#NOBOSTON2024. THAT’S HOW IT STARTED.
Boston, Massachusetts, seemed like a slam dunk to host the 2024 Summer Olympics. Symbolically, having the games in the city that had been victimized by the Boston Marathon bombing would prove the Olympics could still act as a symbol of unity and peace in the face of international turmoil. The United States hasn’t hosted the summer games since 1996, a long stretch of time to keep them out of such a large, lucrative market. And Boston already had many of the facilities deemed necessary for pulling off such a huge, complex event, as well as a storied sports history and fanatical fans. There could scarcely be a better story for the US Olympic Committee to tell the International Olympic Committee, the body that would ultimately decide where the next games would reside.
But the city’s residents had other ideas.
Led by a committed group of activists, Bostonians themselves scuttled the city’s bid, claiming that the supposed benefits playing Olympic host would bring were not worth the money Boston would have to spend. An effective campaign, with the ubiquitous social media hashtag #NoBoston2024, bled support among those who live in Boston and would have had to deal with the game’s effects. What had been a momentary majority in favor of hosting soon turned into a permanent minority; the city’s leaders who had supported the bid were left flailing, trying to justify the necessary infrastructure investments, security, and other extraneous costs sure to crop up when the games came to town. Mayor Marty Walsh was forced to acknowledge that the concerns Bostonians had about the bid needed to be addressed before it could go forward, even as he was deriding those raising questions as “about ten people on Twitter and a couple people out there who are constantly beating the drumbeat.”1
But it was clearly much more than that. “We always felt opposition was going to have to come from the grassroots level, from citizens,” said Chris Dempsey, one of the cofounders of No Boston 2024, the organization whose name also topped the movement itself. And despite boosters outspending opponents $1,500 to $1, come it did.2
Finally, an embarrassed US Olympic Committee backpedaled and pushed a last-second bid from Los Angeles instead, citing a lack of support among Boston residents as their prime reason for the switch.
“Boston is a world-class city. We are a city with an important past and a bright future. We got that way by thinking big, but also thinking smart,” said No Boston 2024 in a statement once the final curtain had come down on Boston’s bid. “We need to move forward as a city, and Monday’s decision [to revoke Boston’s bid] allows us to do that on our own terms, not the terms of the USOC or the IOC. We’re better off for having passed on Boston 2024.”3
Here’s the thing: The No Boston folks are absolutely right.
The modern Olympics have morphed into an orgy of waste, spending, and unfulfilled promises. For their investment, which is oftentimes astronomical, cities get few tangible benefits. They’re sold the illusion of economic prosperity and urban rebirth and instead receive a large bill and a bunch of infrastructure projects that may not be worth the cost or ever used again.
For the World Cup, soccer’s premier event and the only other international sporting competition comparable to the Olympics, it’s the same story, with FIFA, the Fédération Internationale de Football Association, playing the role of the IOC: $3 billion was spent by South Africa to host the tournament in 2010, which grew to $15 billion in Brazil in 2014. The stadiums that these countries built stand as testaments not to their countries coming out on the world stage, but the folly of agreeing to host the World Cup in a place not yet having the necessary infrastructure.
Much of this cost is foisted onto the taxpaying public; while the International Olympic Committee and local governments like to make noise that they are paying for the games with private funds, costs inevitably spill onto the government’s ledger; at the minimum, taxpayers wind up on the hook for infrastructure and security.4 Those infrastructure projects run the gamut, from building the facilities needed to host, such as the Olympic stadium, pool, ski jump, or any of the other myriad things necessary to actually house the events, to transportation projects that even a major city requires to deal with a short-term influx of athletes, journalists, officials, and spectators. That’s where costs inevitably explode. And per the Faustian bargain cities make with the IOC, they themselves are held responsible for any budget overruns. Toss in that corporations operating in and around the games receive a host of tax breaks—and are often exempt from taxation entirely—and taxpayers lose twice: They pay to host, then don’t even receive the tax revenue that would have been raised from the event because the IOC insists on letting its corporate sponsors operate in a tax-free bubble.
When it comes to international sporting events, concerns over cost are not new. Pierre de Coubertin, the founder of the modern Olympic games, said back in 1911, “It would be very unfortunate if the often exaggerated expenses incurred for the most recent Olympiads were to deter countries from putting themselves forward to host the Olympic Games in the future.”5 Little did he know, presumably, how prescient those comments would be. Coubertin himself set a precedent by lowballing the costs of the first modern Olympics—the 1896 games in Athens, Greece—estimating that the entire spectacle would cost three times less than what was necessary to refurbish the Olympic stadium alone. The Greek prime minister, Charilaos Trikoupis, was also ahead of his time, balking at the public cost of hosting and forcing the organizers to scramble for private funds. If only his example had been followed more closely in the decades ahead.6
First, though, it should be noted that talking about the cost of an individual Olympics can be dangerous territory. Oftentimes budgets aren’t published, costs are disputed, and it’s difficult to untangle sports-related costs from other expenditures meant to improve transit, parks, or other public goods—and boosters would often prefer the latter not be counted toward the total. For many of the earliest editions of the games, budgets don’t exist at all.7 The task is further complicated by budget opacity in such places as Russia and China, as well as by currency fluctuations and inflation. I’ve gone with the best estimates for each location that I can find, but bear in mind that guesswork is going on even then, and that costs are not necessarily comparable on an apples-to-apples basis. I’d argue that most estimates of public spending on games in the United States lowball the public expense, failing to factor in at least some of the ways taxpayers supported the effort. And that’s how everyone involved wants it.
