically soothing suggestion: one, what is Athens going to do with the venues for the three years and 348 days between each Olympic spectacle? Two, aren’t there better uses of thousands of acres of scarce urban real estate? Three, where is Athens to find the $2 billion it will need for security at each Olympics?

There’s a better idea: make Los Angeles the permanent host. It has all the venues, the needed infrastructure and the hotels. There’s no U.S. or L.A. chauvinism in this modest plan. I don’t believe L.A. would benefit, but at least it wouldn’t lose. The losers would be the U.S. taxpayers who would have to foot the $2 billion security bill every four years.

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