For an Olympics host city the games are akin to a credit card financed trip to Vegas: lots of wagering on someone else’s dime and hoping for the best. The poster child for poorly executed games was Montreal, 1976. Those games were 800% over-budget – residents are STILL paying off the bonds. On average most cities do a poor job (an average of 170% over budget for the past 50 years). However being over-budget doesn’t necessarily mean the effort was for naught. Atlanta was 147% over budget (1) but was actually one of the success stories (spending a “mere” $2 billion compared to the nearly $15 billion spent on the current London Olympics). In fact most of the games since 1984 have been financial successes. What was special about 1984? The games were held in that good ol’ bastion of capitalism, the United States (Los Angeles). After the financial debacle of Montreal, Californians were wise enough to reject tax increases to cover the cost of the games. This forced the US Olympic Committee to turn to the private sector. The 1984 games were almost entirely privately funded and made frugal use of existing venues. They were the first games to be highly marketed and although criticized at the time for the “unseemliness” of such a sacred event being commercialized, the games turned a profit and that commercialization model has been used ever since.
Events like the Olympics are putatively part of the assumed economic development mandate that some believe is a role government should play. Although I dispute the need for government to play such a role (insomuch as they can play a role by simply getting out of the way) I do agree that the Olympics are about one thing: money. I do not say this as a cynic, but as an observer of human interactions. Money is simply the physical embodiment of humans producing things that other humans want. These people want to consume (watch) sporting events and those people want to produce (participate in) sporting events. Thus the act of facilitating both parties coming together has value. There is no more of a reason for governments to be involved in the Olympics than there is for it to run oil production or mining operations. It’s not that in theory government couldn’t do a good job on its own and actually make money, it’s simply that this has never happened, so why do we keep hoping “this time will be different.” Only the privately “outsourced” games have been successful (as happened in Atlanta and Los Angeles). Which begs the question: if the partial privatization has led to success, why not make the games a wholly private affair? The IOC (International Olympic Committee) could simply rent existing venues from private owners. The IOC would invest profits from the games into programs that foster youth and amateur athletics worldwide thus ensuring a steady supply of future Olympians. Private business would build new venues only where it was profitable. If there were no profits then the private investors would lose their money, not the taxpayer. Businesses that would be positively impacted would come together to form a consortium that would fund infrastructure improvements thereby unburdening the taxpayer from such expenses. In short, those that stand to gain economically from Olympic games should be the ones to (voluntarily) foot the bill. Government has started on the right path by privatizing part of the games, now it needs to complete the journey and stop socializing the costs (taxes) in order to benefit the few (private investors).