There’s little doubt, though, that the pinnacle for Olympic spending has been reached in recent years. The Beijing 2008 summer games, at some $40 billion, shattered the on-paper record; but China wasn’t on top of that dubious list for long, thanks to Russia, which reportedly spent more than $50 billion on the 2014 Sochi Winter Olympics as it turned a favorite location of President Vladimir Putin’s that had little business hosting into an artificially bustling metropolis. These two are outliers—and we’ll revisit why later in this chapter—but it’s definitely the case that the costs of hosting have climbed dramatically in the last thirty years. Calgary spent less than $1 billion to host the 1988 winter games; the Moscow summer games eight years earlier, in US dollars, barely peaked above $1 billion. Prior to the 1980s, it was rare, though not unprecedented, to see costs climb into the billions for a host city.
Yet now, billion is a mainstay of the Olympic budget, even with the concurrent opacity: Sochi and Beijing aside, London spent nearly $15 billion in 2012, Vancouver eclipsed $6 billion in 2010, Athens blew through $9 billion in 2004, and Rio de Janeiro, Brazil, spent some $12 billion in 2016.
In the United States, the 1996 Atlanta summer games cost about $2.2 billion officially, though some analysts say that ignores another $2 billion in public costs, including $226 million in state funds and $857 million in local funds.8 Other estimates put the combined state and local expenditures at as high as $1.58 billion.9 The US Government Accountability Office (GAO)—the government’s official bookkeeper and fiscal oversight body, which was then known as the General Accounting Office—in 2000 pegged the cost to just the federal government, not the state or local bodies, of the Atlanta games at $609 million in 1999 dollars. Of that, about $185 million was direct financial support for the staging of the games, including $96 million for security-related services, while the other $424 million was for infrastructure projects that may or may not have happened anyway. Some $56 million was spent directly on Olympic venues, including $22 million to build the Ocoee Whitewater slalom venue. Even federal money that would have been spent in Georgia anyway received priority funding and an accelerated schedule due to the games.10
For Salt Lake City in 2002, the GAO pegged the cost to the federal government before the games were even finished at about $1.3 billion, $342 million of which was spent on direct staging of the event. A healthy chunk of that was on security at these first post-9/11 games to take place in the States.11 The state of Utah spent an estimated $150 million, while local governments spent $75 million.12
The US federal government picked up half the tab for the 1980 Winter Olympics in Lake Placid, New York—the games that provided us with the “Miracle on Ice,” when the US ice hockey team defeated the heavily favored Soviet Union on its way to a gold medal—costing at the time an almost-reasonable-sounding $363 million. The state of New York kicked in another $63 million for venue construction.13 And even unsuccessful bids have a cost: Chicago spent some $70 million on its effort to win the 2016 games, which left some egg on President Barack Obama’s face when Rio de Janeiro emerged the winner instead.14
What did these cities and nations buy with this money? As with many mega-events—which is what economists call large, regularly scheduled events that cities, states, or nations undertake—the story told to the public is that they are purchasing economic development, increased tourism, and an infomercial on the world stage that will affect the host for years to come. The Olympics and the World Cup are hyped as a can’t-miss opportunity that will have positive ripple effects throughout an economy.
Before the games, as cities are duking it out in the long, protracted bidding process, boosters toss around huge numbers as to the benefits the host city will accrue, one-upping each other every cycle in a sadly predictable spectacle. Boston was supposedly going to see a $5 billion economic boost from the games.15 One estimate has Japan seeing a $250 billion benefit from the 2020 games in Tokyo.16 The projected impact of the South Africa World Cup in 2010—at $6 billion—was more than 4 percent of the country’s entire GDP. As the games get bigger and more extravagant, so do the promises regarding the upside to the hosts. The numbers are so large that they make passing on a hosting bid seem ludicrous, the equivalent of shooting oneself in the foot with a biathlon rifle.
But economist Jeffrey Owen said there’s a problem here: Efforts to assess the impact of the Olympics after the event has happened “have consistently found no evidence of positive economic impacts from mega-sporting events even remotely approaching the estimates in economic impact studies.” “The simple elegance of economic impact studies, injections of money circulating over and over in an economy to create a multiplier effect, has an alluring ‘something-for-nothing’ quality that is hard to refute,” he said.17 However, refuting them can be done.
The biggest issue when talking about the effect of the Olympics, World Cup, or any other large event, sporting or otherwise, is with what economists call the substitution effect. This stems from the theory that says consumers will replace buying apples that have gotten too expensive with pears, or some other similar product, which has effects for producers in traditional economic modeling.
When it comes to mega-events, accounting for the substitution effect means trying to figure out whether money spent on an event—in the form of tickets purchased, hotel rooms filled, restaurant tabs fought over, etc.—is new spending that wouldn’t have occurred otherwise or spending that simply got shifted from something else to the mega-event, benefiting the latter while hurting the former.
As economist Victor Matheson put it, “The substitution effect occurs when consumers spend money at a mega-event rather than on other goods and services in the local economy.”18 For instance, if instead of going to the movies or a fancy dinner, someone decides to go to a sporting event, no new economic activity has been created. Consumer spending has simply gone from benefiting the movie theater or restaurateur to benefiting whoever profits from the sporting event. Not accounting for money that would have been spent in the local economy anyway—i.e., counting every cent spent at the Olympics or World Cup as a net benefit for the community as if it all occurred in a giant vacuum and without said sporting event the streets of a city would resemble something out of a postapocalyptic zombie flick—leads to some of the outlandish economic promises made in pregame analyses.
