The economics of the Games3 min read . Updated: 26 Oct 2009, 08:57 PM IST
The economics of the Games
The economics of the Games
Where there’s a few million dollars of expenditure, there’s usually an economic study pondering how the money was spent. This is particularly true of big-ticket sporting events such as the Olympic or Commonwealth Games. Even as the cost of hosting the Olympics touched a dizzying $40 billion in Beijing last year—more than the entire gross domestic product of Sri Lanka—the literature on the economic effects of such games has grown. Most scholars see only negative economic benefits to hosting these events. From past studies, Mint culls five key conclusions and transplants the benefit of their hindsight into Delhi’s preparations for the Games.
There will be many of these pachyderms roaming Delhi after the Commonwealth Games, says K.T. Ravindran, chairman of the Delhi Urban Arts Commission (DUAC). He cites one Rs800 crore flyover running “from nowhere to nowhere" along Barapullah Nullah. “That route could have just been managed with proper planning, by reprofiling the streets. In the name of the Games, a lot of projects have pushed for quick clearances and sometimes even bypassed clearances."
The 2010 Commonwealth Games were awarded to Delhi on 13 November 2003, after markets had closed in India. The next day, the Bombay Stock Exchange closed 1.68% lower, pulling construction stocks down with it. On the next two trading days, 15 and 17 November, the Sensex rose 46 and 29 points, respectively, but the movement was then attributed to an “encouraging" mid-year economic review that had just been released. If, as Humphreys and Zimbalist write, “stock markets do not forecast large positive economic impacts flowing from the Olympic Games," it is perhaps not surprising that they forecast even smaller impacts from the more scaled-down Commonwealth Games.
Planned well, such events can regenerate derelict urban localities. The cases of East Manchester, which underwent a dramatic transformation for the 2002 Commonwealth Games, or Barcelona for the 1992 Olympics, are often cited as examples of inner-city renewal that got it right.
The problem, Bhan says, is that Delhi has glossed over its “deep, endemic, persistent poverty" and subscribed to an image of a world-class city that isn’t quite right for it. That means gated communities, integrated townships, river promenades, and an expendable urban poor, all fronted with a glass façade. Which is a pity, Bhan notes, because “the Games is a space where you can do, politically and economically, things you cannot do otherwise."
When Lillehammer in Norway hosted the 1994 Winter Olympics, large ski resorts and star hotels were built in preparation; local authorities expected a boom in tourism revenue once the Games ended. The boom never came, as researcher Jon Tiegland found in a 1999 paper titled The Predictions and Realities of the Lillehammer Olympics. Two in five hotels went bankrupt, and the ski resorts, some of which were sold for less than $1, stayed empty.
In India’s case, Srinivas notes, the justification for large tourist infrastructure will depend on additional factors; limited available seats on airlines coming into India, for example, could push prices unnaturally high. “Historical indications of Games hosts (Athens, Sydney, Beijing, etc.) seem to indicate a surge of visitors before the Games, a sort of plateau during the Games…and then a sharp drop thereafter, which corrects itself only in a year’s time frame."
In its 2003 bid document, the Indian Olympic Association (IOA) predicted revenues of Rs840 crore and an operating expenditure of Rs635 crore. This August, however, came the news that the Games would be “revenue-neutral"—that its expenditure would exactly equal its revenue. Now both expense and income estimates have ballooned, to Rs1,620 crore and Rs1,708 crore, respectively. (This holds, of course, only for the operating expenditure; it doesn’t factor in the hefty expenses on infrastructure or security, which go into the government’s books.)
Douglas Turco, an associate professor in Drexel University’s sports management programme, and part of a team studying the Commonwealth Games, believes the 2010 Games could yet turn a profit. “The Commonwealth Games, though smaller than the Olympics, provides an attractive platform for sponsors eager to emerge from the global recession," Turco says. Most of the immediate revenue will accrue to the Commonwealth Games Federation, he acknowledges; “the host economy benefits primarily from visitor spend."