Olympic games: good and bad economics

It is 83 days before Winter Olympic games in Sochi are going to start. It is funny, I am not happy about that. As a Russian citizen I am supposed to be thrilled by the fact that my country is hosting Olympic Games, but I am not and there are few reasons for this.

Economic side of things.

The official story about hosting Olympic games tells us that this is a great honor of being a host country and a fantastic boost to the economy at the same time.

I don’t know about a honor side of the story, but definitely we haven’t seen any significant boosts to economies of many previous hosts of Olympic games. For example, I’ve found some interactive charts on Google Public Data. I put Germany and UK on the same GDP chart, please find a great economic boost taking place before or after Olympic games in London, 2012. There is simply no such thing:

Not that there is any significant economic acceleration prior to Olympic games in times when country builds all these stadiums and swimming pools, not even after hordes of tourists reach the city. Germany hasn’t have Olympics since 1972 and probably happier about it comparing to the UK.

Actually, stop looking for signs of an economic boost for a second and ask yourself a very simple question:

Is this a normal and adequate thing to build all these stadiums, swimming pools, arenas for 7 years before some freak sportsmen show up there and wave their dicks and boobs on cameras for only two weeks?

I think this is highly bizarre thing to do. Imagine billions of dollars allocated and spent on things that have never been needed in the area (otherwise they would already be there) or things that would have never built due to other priorities people have.

Taking the latest example to Olympic extravaganza, Sochi now has winter sports infrastructure like never before in its history. The problem is… people of Sochi are not very good at winer sports, such sports are not popular in Sochi. Probably they would appreciate all this infrastructure built for them, probably they won’t.

There are many different estimates how much money has been spent on this Olympic games, we’re not going to know the full price until the summer of 2014. But the cost is staggering.

Imagine all the railway stations, all this airport development that has been done there. The city is small. It is about 350K people who live there. Do they need handling whopping millions of people coming in? I don’t know, but they probably don’t after the games are over.

So, we took a nice city of Sochi. We wrecked it for a few years by building massive infrastructure there that is seriously inadequate for the city, we nearly killed tourism industry there during all these years, we spent a bloody hell lot of tax payers’ money and finally, we put a huge bill for further maintenance of these sport objects on the Sochi that it could never handle.

So? How all this could boost the economy? I don’t know.

Moral side of things.

Moral side of things is important. Just think about one particular fact. The government of Russia will take about $8B in pension contributions Russian people are going to make in 2014 to improve budget situation of the country.

And at the same time it spends more than $50B on those games since the year 2007.

Clearly if the government tries to fund itself by taking pension money of people we can’t possibly be in a right financial shape to have these games.

Practical side of things.

I believe Olympic games could be a good financial idea if it is done at a place already quite suitable for having them. The city that already has almost all the infrastructure needed, airports and railways in place.

Well, some construction will be required of course, but if it requires enormous preparation for 7 years in a row, probably the better idea is to downscale show programs, have slightly less kinds of sports there etc.

So it becomes a sport and fun event, not a financial catastrophe.

Good economics.

What about cases when Olympics could be beneficial? I think there are plenty of them. For particular companies, not overall.

For instance, you produce winter sports equipment. Of course, Winter Olympics could be a place of your dream to advertise your products.

Or you’re a TV media company. Of course you would like to broadcast the games making money on expensive ads time during competitions.

What I don’t like though, is things that VISA does. VISA would me the only payment system in these Olympic games. Have MasterCard or AmEx card? Hmm. you’re shit out of luck man 🙂 Pull out your VISA or get a bundle of rubbles in cash. Who will be happy about this?

Civil liberties side of things.

There were so many scandals about these Olympics before they even started. Government is going to put unprecedented number of restrictions on people around Sochi.

First, they are going to forbid any cars from other cities from entering Sochi during Olympic games.

Second, Russians who wish to attend games as spectators, will have to register themselves in 3 days after arrival (normally this is required in 90 days).

Many other things they forbid, restrict and disallow we’re going to know soon 🙂 Believe me it is not the end of the list.

The bottom line.

The games as we know them today suck. I’m not going to go and suggest you to think twice if you thought it might be a great thing to spend your money and time on.

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