Problem number two coincides with problem number one. “Crowding out” is the failure to account for the spending or tourism that would have occurred but didn’t due to the mega-event itself. Perhaps call it the hassle effect: People who would have visited a city or country don’t because they would prefer not to deal with the crowds associated with the Olympics or a World Cup. Ever considered going to a particular bar or restaurant but then decided not to because “that place will probably be packed”? That’s the effect we’re talking about, on a grander scale.
In 2002, for instance, hotel occupancy rates and the number of passengers arriving in the airport didn’t increase in Salt Lake City from previous years, despite its hosting of the Winter Olympics, indicating that perhaps as many tourists were scared away from the city as enticed to visit.19 That same year, in South Korea, the number of European visitors coming in for the World Cup was directly offset by a decrease in the usual number of Japanese visitors.20 The crowding-out effect is not limited to the few weeks during which a sporting event takes place. The European Tour Operators Association in a 2006 report found that hotel occupancy rates actually declined in Atlanta and Sydney when the Olympics came to town, compared to years in which they weren’t playing host.
“During the Olympics, a destination effectively closes for normal business,” the report said. “Both tourists and the tour operators that supply them are scared off immediately before and during the events. This ‘absence’ then creates its own effect, as the normal conveyor belt of contented customers begetting new arrivals has been broken.”21 In Atlanta, hotel occupancy rates fell from 72 percent in 1995 to 68 percent in 1996, the year it played host.22 During the 2006 World Cup in Germany, the year-over-year utilization of available hotel accommodations fell from the year before by more than 10 percent in both Berlin and Munich.23 Far from a mega-event-induced influx, these places wound up with tourism deficits.
This, again, is an issue that dates backs to the first modern games in Athens: The New York Times reported at the time that many Athens tourists “abstained from going … intentionally delaying their visit to Athens till after the termination of the games.”24
Retailers often report a similar phenomenon. A spike in sales may occur during the games themselves, but an absence of tourists is seen before and after, because visitors who usually come to a place avoid the pregames hoopla and the postevent cleanup, saving their trip there for another year. Anecdotal evidence from London in 2012 backs up this idea: Retailers saw a boost around the time of the games, but it was more than offset by declines during the weeks surrounding the festivities, as the city’s usual stream of shoppers declined to come out of a fear of a rather large hassle. “Go and interview a restaurateur in central London near Piccadilly or go and interview a theatre manager in central London about how their business was in central London in August 2012 [during the Summer Olympics] and they’ll say, ‘It was awful. It was like the Great Depression,’” said economist Andrew Zimbalist.25
Two other factors that complicate the story regarding an economic bonanza caused by big sporting events are worth mentioning. The first is what German economist Wolfgang Maennig has termed the couch-potato effect: people from a local population staying home to watch an event with friends or by themselves, thereby limiting their spending from its usual baseline. Adding a tourist but encouraging two locals to stay home, cook, and watch a World Cup game on television rather than going out to eat or watching their local soccer club’s game from a nearby pub incurs both a benefit and a cost to the local economy, but most analyses don’t attempt to grapple with the latter, treating the new tourist’s money as a benefit with no cost.
That’s not to imply it’s necessarily a bad thing for the local population to have something worth staying home to watch. “The couch potato effect can be interpreted in a more optimistic, positive way. What better fun can you have as, let’s say, a soccer fan, a football fan, than to invite friends who bring a six-pack and some potatoes and watching the game together,” Maennig said. “It’s much more fun than going out and having dinner, for example.… Indeed, the World Cup is positive, but it does not imply additional spending.”26
The other factor is what’s known as time switching, in which consumers merely alter their pattern of consumption to a different moment, instead of changing it entirely, but still adding no net benefit to the economy. This principle affects all sorts of questions regarding economic consumption patterns—usually having to deal with tax breaks and whether they induce new purchases or merely cause people to buy things they would have bought anyway, but at a different time, in order to take advantage of the break—and mega-events are no exception. Is that Olympic visitor to Paris really a new visitor who would have not come at all in the absence of the Olympics, or merely someone who would have come to the city anyway, but shifted her visit forward a month to see the event? If it’s the latter, was their benefit to the local economy a result of the Olympics or not? Most boosters fail to acknowledge this effect, treating every visitor to a mega-event as if he or she would never have come if not for the event itself.
Finally, those leakages that plagued the movie and hotel chapters need to be taken into account. When talking about the effects of hosting the Olympics and the World Cup, this is of paramount concern, since many of the corporations responsible for organizing the events aren’t locally based. For instance, does a Coca-Cola sold at the stadium hosting a World Cup game benefit the local economy or Coke’s corporate bottom line in Atlanta, where it’s based? Wouldn’t it have been more beneficial for the economy for that Coke purchaser to buy a drink in a local pub instead?
So that’s the theory behind why the numbers tossed around about mega-events should be taken with large grains of salt. And study after study backs up the theoretical. Researchers have futilely searched for some sort of ex post facto macroeconomic impact on a city or nation from either the World Cup or the Olympics, all in vain. As Jeffrey Owen wrote, “To date there has not been a study of an Olympics or other large-scale sporting event that has found empirical evidence of significant economic impacts.”27 He added that, when it comes to finding such an impact, “it is unlikely anyone ever will.”
