When Japan hosted the 2020 Olympics (in 2021, postponed due to the COVID-19 pandemic), many watchers are wondering if the Japanese can eke out an economic profit. Not only did COVID push the games back a full year, but the increased waves of infection into the summer also put a hold on tourism and spectators in Tokyo.
The economic toll from these games is already proving disastrous, with one Japanese CEO proclaiming that the losses will be “enormous.” Indeed, economists have projected that the total losses will end up in the tens of billions of dollars.
While the COVID pandemic certainly was unexpected, the financial planning around the Tokyo Games was already facing criticism prior to 2020, as many argued that the Japanese Olympic committee paid far too high—with a bid budget of $83 million—to win the games. Not to mention the costs of building new event venues and upgrading infrastructure, much of which will never be used due to the spectator-less games.
Japan, however, is not the first financial disaster of an Olympics and probably won’t be the last. Read on to see what other countries faced Olympic-sized losses, and which made out with a profit.
- Countries around the world enter into heated competition to host the Olympic Games.
- Doing so is supposed to bring an economic boom, increased tourism, and national prestige—and for the lucky, the risks prove worth the reward.
- However, these Olympic dreams do not always pan out, and in some cases turn into an economic nightmare.
A Greek Tragedy
The Olympic Games were held in Athens, Greece, in 2004, and some have speculated that the financial hole dug by excessive and irresponsible spending—in excess of $15 billion at the time—helped lead to the enormous Greek financial crises of the 2000s and 2010s. Cost overruns and mounting debts were never paid off, and several sports venues that were constructed for the games were rarely used in the years that followed.
Economists estimate the cost per household at more than €50,000, which has been shouldered by Greek taxpayers ever since.
The Montreal Games of 1976 are almost synonymous with economic decline following an Olympics bust. Budgets spiraled out of control, and debts related to the games ballooned. The main Olympic stadium, with an estimated budget of $250 million at the time, ended up costing $1.4 billion and took until 2006—30 years later—to be fully paid off.
Some have argued that Quebec’s 1980 referendum for independence from Canada was sparked by Montreal’s budgetary woes. Another result of the economic fallout was the birth of Canada’s national lottery, a scheme originally devised to help repay the Olympics losses.
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 in 2000. Heralded as one of the most positive and well-organized Olympics of all time, the Sydney Games were a triumph for outstanding infrastructure and immense sporting achievement. Despite receiving almost unanimous praise from viewers around the globe, though, 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 $6.5 billion AUD by the time the first medals were awarded, $1.5 billion AUD of which were 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.
What Britain Did Right
In the aftermath of the 2012 Olympic Games, host city London and its residents rightfully basked 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 an expensive outlay, the discussion afterward was filled with the positive social ramifications of the event and its empowering influence on U.K. youth.
While this switch was partly due to the goodwill that the games generated, it also reflected the financially sound approach that London authorities took in organizing and hosting the event. Although the stock market often loves the Olympics, individual economies often don’t. Nations have long had a history of bad financial repercussions following their hosting of the Olympics.
Heeding the numerous lessons of previous countries that have suffered long-term financial issues after hosting the Olympics, London chose to invest as part of a sustainable fiscal plan. Most of the sporting venues that it built were dynamic but temporary. In addition to these temporary venues, London authorities have also ensured that the Olympic Stadium itself can be utilized fully as a long-term sporting venue. Although the stadium was a permanent structure, it was designed to be utilized as a versatile sports arena. The venue has already attracted interest from a host of English sports teams.
The Bottom Line
When you look at the experiences of Tokyo, Athens, Sydney, and Montreal as Olympics hosts, there are clear factors that unite them in their hardships. Unforeseen spending, a lack of long-term planning, and an inability to maximize the use of venues have all contributed heavily to each city’s economic decline. But they also taught important financial lessons. The London Olympics actually bucked the trend and established a template for future hosts to follow, although the losses generated by the 2020 Games in Japan may leave others wondering.