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Is Hosting the Olympics a Good Investment for the Host Population’s Welfare?

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The purported benefits of hosting mega-events such as the Olympics have been increasingly criticized by economists and journalists, and questions are being raised. Are the host nations for the Olympics or similar events making a good investment? Could the money be better leveraged to help the poor via other means? What makes hosting mega-events beneficial or not?

The costs of hosting the Olympics used to be small, in the millions of dollars. In the past few decades, this has not been the case. Billions of dollars are poured into infrastructure projects and other related costs in order to create the environment for hosting the Olympic Games.

The huge investment and sunk costs put into hosting the Olympics are not always returning the same value. The stadiums built for the events are often left unused and in a state of decay within only a few years of the events. With little demand for such a large amount of new sports infrastructure, the huge construction costs rarely pay for themselves in the long run.

On the other hand, there is such a thing as the “Olympic Effect”—trade openness and overall transactions tend to increase for the host country following the Olympics. Prestige and attention is also granted to the host country, as the Olympics are a chance to showcase the host’s best qualities and cultural attractions. This is important—but is it worth the cost? Many would say it probably is not.

The Sochi Winter Games cost Russia $50 billion, the highest costs of all time for an Olympics Game. The national economy benefited negligibly from the Games but the regional effect may have indeed had some positive impact. Because of the expected increase in tourism and guests in the region, infrastructure of all kinds had to be upgraded to be able to accommodate the flash flood of spectators and athletes. This could mean a long-lasting positive impact on certain regions of the country, even if the new infrastructure is underused afterwards.

The more recent Olympic Games have been held in emerging economies such as Russia and China, with Brazil upcoming. This trend away from more developed nations such as the United States and European countries is important to recognize. Government spending is particularly important for these developing nations. Investing wisely is the name of the game for economic development, and the Olympics net return on investment is questionable at best. This is not a good sign for these countries. For example, Brazil built massive stadiums in small cities for the World Cup that had no use for them past the mega-events for which they would be used. The government even cleared out favelas (slums) in order to build new infrastructure and gentrify city outskirts. It begs the question, is it possible that Brazil should be using the billions of dollars to help those in the favelas and others like them, rather than build massive stadiums? These are the questions that emerging economies must consider carefully when they make the investment that most economists consider an economic net loss.

Norway recently withdrew its bid for the 2022 Winter Games due to concerns that the cost would be too large and a lack of public support. The lack of evidence that the Olympics produce the economic benefits advertised is a message that must be heeded. The hidden costs of hosting mega-events such as the Olympics and the World Cup are especially prominent to a developing economy like Brazil. First, they might end up losing money and, secondly, that money could have been leveraged to a much greater degree. Just imagine if instead of hosting the Sochi Games, Russia had the same enthusiasm for spending $50 billion—but on social and job-training programs designed to reduce poverty within their own borders. These are the hidden costs of hosting mega-events.

– Martin Yim

Sources: NBER, The Economist, International Business Times, Reuters
Photo: NPR

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The Struggle of Circassians in Sochi

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With the Winter Olympics now over, many are lamenting the failure of civil society and LGBT advocacy to impact the games, due in large part to the IOC’s unwavering apolitical stance. Yet what is more shocking is how little of Sochi coverage went to the Circassians, a North Caucasian ethnic group indigenous to the region.

In the 19th century, Circassians were the subject of a bizarre European and American fixation which arose in part from anthropologist Johan Friedrich Blumenbach’s claim that they were the origin of the white race. The image of the “Circassian Beauty” was extolled by authors from Pushkin to Dumas—all while the Arab-African slave trade imported Circassian women into Ottoman harems through the 18th and 19th centuries. Then in the early 1800’s, the Russian conquest into the Caucasus led to what many are calling the ethnic cleansing and genocide of Circassians.

During the years before the Winter Olympics, the Circassian Cultural Institute, among other organizations, united Circassians worldwide to raise awareness about the tragic history of the region and get recognition from the Russian government that the Russo-Circassian War was in fact a genocide—an allegation that Russian leaders, from Tsar Nicholas II to Vladimir Putin, have downplayed and denied. Roughly 700,000 Circassians live in Russia, with significant numbers in Turkey, Jordan, Syria and New Jersey in the U.S., where the Institute is based.

Delegations in Israel and Turkey have lobbied and protested both the IOC and the Russian embassies in their respective countries, with little response from either. Moreover, Circassian advocates and local community leaders were detained in the months prior to the Olympics. Many have also accused Putin of downplaying the ethnic heterogeneity in the region, and misleadingly portraying Sochi as an ethnically Russian region. While the struggle has been reported on by several reputable news outlets, discussions on Circassians in Sochi have failed to launch from the blogosphere into mainstream media.

Martin W. Lewis at Stanford University attributes the lack of reporting to confusion, uncertainty and overwhelming lack of awareness by Western audiences of the history and demographics of the Caucasus region.  Lewis suspects that the story, in the minds of reporters, may be too complicated for observers to bear, and furthermore distracts audiences from the “tunnel vision” of the Caucasian narrative—which has predominantly focused on Chechnya, not Circassia.

The disproportionate focus on LGBT rights and allegations of corruption in funding—not to mention the anecdotal and overdone coverage on Sochi hotel rooms and bathrooms—may have very well swayed attention away from the plight of Circassians in Sochi. And now that the Olympics are over, Ukraine and Crimea take center stage in Eastern European affairs. Looking back, Sochi seems like a lost opportunity for garnering the global awareness that only the Olympics can bring, especially for a region that has, until now, kept out of the spotlight.

– Dmitriy Synkov

Sources: Buzzfeed, The New Yorker, GeoCurrents, The Asahi Shimbun, Mirror of Race
Photo: The Nation

Neo-Nazis in Russia

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As the Sochi Winter Olympics approach there is growing concern over the Neo-Nazi movement in Russia. Over half of the world’s Neo-Nazi members are in Russia.  This movement is behind the abuse of gays and violation of gay rights.  The group also opposes foreigners, Jews, Muslims, Roma, and Asians.

The group has recently become a paramilitary organization, although they claim to be a sports club.  The Neo-Nazis are training members in weapons as well as hand-to-hand combat.  Many of the weapons used are outlawed, and therefore bought from the black market.  They are strictly anti-drug or alcohol, focusing on fitness and bodybuilding to train for their “revolution.”

There are an estimated 50,000-70,000 Neo-Nazis in Russia according to an ABC News report.  The group seemed to organize around widespread unemployment and poverty in the early 1990s.  Many of the members are young adults who were hit hardest by the economic downturn.  The group operates under the official name of the Russian National Unity, a party founded by Alexander Barkashov in 1990.  The party symbol is the swastika and some members receive military training in Moscow.

In 2007 a student associated with the Neo-Nazis was arrested for posting a video of two migrant workers being beheaded in front of a swastika flag.  Recently the group has been targeting gay youth, finding them on dating sites or social media.  Neo-Nazis may create fake profiles and ask to meet up with someone who identifies as homosexual only to then physically and emotionally abuse them.  Many of these attacks have been posted online.  The group recognizes homosexuality as ‘pedophilia” and see their acts of violence as justified under this definition.  Groups have organized using the slogan “Occupy Pedofilya” as a rally cry against homosexuality.

– Stephanie Lamm

Sources: The Verge, Pink News