In 2012, researcher Samantha Edds took a look at three relatively recent Olympic games that were considered huge successes—those in Atlanta, Sydney, and Barcelona—and found that, compared to similar cities within each host city’s country, the hosts themselves saw little to no impact in three sectors that would be considered ripe for mega-event benefits: construction, tourism, and financial services. In fact, the control cities—she used Charlotte, Melbourne, and Madrid, respectively—often saw greater GDP growth during the Olympics than did their hosting counterparts.28 “It seems constituents, developers, hotels, and those who stand to make a profit (according to economic impact studies) should not take study numbers at face value that promise vast amounts of extra profit garnered by hosting the Games,” she wrote. During the 1994 World Cup, cities in the United States that hosted games actually saw a net reduction in incomes, instead of the promised boost. Having World Cup games in town was the ultimate economic own goal, to use the soccer phrase.
This jibes with a host of other research finding that the Olympics and World Cup provide little to no benefits across a host of indicators: employment, incomes, GDP, you name it. At best, the games provide a sugar high for a few weeks. Victor Matheson and economist Robert Baade found that, in both the Los Angeles and Atlanta examples, a high percentage of the jobs created—and new jobs is one of the many benefits that boosters love to say will come to the host city—were simply temporary and transitory: They came and went, leaving no real economic development behind. Long term, the two economists believe it’s possible that the games created job loss once the opportunity costs of spending on the games is factored in—i.e., what else the money dedicated to the Olympics could have been spent on.29
“The bottom line is, every time we’ve looked—dozens of scholars, dozens of times—we find no real change in economic activity,” said economist Philip Porter.30
While the benefits of playing host are mostly a mirage, the costs are very, very real. According to research by Bent Flyvbjerg, Allison Stewart, and Alexander Budzier at the Saïd Business School at the University of Oxford, Olympics hosts overrun their budgets by an average of 156 percent.31 Going over budget is pretty much a given. “The Games overrun with 100 percent consistency,” the first two authors wrote in an earlier working paper. “No other type of mega-project is this consistent regarding cost overrun. Other project types are typically on budget from time to time, but not the Olympics.”32
The poster child for the risks of playing host is Montreal, site of the 1976 Summer Olympics, which bested subsequent hosts Moscow and Los Angeles in the bidding to win Canada’s first Olympics. Prior to hosting, Montreal Mayor Jean Drapeau said, “The Montreal Olympics can no more have a deficit than a man can have a baby.” That turned out to be, well, not right.
According to Flyvbjerg and Stewart, Montreal overran its budget by 796 percent. What was supposed to be a cost in the hundreds of millions of dollars ballooned to $1.6 billion, then a record.33 At the center of the boondoggle was the Olympic stadium, nicknamed the Big O due to its shape. Cost overruns and labor strife prompted the government of Quebec province to ultimately swoop in to help the overwhelmed city get it constructed.
The Big O wasn’t even completed at the time of the 1976 opening ceremonies; when it was finally finished, the stadium was the second most expensive sporting venue in the world. But even worse were the long-term costs. The city didn’t fully pay off the bonds for the Big O, which were covered via a special tax on tobacco, until 2006, three decades after the games had come and gone, prompting residents to give it the moniker the Big Owe instead.34 Montreal’s fiscal escapades left only Los Angeles to bid on the 1984 Olympics, which is considered perhaps the most economically successful and sensible games ever, for reasons I’ll revisit later.
Montreal’s cost debacle matters for two reasons. First, it highlights something that all host cities have experienced: the initial estimate for the cost of the games is too low, and often by a lot. In the United States, the percentage overruns for Lake Placid, Atlanta, and Salt Lake City were 321 percent, 147 percent, and 29 percent, respectively—and that’s just for directly sports-related costs, not any ancillary stuff.35 Those overruns can have budgetary impacts for cities for a long, long time. Second, every dollar that Montreal spent over three decades servicing the debt incurred from 1976 was one less dollar it could have spent on all the other things a city does. Money raised from taxing tobacco, which Montreal resorted to, could have, for instance, been put into smoking-cessation programs or health care. Instead, it went to pay for a stadium.
In Montreal’s defense, at least that stadium was still used for a while. It was the home of Major League Baseball’s Montreal Expos until they up and quit the city to move to Washington, DC, and become the Nationals in 2005, as noted earlier, picking on DC taxpayers for some $700 million. Other Olympic venues were reimagined as tourist attractions, including the velodrome, which was converted into what is now the Montreal Biodome. Other hosts, though, aren’t so lucky in their ability to repurpose slightly used Olympic venues.
Take, for instance, Athens, host of the 2004 summer games. The Athens games cost some $11 billion, a figure that doesn’t even include upgrades to the city’s airport and metro system.36 (Lawmakers constantly highlight improvements in transportation infrastructure as a benefit of hosting the games, as if spending money on transit is impossible in the absence of spending even more on unrelated sporting facilities, which is obviously not the case. Just invest in transportation for the sake of making your own residents’ commutes better!) Today, the sporting facilities in Athens sit empty and rotting as the country remains mired in the depths of a fiscal crisis to which, some analysts say, unfettered spending on the Olympics contributed.
