Economic Impact of Hosting Major Sporting Events
The Economics of Hosting Major Sporting Events
The hosting of major sporting events such as the Olympic Games has become the subject of intense competition among nations. Governments seem willing to make large financial commitments in order to win the bidding competition, but evidence suggests that the economic impact of this spending is limited. While this outcome is easily understood in terms of rent-seeking behavior, it is suggested that organizations such as the IOC could better serve their constituents by diverting competition away from lavish provision of facilities towards goals that would raise participation in sports. The members of the IOC Executive Committees do little to discourage extravagant spending. The memberships of these organizations have frequently been accused of outright corruption in the past, but corruption is only one part of the problem. It is perfectly reasonable for the IOC to extract a surplus from the sale of TV and sponsorship rights to fund the global development of sport. However, the unjustified claim that these events produce substantial economic benefits can mislead people into believing that their taxes are being productively spent on social regeneration rather than just funding mass entertainment, and lead some private individuals to invest their own wealth in the expectation that an event will generate returns when it is unlikely to do so.
Short-Term Economic Benefits
Short-term economic benefits may be defined as the total changes that will occur in terms of employment, revenue, and total national output through outside investments. The first economic impact will result from the fact that the host country will be required to produce more goods and services to cater to the additional numbers. The consumers of those goods are most likely going to be the athletes themselves and their officials. There will also be international spectators and national spectators that will need to consume additional industrial products. It is a matter of fact that the event will need to be covered by media personalities both nationally and internationally. These groups will need to consume goods made by the host country. The Olympics themselves have representatives in the host country, and they will need to consume commodities. Lastly, there will be numerous sponsors attending the event, and they will also be required to purchase commodities. The total sum of additional revenue that will come from the sale of commodities produced by the host country’s industries to the above-mentioned groups will make up a huge chunk of the direct economic benefits coming from hosting the Olympics.
Long-Term Economic Benefits
Long-term economic benefits of hosting the Olympics fall into three major categories:
- The creation of infrastructure that reaches worldwide standards.
- The benefit of receiving international attention through media coverage.
- Benefits related to the community: formation of educational and youth programs, job creation, local volunteer programs, and community development programs.
All the details of both the short-term and long-term benefits will be examined in the subsequent portions of the essay.
Image and Attitudinal Shifts
The defenders of the Olympics invariably endeavor to get around these kinds of short-term cost-benefit imbalances by demanding that critics consider the longer-term positives in the shape of image and attitudinal shifts toward the host city and nation. They claim these will lead to increases in tourism, inward investment, and better economic prospects.