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The Economics of Hosting the Olympic Games

By James McBride
- via Foreign Affairs    Jul 20, 2016

Introduction

The Olympics have evolved dramatically since the first modern games were held in 1896. In the second half of the twentieth century, both the costs of hosting as well as the revenue produced by the spectacle grew rapidly, sparking controversy over the burdens being shouldered by host countries. A growing number of economists argue that both the short- and long-term benefits of hosting the games are at best exaggerated and at worst nonexistent, leaving many host countries with large debts and maintenance liabilities. Instead, many argue, the bidding and selection process should be reformed to incentivize realistic budget planning, increase transparency, and promote sustainable investments that serve the public interest.     

As Rio de Janeiro struggles with rising crime, funding shortfalls, underequipped police forces and hospitals, and worries over the Zika virus, its 2016 Games have highlighted the ongoing debate over the costs and benefits of hosting such a mega-event.

When did the costs of hosting the games become a concern?

For much of the twentiety century, the staging of the Olympic Games represented a manageable burden for the host cities. The events were held in developed countries, either in Europe or the United States, and in the era before television broadcasting, hosts didn't expect to make a profit. Instead, the games were publically funded, with these advanced countries better positioned to bear the costs due to their larger economies and more advanced infrastructure.

The 1970s marked a turning point, wr...

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