Instead of using the money spent on the Athens games on more productive uses, it went toward white elephants—projects that were expensive and, while momentarily useful, have been rendered a burden by the passage of time. The term white elephant derives, supposedly, from stories that kings of Siam would give courtiers they disliked gifts of literal white elephants, so as to bury them with the expenses necessary for keeping the animal alive.
American cities are not immune to such things, either: Atlanta’s $20 million tennis venue at Stone Mountain, used in 1996, has been abandoned and looted; efforts in recent years to rehabilitate it have gone nowhere.37 In 2018, Pyeongchang, South Korea, which hosted that year’s winter games, came up with a rather novel solution to this particular problem: use its $109 million Olympic stadium four times and then simply tear it down.38
It’s fairly obvious why the white elephant problem plagues the Olympics: The sort of sports involved don’t garner much attention in non-Olympic years. How often does a city need a world-class velodrome or ski jump? Hardly ever. Even cities in which much of the infrastructure to host the games already exists—a popular notion when it comes to bids from places such as Washington, DC, or New York City—still need to build facilities for more obscure sports that will have to be transformed into something else later or, like those in Athens, be left to rot.
Perhaps less obvious, though, is the trouble with the World Cup. After all, soccer is the most popular sport in the world. But the stain of its premier tournament has affected several countries, and two in particular: South Africa and Brazil.
For starters, just as with the Olympics, there’s little evidence that the World Cup provides any lasting economic benefits to the host nation. (Remember, the World Cup takes place at sites throughout a country, unlike the Olympics, which all takes place in one city.) South Africa recouped only a fraction of its costs to host the 2010 World Cup, the first on the African continent.39 And that’s not an outlier. The 2006 tournament in Germany provided no boost to the country’s economy, according to Wolfgang Maennig, the German economist.40 Economists Matheson and Baade found that American cities hosting the 1994 World Cup actually “experienced cumulative losses of $5.5 to $9.3 billion as opposed to ex ante estimates of a $4 billion gain touted by event boosters.” They added, “Potential hosts should consider with care whether the award of the World Cup is an honour or a burden.”41
At least, though, in cases such as the United States and Germany, there is demand for the sort of stadiums required to host the event. In the United States, NFL stadiums work just fine. (The 1994 World Cup is still the most attended tournament in World Cup history.) European countries have no shortage of world-class soccer stadiums due to the huge demand for their domestic-league games—a place such as Germany or England can, in theory, host a World Cup on the cheap, without constructing new stadiums. That’s one of the justifications for the successful joint 2026 US-Mexico-Canada bid, jokingly referred to as the NAFTA World Cup: All of the necessary stadiums are already in place, circumventing some of the white elephant concerns.
The same can’t be said, though, of a place such as South Africa, where the stadiums used to such fanfare during the tournament now stand empty. South Africa built five new stadiums for the event, at a cost of nearly $2 billion. One of them, Cape Town Stadium, which cost $600 million, is losing an estimated $6 million to $10 million per year while hosting Ajax Cape Town, a team that draws about four thousand spectators per game into the fifty-five-thousand-seat facility. The same story repeats itself across the country, with local teams coming nowhere close to filling the soccer palaces they play in.42
Ditto Brazil. As a 2015 report by NPR’s Lourdes Garcia-Navarro made clear, many of the stadiums built for the 2014 World Cup, even in a generally soccer-crazy country, are proving to be pretty much useless. One, which cost $550 million, has become a bus parking lot. Another “is trying to make money by hosting weddings and kids’ parties—with little luck.”43 A stadium in Manaus, out in the rain forest of Brazil’s vast and jungle-heavy Amazonas State, is being sold to a private company after being built with public money.44
Manaus nicely highlights the absurdity of using the World Cup as an economic development tool. Brazilian officials argued that the tournament and the stadium, in a place that many travel advisers explicitly warn against attempting to reach via road due to its remote location in the rain forest, would bring a long-term influx in tourism that would outlive the World Cup. But there was no reason to think that would be the case.
“There will be [another] World Cup four years from now, and everyone who is a World Cup tourist will have forgotten about Manaus and Brazil, and they’ll be traveling off to Russia” for the 2018 edition of the tournament, explained Dennis Coates, an economics professor at the University of Maryland–Baltimore County, when I spoke to him ahead of Brazil’s tournament. Plus, he said, Manaus is dealing with stiff competition from other sites within Brazil: “São Paulo, Rio—those areas are always going to be bigger tourist destinations, and there’s not a lot Manaus can do, and there’s not very much that a stadium can do, to change that effect.”45
Meanwhile, domestic priorities almost always get the short end of the stick when governments are instead plowing money into international events. “People are going hungry and the government builds stadiums,” Eleuntina Scuilgaro, an eighty-three-year-old Brazilian, told The New York Times, a sentiment shared by plenty of her fellow countrymen and -women who took to the streets to protest their country’s hosting of not just the World Cup, which it spent $14 billion on, but the 2016 Summer Olympics.46 Like Greece, Brazil plunged into economic crisis—this time post–World Cup but still pre-Olympics—bringing even more of a spotlight to bear on the out-of-control spending to play host. Brazil’s Olympic effort was plagued by problems, from overbudget projects to uncompleted infrastructure to locations for water events that were, to put it bluntly, polluted beyond repair. Throw in the Zika virus, which was running rampant in the country in the months leading up to the games, and pretty much everything Brazil did looked like a mistake.
The USA didn’t face costs like that from hosting the World Cup in 1994, but it still, as briefly mentioned before, didn’t bring the economic benefits one might hope for. The $4 billion in promised benefits turned into billions of dollars in losses, after US cities spent some $370 million in infrastructure upgrades to host. American cities essentially paid good money to lower their own incomes.
