London 2012: is the host city a winner?

London’s spectacular Olympic Opening Ceremony brings back a  long time bone of contention of mine, which is the cost of hosting mega-events – are the benefits to the host city and country all they are cracked up to be by those who want the event i.e. the media and vested interest groups of civil, building contractor and tourist industry lobbies  – here in Cape Town we have the legacy of Soccer World Cup 2010 in both  stadium building cost overuns – up from estimated R3,4 to R4,4 billion and unsustainable operating costs that at present are funded by municipal budgets (‘Surprising’ cost of running Cape Town stadium) “In a briefing to Parliament earlier this year, director of the city’s 2010 operations Lesley De Reuck said the current operational and maintenance costs, including management of the adjacent Green Point Park, were about R46,5-million a year.” These costs are at present not equaled by rentals for events, nor are they likely to be in the near future – this now nearly two years later.

It is extremely difficult to find actual figures as far as tourism and other benefits from the aftermath of the event are concerned – vested interest in the central city continue to maintain benefits were substantial  but for a more balanced, but still pessimistic view  I quote the concluding paragraph from a study by  Justin Sylvester and Daniel Harju  for IDASA “Whats Left after the World Cup”

“Yes, the large expenditure on infrastructure and stadiums significantly boosted the economy and had an impact on job creation, but it was a negligible one. The point is that despite the developmental and pro-poor rhetoric associated with the event, the economic benefits were disproportionately enjoyed by those who have access. The World Cup did not change the face of an economy skewed in favour of the economic and political elite.

While the economic benefits of the World Cup and its distribution are quantifiable, the positive impact on the cohesiveness of South African society is not. It may also be inappropriate to weigh up this feel-good factor and the improved integration across racial and class cleavages against the cost of the World Cup. Placing a cost effective price on such a legacy is inappropriate given the deep divides and strain that exist in South Africa’s social fabric. But while this is surely a welcome legacy, the World Cup illustrated the disconnection between those who govern and those who are governed.

The football World Cup is a monumental logistical challenge that placed enormous levels of pressure on all three tiers of government, as well as on labour and business. That the tournament has been hailed a success speaks to the strong levels of accountability that were demanded from all of these sectors by external actors such as FIFA and the international community. But ordinary South Africans were excluded from much of the economic and infrastructural benefits associated with the tournament. And more importantly, the ordinary public’s inability to influence much of the processes related to the hosting of the tournament betrays the poor levels of accountability and transparency that exist within our democracy. Therein lies a strong lesson for other developing countries who wish to bid to host mega events such as the World Cup”

These findings are mirrored in an interview with Melbourne economist John Madden who comments on studies done for the Sydney 2000 Olympics benefits and costs,  reposted from from smartplanet   by 

Scale model of the new Olympic Park in London.

Sydney 2000 vs. London 2012

‘Madden suggests that London is unlikely to experience an overall economic benefit from the 2012 Games. He points to the London Games having a much higher cost than Sydney. But he does concede that London might fare better than Sydney in providing wider economic benefits that might offset its higher costs. He outlines several reasons for this.

“In Sydney, the construction of purpose-built Games facilities involving expenditure of $1.9 billion (in year 2000 prices) accounted for the bulk of the cost of the Games to economic welfare,” he explains.

Though Sydney’s Olympic Stadium continues to be used, it still struggles to cover the operating costs and recoup the original construction costs. However, Madden speculates that the story might be different for a densely populated city like London.

“There are a number of factors that may cause the London Olympics effect on economic welfare to be considerably less than its accounting costs. These include the London Olympics having a large urban renewal component, and the likelihood that in a city of its size there is a greater chance of facilities and infrastructure built for the Olympics having a profitable post-Olympics use.”

Venues such as London’s new Olympic Stadium will continue to be used after the Games by the burgeoning population, and possibly sold to a local football club as a way to recover operational costs.

A benefit that some commentators contend is a tourism legacy arising from showcasing the host city. According to the IOC and official government figures, tourist visits to city of Sydney were up by 11% in 2000, with an additional 1.1 million people visiting Australia between 2000 and 2004.

However, Madden’s research suggests something entirely different. He finds no evidence for an Olympics-induced tourism legacy for Sydney in the years following 2000. He argues that for cities with a high international profile (such as London), it is unlikely that the Olympics will give a further boost to tourism growth.

A final factor distinguishing the London Games from those of Sydney is the state of the overall economy. When Sydney hosted the Games, it was in a period of essentially high employment. Whereas, the 2012 London Games are occurring during a recessionary period.

“Unlike Sydney, it turns out that a good deal of Olympics expenditure is occurring during a recessionary period. The stimulatory effect of this expenditure may considerably lower the cost of hosting the Games.”

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