It may seem simple, the organisers borrow large sums to invest into new stadiums and infrastructure in order to host the Olympics with the hope that when the big two-week event comes around ticket sales and tourist spending is great enough to cause economic benefit. Its cost-benefit analysis. However, its not quite as easy as that.
Political instability and inequality
Rio 2016 has been stained by Brazilian protests with the majority of ‘the people’ not seeing any benefit from the mass investment in Rio. These people living in the favelas claim to have seen no improvement in their living standards despite the $15bn being spent on the Olympic games. However the Brazilian government claim they have spent much less public money on the games, with private investors providing most of the funds, seeking large returns on their investments following the games. This will simply increase the already high inequality in Rio.
Additionally, increased spending in host nations due to tourism is unevenly distributed towards business owners rather than workers, again increasing the inequality within the nation. However, with this stronger economy, trickle down economics seems to come into its own, with many poor areas where Olympic events are held, such as the Deodoro area now having access to clean water, basic sanitation and public transport which before the games seemed a long way away. Although these basic needs are not yet universal for example the Guanabara Bay remains an area of mass sewage and household waste. These areas would need to be cleaned up for the overall benefits of the Olympic games to be a reality. Corruption, a bigger problem in Rio than in London 2012, with poor economic conditions and unstable politics there is little possibility development in these crucial areas.
London 2012 saw a boost to the UK economy of £9.9bn, while the figure is met with scepticism, there is no doubt that overall there was economic benefit from the 2012 games. There was high levels of inward investment into the UK, not just London, additional spending from Olympic-related promotions and overseas contracts for architects to design venues in other host nations, as a result of the success of the London games. This greater prosperity helped to create more jobs in the economy and left behind a great legacy for Great Britain.
The announcement of Beijing hosting the 2008 Olympics put China on the map as a real international player in the world economy. To prepare for the games China invested around $40bn in infrastructure from 2001-06 transforming the landscape of Beijing. As well as the sporting venues there was new transport infrastructure including a city rail line, new airport, new roads, all benefiting Beijing as an international city. Most notable were the environmental improvements with regulations on air pollution drastically changing the air quality for the games, improving the health of those living in Beijing. Estimates showed the games added 2.5 percentage points to economic growth from 2002 until the games in 2008. This shows the huge impact an Olympic Games can have.
The overall economic effect is yet to be seen for the Rio Games, but similarly to China it will not come without some protests arguing against the games. Nevertheless, the long term legacy the games can have in bringing greater infrastructural investment is potentially astonishing.