Why, exactly, do costs spiral so far out of control? Much of the blame can be laid at the feet of the International Olympic Committee or FIFA, both of which rake in big dollars from their events. Broadcasting revenue makes up the bulk of the funds, but corporate sponsorships are also a significant source of largesse (all of which is distinct from public funding for the games). According to tax filings, the IOC brought in some $5 billion between 2009 and 2012 and expected to bring in close to that for the 2013 to 2016 cycle.47 It then doles out that money to national Olympic committees, setting up a cycle of perks and back-scratching that extends into all the most powerful Olympic nations. And the IOC is notoriously opaque about its spending priorities and budgeting. “One thing that in many ways doomed Boston’s bid from the start was their lack of transparency, and that’s something endemic to the Olympic process,” said Jonathan Cohn, one of the cofounders of No Boston 2024. “That’s something that never went well in Boston to begin with.”48 And just about every critique leveled at the IOC applies to FIFA, a notorious hotbed of corruption. Former FIFA head Sepp Blatter wouldn’t even travel to France for the Euro 2016 tournament because he feared an extradition attempt by US authorities, who had cracked down on allegedly corrupt soccer officials.
The myth of the Olympics boosting economic development combines with the IOC’s insistence on providing a bigger and better spectacle to broadcasters and corporate sponsors each time the games comes around to create a toxic stew that ends up costing the hosts huge amounts of money. “It has to be gilded, it has to be over the top, and that drives a lot of strange behavior,” Allison Stewart of the Saïd Business School told me.49
And it’s actually the most fiscally prudent Olympics that prove how it happens.
Whenever skeptics claim that the Olympics are inevitably a financial boondoggle, “Los Angeles 1984” is the rejoinder. Those games, by most accounts, easily made a $250 million profit and were well managed from start to finish.50 The issues that plagued subsequent games simply weren’t an issue in LA. But the way the city did it puts the lie to the rest of the Olympic money myth.
In the wake of the 1976 disaster—which, remember, Montreal spent the next thirty years paying off—few cities bid to host the 1984 games. And this was already a time of hosting crisis for the IOC. Denver, Colorado, in late 1972, pulled out of hosting the 1976 winter games after voters failed to approve public funding, pushing those contests to Innsbruck, Austria, instead. “They overestimated the benefits and underestimated the costs. Colorado was generally persuaded that they didn’t have an adequate grasp on the figures, and Colorado was very much liable to have to fund dramatic cost overruns,” said Dick Lamm, a state representative at the time of the Denver bid who later served as the state’s governor.51 When the games were put to a public referendum at both the city and state levels in Denver and Colorado, voters rejected them by 1.5 to 1. So the IOC was already on edge about costs, and Montreal’s debacle confirmed everything that Colorado residents had feared. Finding a taker for the 1984 summer games, then, was a monumental task; no one wanted to step into the breach and convince their voters that being the sequel to Montreal’s mess was worth it.
In the end, only New York City and LA agreed to host in 1984; Tehran, the sole other interested city, dropped out before the final vote. Once the US Olympic Committee decided on Southern California over the Big Apple, that was it. But being the sole bidder has its perks.
Intent on not becoming another Montreal, Los Angeles did everything on the cheap. It already had most of the necessary facilities—including the Los Angeles Coliseum, used to host the 1932 games, which was again pressed into service—and much of the public infrastructure on which hosts rely was also in place. By leveraging its position as the sole bidder, the city tossed aside the IOC rule requiring the host city to cover any cost overruns in organizing the games. Peter Ueberroth, who was essentially named CEO of the LA effort, himself said, “I don’t want my tax dollars wasted in Los Angeles in the same way as was done in Montreal.”52 (Ueberroth was named Time magazine’s Person of the Year for his accomplishments organizing the LA games.)
Waiving the rule requiring the host city to bear all cost overruns was perhaps the most important part of the tale. As noted earlier, the Olympics run over budget with just about 100 percent certainty, and the IOC demands that the host city—i.e., taxpayers—cover all of the extra cost. Being host sets a ticking fiscal time bomb that inevitably explodes. And city officials who buy into the myth of Olympic development agree to it. This IOC demand was a key facet in turning the population of Boston against hosting the 2024 games. “Ultimately, that was our most effective argument,” said Chris Dempsey, the No Boston 2024 cofounder. “It’s hard to fundamentally trust [officials advocating for the games] when they’re still pushing that blank check.”53
But because Los Angeles was empowered as the sole bidder for the games, it got this rule waived and put on a fiscally prudent event. The IOC’s monopoly power ran into another monopoly.
LA 1984, though, is the exception, not the rule. Its unique position as the sole city willing and able to put on the games gave it leverage to make demands that other cities vying to host are usually unwilling to make, as doing so would doom their bids from the start. And requiring host cities to cover the full cost of budget overruns is merely the beginning of the IOC’s list of demands.
The organization also requires hosts to provide a slew of tax breaks and exemptions to not only the organizing committee itself, but to all of its corporate sponsors as well. A similar tax-free bubble is required around World Cup host sites.54 These exemptions give companies such as those providing the food a windfall at taxpayers’ expense, simply because the IOC is in a position to require it. Brazil gave up some $530 million in tax revenue during its 2014 World Cup, for instance.55 During the London Olympics, McDonald’s and Coca-Cola even won some public relations goodwill by refusing the tax breaks that the IOC had demanded on their behalf.56 But make no mistake: Those corporations with the foresight to sign on as sponsors of the Olympics receive a nice gift of tax-free sales in return. The games essentially become an international tax-free zone for those companies the IOC has brought into the fold.
