The mayor of Rio de Janeiro would like the world to know that the economic crisis engulfing Brazil “in no way delays the delivery of Olympic projects and the promises assumed by the city of Rio.”
Other non-Olympic promises are in jeopardy. On the weekend Rio’s state governor declared a state of financial emergency. The city faces “a total collapse in public security, health, education, transport and environmental management” if it does not receive funding from the federal government of Brazil.
What a contrast. On the one hand, Rio’s politicians have absolute confidence they will deliver this year’s summer Olympic games, which begin on August 5. On the other hand, they have almost no confidence they will be able to provide their citizens with the basic functions of government.
Rarely is the moral bankruptcy of the Olympics so starkly put. Bread and circuses both consume scarce resources. What should we think of governments that put circuses first? What should we think of the circus?
Brazil is in the middle of an economic and political crisis. The Brazilian economy has been in recession since the start of 2015. It has shrunk a massive 5.4 per cent since this time last year. Brazil’s inflation rate is around 10 per cent. The only silver lining is that the economy shrunk by slightly less than experts had predicted.
Brazil’s recession is having social consequences. The cash-strapped Rio state government cut the police budget by a third, reversing advances in crime reduction made since the turn of the century, and raising concerns about tourist safety during the Games. Unemployment is at 11 per cent and growing, and 24 per cent of young people are unemployed. This is the worst economic crisis in Brazil since the 1930s.
The political crisis is almost as calamitous as the economic one. President Dilma Rousseff has been stood down while she is impeached by Brazil’s senate. Rousseff is formally accused of manipulating the government budget to hide the size of the deficit. (Simply servicing Brazil’s debt costs 7 per cent of the country’s GDP.) But she’s also tied up in a major corruption scandal concerning a state-owned oil company. The interim president is also tied up in a corruption scandal. Indeed, up to 30 per cent of the country’s politicians might be implicated in a corruption scandal shortly.
It could well be that the Rio Olympics go off without a hitch. News stories about delayed projects and panicked construction are as much a part of the Olympic ritual as the torch relay and parade of nations.
But outside the athlete’s village and ticket-only areas will be a country straining to foot the enormous Olympic bill.
Hosting the games is a terrible economic deal at the best of times. Hosting the games when you’re a developing economy in the middle of a serious recession is its own scandal.
The woeful economics of the Olympics are clear-cut and, outside the corridors of political power, uncontroversial. A paper published in the Journal of Economic Perspectives in May this year summarising a mass of scholarship and analysis found that the Olympics are almost always a “money-losing proposition”.
The influx of tourism rarely compensates for the decline of economic activity displaced by the Games, and rarely translates into long run tourism increases. It is true that hosting an Olympics encourages governments to invest in infrastructure, but the bulk of those funds are spent on uneconomic specialised venues that cities struggle to utilise once the closing ceremony is finished. Only construction and development companies gained from the Sydney Olympics, as my colleague Sinclair Davidson has found.
The economics are even worse for developing countries. To avoid disaster host cities need extremely capable and non-corrupt management, as well as the political stability to facilitate that management. These sorts of institutions are sadly lacking in poorer nations.
Hosting the Olympics is particularly dangerous for countries that lack tight control over government expenditure. For instance, the Athens games in 2004 exacerbated Greek fiscal profligacy – while the Olympics did not cause the Greek economic crisis, the stadiums and infrastructure stand as monuments to the reckless spending that did.
Brazilian governments spend 41 per cent of the country’s GDP, which, as the Wall Street Journal pointed out in April, approaches the sort of spending levels seen only in mature social democracies like Germany and Norway. It is just not a country with the institutions to manage the extreme political and economic pressures of Olympic hosting.
It is galling, then, that the International Olympic Committee has been encouraging bids from developing countries. Even a failed bid can be extremely expensive – the “low cost” bids for the 2024 games cost about $AU80 million each.
This money of course comes not from the politicians who flank their bids and take box seats at opening ceremonies. It comes from the taxpayers of the bidding countries, and from the public services not provided as scarce resources are redirected towards stadiums and ceremonies.
The Olympic movement likes to affect an image of sporting valour and nobility. But it is the epitome of government waste, almost always doing great harm to its host and taking a real human toll. Once the athletes have gone home, let us hope Brazil can recover from this recklessness quickly.