The Olympics: Worst development investment a country can make

An elderly man stands outside the Central do Brasil soup kitchen next to clothing displayed for sale in Rio de Janeiro, Brazil. Many Rio de Janeiro's busy soup kitchens have been closed because the cash-strapped state has failed to pay suppliers that serve the cheap meals to the poor. AP Photo/Silvia Izquierdo

On the list of ill-conceived development projects, some say the Olympics and the World Cup are somewhere near the worst.

When Brazil first began competing to host this year’s summer Olympics, many advocates claimed this would benefit the poor by improving basic infrastructure and local economies. Brazil has spent more than $12 billion to put on the 2016 edition of the summer Olympics in Rio and, fortunately, many of the most dire predictions based on Rio’s struggles against crime, disrepair and pollution – to name a few – have so far failed to come true.

The 2016 Rio Games are now entertaining the world and mostly being celebrated in the media for their daily sports achievements.

But a number of experts say the Games will still leave the country worse off. Stadiums and new transport lines displaced some 77,000 Brazilians, as construction crews leveled favelas to make way for the Games.

Victor Matheson

Victor Matheson

Economist Victor Matheson contends that spending money on sports stadiums is about as close to a guaranteed bad investment by governments as one can get. Matheson has made a specialty of studying the economic and social impact of paying for and building stadiums. His research shows that the many projections touting development opportunities for neighborhoods where stadiums are placed are bunk.

“The basic idea is that sports stadiums typically aren’t a good tool for economic development,” Matheson said to The Atlantic in 2012. “Take whatever number the sports promoter says, take it and move the decimal one place to the left. Divide it by ten, and that’s a pretty good estimate of the actual economic impact.”

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It’s no big secret that sports stadiums often are a money loser for cities. The few successful instances are venues used frequently throughout the year like Madison Square Garden in New York City and the Staples Center in Los Angeles.

If building stadiums are usually a waste of money, Matheson says, then building stadiums for a one-off event like the Olympics is about as useful as setting money on fire.

“From a development standpoint, the only thing worse than an expensive, publicly financed stadium is an empty, expensive, publicly financed stadium,” wrote Matheson about the billions spent by Brazil to host the World Cup two years ago.

For cities that do not already have the infrastructure in place to house athletes, provide for hundreds of thousands of fans and operate major events, hosting the Olympics is an easy way to lose money.

Athens, for example, went 60 percent over budget and lost billions of dollars in order to host the historic 2004 summer Games. Montreal took decades to pay off the $1.5 billion debt it accrued. More recently, China dropped $40 billion, and Russia spent $50 billion to play host. The price tends to go up every year and an analysis of every Olympics since 2006 shows that spending typically exceeds the budgeted amount. All is done in order to host the world’s largest sporting competition.

“The Games overrun (projected budgets) with 100 percent consistency. No other type of megaproject is this consistent regarding cost overrun. Other project types are typically on budget from time to time, but not the Olympics,” say Brent Flyvberg and Allison Steward, in their research paper.

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The financial losses caused by the Games only make matters worse for a country like Brazil.

The city of Rio was forced to cut its health budget by 30 percent since the start of 2015. It is facing a financial crunch at the same time the country is in turmoil over the impeachment of  President Dilma Rousseff just a few months ago. The last thing the city and national governments need, many critics say, is a massive event televised across the world that is likely to leave everyone in Brazil worse off. Money that could be spent fighting the spread of Zika and dengue will have gone to construct stadiums.

The Mangueira slum is backdropped by fireworks exploding above the Maracana stadium during the opening ceremony of the Rio's 2016 Summer Olympics in Rio de Janeiro in Rio de Janeiro, Brazil, Friday, Aug. 5, 2016. (AP Photo/Leo Correa)

The Mangueira slum is backdropped by fireworks exploding above the Maracana stadium during the opening ceremony of the Rio’s 2016 Summer Olympics in Rio de Janeiro in Rio de Janeiro, Brazil, Friday, Aug. 5, 2016. (AP Photo/Leo Correa)

It will be a great event for the spectators, athletes, International Olympic Committee, sponsors and the networks broadcasting the events. Compelling stories are already being told about the journey that athletes took to get to Rio, including the heroic story of a Syrian refugee competing as a swimmer.

The memories will be different for the tens of thousands of poor Brazilians who lost their homes in the name of sports.  After the Rio Games, when all the celebratory hyperbole and triumph-over-adversity stories focused on human athletic performance end, this event likely will be remembered by locals as just another massive waste of money for a country that perhaps could have spent it better solving its political, social and economic crises.

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Tom Murphy

Tom Murphy is a New Hampshire-based reporter for Humanosphere. Before joining Humanosphere, Tom founded and edited the aid blog A View From the Cave. His work has appeared in Foreign Policy, the Huffington Post, the Guardian, GlobalPost and Christian Science Monitor. He tweets at @viewfromthecave. Contact him at tmurphy[at]humanosphere.org.