The upshot of the IOC’s insistence on big garish spectacles, new facilities, loads of tax breaks for its corporate sponsors, and foisting of cost overruns onto the hosting government causes a significant problem: Increasingly, only authoritarian countries are in the running to host. They’re appealing because they don’t have the sort of democratic accountability evident in Boston. “There’s clearly a sense there that the IOC [is] attracted to the ability to spend money without any kind of oversight,” said Robert Orttung, a professor of international affairs at George Washington University and coauthor of the book Putin’s Olympics: The Sochi Games and the Evolution of Twenty-First Century Russia. “The organization itself is geared in favor of these authoritarian ways.”
It’s no coincidence that the two most expensive Olympics in history—Beijing and Sochi—occurred in countries where the leadership didn’t have to answer to the people for its spending or the blatant corruption underlying it. This notion has a foundation in Olympic history, too. Avery Brundage, who was president of the IOC from the 1950s to the early 1970s, openly admired dictators for their ability to circumvent democracy. As late as the 1950s, he was writing about the successes of Nazi Germany in the 1930s. He also played a key role in ensuring that the United States did not boycott the 1936 Olympics in Berlin, where African-American Jesse Owens famously won four gold medals under the nose of the Third Reich.57
The Olympics shares this penchant for avoiding the pitfalls of democracy with the World Cup. The petrostate Qatar, which bribed its way into hosting the 2022 tournament, is expected to spend $200 billion on its tournament.58 That’s not a typo—it would by far be a record amount of spending on an international sporting event, in a country of just 2 million people, nearly 90 percent of whom are temporary foreign workers. Initial plans for the tournament included ridiculous proposals to build air-conditioned stadiums—Qatar is just about entirely hot desert, after all—and when they fell through, FIFA forced the soccer world to rearrange its schedule to play the tournament in the winter, rather than its usual summer slot.
The bidding for the 2022 Winter Olympics nicely highlights what we’re discussing here. Initially, several cities that would have been strong, traditional hosts for the winter games suggested they would bid. But then, one by one, just like Boston, they stepped away.
First, it was a joint bid from Davos and St. Moritz, Switzerland, which fell to public referendum, with nearly 53 percent of voters saying no thanks to hosting.59 Then voters in Munich, Germany, did the same. “The vote is not a signal against the sport, but against the nontransparency and the greed for profit of the IOC,” said Ludwig Hartmann, a local German lawmaker, at the time.60
Next came Stockholm, Sweden, where officials iced the bid because of cost concerns. “Although the calculations are well worked out, we estimate that revenues will likely be lower and costs higher than the investigation indicates,” said Stockholm city council chairman and finance commissioner Sten Nordin. The city’s ruling Moderate Party added in a statement, “Arranging a Winter Olympics would mean a big investment in new sports facilities, for example for the bobsleigh and luge.… There isn’t any need for that kind of facility after an Olympics.”61 Kraków, Poland, followed next, where nearly 70 percent of voters in a referendum rejected the games.62
Finally, Oslo, Norway, bid adieu to a bid—even though a majority actually supported it in a referendum—citing the crazy demands of the IOC. One prominent newspaper columnist said the IOC’s members expected “that they should be treated like the king of Saudi Arabia.”63 That left just two cities in the running: Beijing (again) and Almaty, Kazakhstan. Both are in countries where democratic accountability isn’t a problem. Beijing won, which will make it the first city to host both the summer and winter games.
There’s a double danger here. If the IOC and FIFA come to depend on dictatorships as the most dependable source of potential hosts, political pressure on the rest of the world to keep their athletes away from the games could increase. Even in 2014, some prominent liberal commentators called for a boycott of the Sochi Olympics due to Russia’s draconian antigay laws.
In 1936, the United States also seriously considered boycotting the Berlin games. Jeremiah Mahoney, head of the Amateur Athletic Union, which at the time regulated amateur sports in America, said participating in Berlin would be akin to “giving American moral and financial support to the Nazi regime, which is opposed to all that Americans hold dearest.” The IOC even considered moving the games from Berlin altogether.64
In the end, of course, the Berlin games went on, after the head of the US Olympic Committee personally vouched for the Germans.
Then there was the 1980 boycott of the summer games in Moscow, meant to protest the Soviet Union’s 1979 invasion of Afghanistan. Anita DeFrantz, an American member of the IOC and a former Olympian, called the boycott “a pointless exercise and a shameful part of US history.”65 Even the State Department admitted as much, saying, “The Carter administration had wanted to express the extent of international displeasure with the invasion of Afghanistan and to pressure the Soviets to pull their armies out of the conflict. In actuality, the Soviet-Afghan War continued and did not end until 1989.”66 The Soviet counterboycott of the 1984 games, too, had little practical impact.
So history shows us that boycotts don’t do much of anything to change the course of Olympic history. But if the games do become solely a dictator’s plaything, the calls for boycotting are again going to come.
