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Olympics Honors Assignment 1
Olympics Honors Assignment 1
March 3, 2022
ECON 200
Hosting the Olympics was once regarded as an honor and profitable but as the number of
explicit costs associated with the Olympics have risen, countries must now consider if the
Olympics is worth the investment. Prior to the 1960s the Olympics had significantly fewer
athletes and events which made the games profitable but since, “The number of Summer
Olympics participants almost [doubled] and the number of events [increased] by a third during
the 1960s” (McBride, Para. 4) costs have gone from the low billions to costs north of $50 billion
dollars. Due to these high costs the Olympics often leave hosting countries in crippling debt.
Although debt is never a good thing, countries receive many benefits associated with this debt.
So the only way to truly determine whether or not hosting the Olympics is worth the investment
is to view it with a: government, supplier, demander, society, and a socially benevolent dictator
perspective.
Looking at the costs and benefits from a government perspective, hosting the Olympics
is not worth the investment. Starting off with the bid for the Olympics, “The cost of planning,
hiring consultants, organizing events, and the necessary travel consistently falls between $50
million and $100 million” (McBride, Para. 10). If and when the country gets the successful bid it
must incorporate all sorts of renovations to accommodate over tens of thousands of athletes,
employees, and viewers. The International Olympics Committee (IOC) a non-profit organization
that acts as the owners of the games, “...Requires cities hosting the summer games to have a
minimum of forty thousand available hotel rooms…” (McBride, Para. 13). Hotels alone are very
expensive but other infrastructure costs still must be considered. Renovations in transportation
with things like airports, trains, and roads are a common occurrence when hosting the Olympics.
Sports related ventures such as stadiums can also be added to the bill of infrastructure. Total
infrastructure costs range from as low as $5 billion dollars and as high as $10 billion dollars.
When looking at figure one we see that countries that spent over $2 billion dollars on
infrastructure, with the exception of Seoul, incurred a debt at the end of the Olympics.
Infrastructure is the largest cost in planning for the Olympics but it is a necessary one and if a
country does not already have an infrastructure in place its likely not going to be worth the
capital. In addition to Infrastructure, governments will enact new laws and new policies
regarding the environment. Common projects involve cleaning up streets, rivers, lowering
pollution levels, refurbishing land, etc. These environmental costs are costly and tend to be in the
billions. During the 2008 Olympics Beijing spent over, “...$11.25 billion on environmental
cleanup.” (Wills, Para. 6). In the 2000 Olympics Sydney spent over $3 billion dollars on
environmentally friendly materials, new water systems, and restoration of damaged land
(Olympics, Para. 3). So overall with costs of bidding, infrastructure, and the environment hosting
Figure 1
Suppliers within the hosting country have a mixed response when it comes to the
Olympics. More established and renowned companies are far more willing for their country to
host the Olympics than local companies are. Bigger companies such as Coca-Cola, Nike, Toyota
and Mcdonalds are able to spend more on sponsors, advertisements, and have larger influence in
the media and therefore are able to attract a significant amount of consumers overseas and
locally. Smaller businesses typically don’t have the necessary funds to promote their products on
a stage as big as the Olympics. Smaller companies also have to worry about their supplies with
this new influx of tourists. The increase of tourists will increase traffic, parking access, and delay
overnight deliveries times (Hirst, Para. 16). Both larger and smaller companies will hire more
employees but larger companies have the flexibility to allocate these employees to different
facilities whereas smaller companies are usually cramming these employees into the fewer
buildings they own, resulting in greater losses of marginal production. When the Olympics end
hosting countries are usually left with debt, creating larger taxes. These bigger more established
companies will have generated enough revenue to deal with larger taxes and still provide larger
incomes for those associated with the company, raising many of their employees' standards of
living. Smaller companies that did not see the same substantial growths in revenue have a
tougher time paying for these increases in taxes and as a result deduct income off of their
workers, lowering standards of living. A negative for both smaller and larger suppliers is that the
country's citizens also have to pay larger taxes, resulting in smaller incomes and less consumer
spending. Overall hosting the Olympics is worth it for bigger suppliers that can afford
advertisements and the increase in taxes but for smaller local suppliers it is not worth it because
Viewing the Olympics from a demander perspective the Olympics is more of a burden.
Demanders are typically left paying the country's debt through taxes. Depending on how much
debt the country was left in it could leave taxpayers paying additional taxes for decades. In 1976
the Montreal Olympics left taxpayers paying 1.5 billion dollars in taxes which took nearly thirty
years to pay off. The Sochi Winter Olympics of 2014 will leave Russian taxpayers paying about
$1 billion dollars annually for the foreseeable future (Mcbride, Para. 17). This increase of taxes
is bad news for demanders as there will be increasing prices everywhere in the country due to the
increased demand of these new tourists. Inelastic goods such as gas, and clothing still have to be
paid for at least in the short term so you are losing more money than you were prior to the
Olympics. Even when considering the few benefits demanders receive from the Olympics such
as cheaper transportation costs; the Olympics will lead to reduction in income for many
demanders which leads to a lower standard of living. The reduction in demander income,
increasing taxes, and having to pay larger prices make the Olympics not worth it for demanders.
The Olympics are costly from many viewpoints but thinking of society as a whole the
Olympics might be worth hosting. During the Olympics hosting countries welcome hundreds of
thousands of tourists. In 2016 Rio de Janeiro, “...Announced that the city received 1.17 million
tourists during the Olympic games” (Kalvapalle, Para. 1). These tourists come from all over the
world each having different cultures, languages, and practices. When these tourists arrive in a
hosting country it helps diversify that society allowing society to market off of these new
cultures. New businesses will arise in the food industry, automobile industry, technology
industries, and much more industries! Similar businesses will then enter the market to jump in on
the success creating competitive markets which is good for the economy. Another benefit of
hosting the Olympics is the increase of jobs. Some argue against how effective the Olympics is at
creating jobs since, “Most jobs went to workers who were already employed” (Wills, Para. 7)
and though this may be true we have seen that the Olympics do create just enough jobs to be
effective for those who are unemployed. In 2012 jobs created by the Olympics was a major
success with over 100,000 jobs being created and, “At the same time, the jobless total fell
unexpectedly by 50,000, to a 15-month low of 2.53 million, or 7.9 percent” (Prynn, Par. 3). The
increase of jobs leads to lower unemployment rates which ultimately results in higher GDPs.
Figure 2 shows that every country aside from Brazil and South Korea had an increase of GDP
the year they hosted the Olympics from the year prior. So when considering the new competitive
markets, the reduction in unemployment rates and the common increases in GDP hosting the
countries. Looking at the scope of the Olympics from a wider perspective perhaps as a socially
benevolent dictator the games are worth it for a variety of reasons. Once the expensive costs of
infrastructure, and the environment are implemented the hosting country will be able to reap the
benefits of what was built for the Olympics for the foreseeable future. The country will live in an
environment that is less polluted as policies, laws, and actions were taken preparing for the
Olympics and for tourists. These environmental actions will create effective environmental
systems that are good for the economy. In the 2000 Olympics Sydney, Australia deployed an
urban water recycling system that saves 850 million liters of drinking water each year
(Olympics, Para. 3). Although there will be negative impacts on different ecosystems with the
destruction of animal habitat, hosting countries can relocate these animals into different regions
that have less human activity than their prior environments which might benefit these animals in
the long run. The Olympics may destroy animal habitat, and reduce animal populations but in the
long run both animals and humans can live in a cleaner more sustainable environment.
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