In the immediate aftermath of the 2012 Olympic Games, host city London and its residents can be forgiven for basking in the glory of what proved to be a momentous and extremely successful event. While all the talk prior to the Games was of the financial costs involved, and whether Britain could survive such spending, the attention has now switched to the long-term social impact of the event and the influence that this may have on empowering the nation's youth.
While this switch in focus is partly due to the level of emotion and positivity that the Games have generated, it is also due to the financially sound approach that the London authorities took in organizing and hosting the event. Although the stock market loves the Olympics, host nations have had a history of bad financial repercussions due to allowing the event to take place at home. Heeding the numerous lessons of previous countries that have suffered long-term financial issues after hosting the Games, London chose to invest in dynamic and temporary sporting venues as part of a sustainable fiscal plan.
How Poor Planning Cost Greece Billions
In addition to these temporary venues, the London authorities have also ensured that the Olympic Stadium itself can be utilized fully as a long-term sporting venue. Although this is a permanent structure, it has been designed so that its seating capacity can be reduced to just 25,000. The venue is already attracting interest from a host of English sports teams. This is in stark contrast to the legacy left by the 2004 Games held in Athens, which cost an estimated $15 billion to host and saw a number of permanent venues built that remain idle to this day.
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Many economists trace the beginning of Greece's current economic issues to the Athens Olympics, which stand as an embodiment of excess and irresponsible spending. To begin with, the total spending was far in excess of the nation's original budget, due in part to additional security costs incurred in the aftermath of September 11. While this is an understandable expense, the building of unnecessary and ill-conceived permanent sporting venues was extremely difficult to comprehend. This lack of foresight and planning left the nation with a shortfall of 50,000 euros per Greek household, which has been shared among the taxpayers ever since.
Success Followed by Failures
The contrast between the success of an Olympic event and its economic impact can be sizable, and this was certainly the case with regards to the Sydney Olympics. Heralded as one of the most positive and well-organized Olympic Games of all time, the Sydney Games were a triumph for outstanding infrastructure and immense sporting achievement. Despite receiving almost unanimous praise from viewers across the globe, a lack of forward thinking and legacy planning has left the citizens of Sydney debating if Olympic economics means boom or doom.
As is often the case with hosting the Olympic Games, the New South Wales government was forced to spend a great deal more than it initially budgeted for the event. The total investment had risen to approximately 6 billion Australian dollars by the time the first medals were awarded, with 1.5 billion Australian dollars being covered by public funds. Then, as a portent of what was to befall Athens four years later, the much vaunted Olympic Park became dormant as the government struggled to implement its plan of redeveloping the site as a residential suburb. This did not materialize until 2005, by that time it had become little more than a sightseeing highlight for tourists.
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A Sign of Things to Come
The legacy of the Sydney and Athens Games may provide crucial lessons for future hosts, but they are not the first cities to experience financial meltdowns in the aftermath of the Olympics. In fact, it is the Montreal Games of 1976 that remain synonymous with economic decline, having left behind a 30-year legacy of debt and financial disaster.
At the time of the event, Montreal was undergoing a dramatic surge in terms of its global profile. In conjunction with the Expo '67 World Fair that was held to celebrate the nation's centenary, the Games helped to transform the city into a world-renowned location. The governing body soon ran into the familiar budgetary issues, as their estimated costs of $360 million fell drastically short of the final $1.6 billion bill.
The Bottom Line
When you look at the experiences of Athens, Sydney and Montreal as Olympic hosts, there are clear factors than unite them in their hardships. Unforeseen spending, a lack of long-term planning and an inability to maximize use of venues have all contributed heavily to each city's economic decline. Perhaps the most worrying factor is that these important financial lessons have not been learned over time. The London Olympics may actually buck this trend and establish a template for future hosts to follow.
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