Meanwhile, the concerns voiced by residents and lawmakers in Kraków, Munich, and the rest of the cities that passed on the winter games could have come straight out of the Boston tale. In Beantown, as Boston is known, planners proposed to build a temporary stadium, which would then be removed and the surrounding area turned into an upscale neighborhood. As Jonathan Cohn said, the plan was to “build a giant stadium that they would then take down to build a new neighborhood” that would “build up a lot of capacity in upper-income housing, but nothing like schools or libraries or fire departments.” Cohn said, “That definite dynamic of building things that no one asked for, and potentially knocking them down to build new things no one asked for,” helped doom the bid.67 The Boston team is now exporting its know-how, having been in touch with opposition groups in Hamburg, Budapest, and Rome on how to best argue against the spin emanating from Olympic boosters.
Before turning to some good news regarding what hosts can expect from the games—and there is some, I promise—I have one more point to make regarding the lack of tangible benefits they provide. Proponents often claim that hosting is an infomercial for a city, providing a tourism boost that outlasts the games by drawing the world’s attention to a locale. The textbook example cited is Barcelona, Spain. In that instance, it seems plausible that the games did help turn the city into a tourist attraction it might not otherwise have become, since it was starting from a relatively low bar, overshadowed by other cities within its own country such as Madrid. (I visited the still-standing site of the Olympic stadium and flame in Barcelona. It’s a lovely city.)
But even if some tourism dividend exists over the long term—and remember, most quantitative analyses say there isn’t any—it only surfaces if the location was previously not a tourist destination. Otherwise, the substitution effect or time switching comes back into play: Olympic tourists replace existing tourists who avoid a city because of its popularity, or people who were planning to come to a city anyway move their trip around to accommodate seeing the games. Does anyone believe that places such as London, Paris, Los Angeles, or New York needed publicity to detail their tourist attractions?
As a resident of Washington, DC, I find this nonsense to be close to home. Twice in recent years, the city has contemplated a bid for the Olympics, and showing off the city for the world was one of the reasons organizers said it should be done. “There is no bigger global spectacle, no better way to hold a coming out party, than the Olympics,” said Ted Leonsis, one of the key boosters of a DC bid and the owner of the city’s Washington Wizards and Washington Capitals sports franchises.68
But the idea that the capital of one of, if not the, most powerful nations on earth—and one that is chock-full of well-known tourist attractions already—needs a “coming out party” is absurd. DC already attracts some 19 million domestic tourists annually, as well as more than 1.5 million international tourists, the latter putting it in the top ten among US cities, ahead of Chicago and Boston.69 Seeing shots of the Washington Monument scroll across their TV screen for two weeks isn’t going to make a significant difference in the city’s fortunes. (Also, the city already has severe infrastructure woes that need to be addressed without diverting funds into Olympic infrastructure.)
There are benefits to hosting, though, even if a city is not in the unique situations that both Los Angeles and Barcelona found themselves; I’m not going to be all doom and gloom. Those benefits just are of the nonmaterial kind and don’t show up on a budget ledger. Economists call it the feel good effect: Hosting a major sporting event (assuming it goes well) makes the residents of a place happy. Several researchers have found that a sense of civic pride pervades a country after it hosts a sporting mega-event. “It’s like a wedding,” Victor Matheson says. “It won’t make you rich, but it may make you happy.”70
This is what Wolfgang Maennig, the German economist, said is perhaps the most important effect the hosts can expect to enjoy. His study of the 2006 World Cup in Germany—an event that can be treated as broadly analogous to a similar one in the United States—found that “these effects are the greatest measurable effects” of the tournament.71 “If the World Cup makes people happy, we should invest in a World Cup,” said Maennig. “But we should stop pretending that hosting a World Cup will make us rich. It’s not true.”72
Indeed, big international sporting events do not make us rich. They do, though, line the pockets of the members of the International Olympic Committee, FIFA, and the corporate sponsors who glom on to an event paid for in large part by the taxpayer. It’s certainly a worse phenomenon for the developing world—where the infrastructure for hosting has to be built from the ground up—or for those living in countries where playing host is a reason to make a bleak human rights situation even bleaker. But even in those countries that can afford them on paper, the games are nearly always a budget-busting boondoggle, a terminally bad use of resources, and the IOC takes little responsibility for the large bag the taxpaying public is often left holding. As Allison Stewart, from the Saïd Business School, pointed out, what governments should be doing is “accommodating the games as an interim step, as opposed to the end in itself” in their urban planning and other development goals, because, given that such mega-events consistently cause huge fiscal problems, “as an end in itself, it doesn’t make any sense.”73
Maybe the activism of recent years will have an effect on the system. No Boston 2024 laid out a good template for how to take the fight to the IOC or FIFA and the local officials who want to use the same old Olympic playbook that doesn’t consider the opportunity costs of hosting the games. As Jonathan Cohn said regarding Boston, “The more people were paying attention, the more likely they were to oppose it.”74 The end of the bidding for the summer 2024 and 2028 games—which resulted in unopposed bids won by Paris and Los Angeles, respectively, after the latter agreed to back out of the bidding for the earlier event and the IOC freaked out over so many cities passing—at least provides the opportunity for cities to prove that they can use their leverage, lower the cost of the Olympics, and still put on a good show. The same could be said for the 2026 World Cup bid by the United States, Canada, and Mexico, which would also require little in the way of new infrastructure. Hopefully they succeed. Because until the system does change—until the IOC feels sufficiently pressured into believing that its current way of doing business is no longer tenable—the Olympics and other big international sporting events will continue to be fool’s gold, and hosting them a fool’s errand.