China Olympics: Cost Versus Reward

With China’s Olympic Games coming next month I thought it would be fitting to look at the cost they have paid, and compare that to the potential rewards which come from hosting this prestigious event. There has been a debate for sometime about whether or not hosting the Olympic Games is good or bad for the city’s economy, and this year’s games are no different. Beijing will spend an estimated $42 billion on the Olympic Games, according to the Wall Street Journal, a number that far surpasses any other city’s previous commitment, but will they receive value from this investment?

Sure, $42 billion is a ridiculous number to think about, and on the surface one could say that there was no way the Olympics could generate that much money for a city. However, we must also consider what that $42 billion went towards. A good majority of these funds went towards infrastructure improvements, as well as environmental cleanup. In the rapidly growing economy of China, infrastructure is in high demand, and many of these improvements were badly needed. The bigger question is whether they got a little too extravagant with the improvements, and whether those additional funds could have been put to better use elsewhere. Not all of the improvements have been of the extravagant type, however; in some cases, residential areas now feature streets lined with port-a-potties.

In addition, the almost $10.5 billion spent on environmental cleanup--while not providing immediate economic benefits, per se--is hard to argue with. I’ve heard horror stories about the pollution in Beijing, as I’m sure most people have. In fact, the pollution is so bad that many Olympic athletes will be staying in South Korea or Japan and flying in solely for their events. So the fact that the government is finally trying to clean it up is probably a good thing. Now, if they can just keep the pollution under control once the Games are over, that would be the next step.

On the other hand, some of that $42 billion has seemingly been spent on extravagances and items which will be of little lasting value. For example, there really aren’t any plans for the bird's nest stadium after the Games, and it doesn’t offer protection from Beijing’s harsh winters and hot, rainy summers, according to the Wall Street Journal. If we want to see how the Olympic Games can adversely affect a city’s economy, we need to look no further than Athens. The $15 billion Athens spent readying itself for the last Olympic Games--ranging from building a light rail system to kenneling all the city's stray dogs for the duration of the event--sent the city into debt, and they have yet to recover. In addition, according to Tourism-Review, the Olympic Games don’t always result in increased tourism. They point out that during the Barcelona and Sydney games, for example, while they did see Olympic Games-specific tourism, the regular tourists stayed home. They ended up in the same place, tourism-wise, as they would have been without the games.

Increased tourism to China is unlikely, as the country is making it more difficult to obtain visas to visit the country. Many people who have already purchased tickets to the Olympics will not be able to attend because the country won't allow them in. Further, the city will be shutting down shops and restaurants that are near Olympic venues because they don't want crowds to form. The city is so paranoid about crowds that, on the 11th day of each month, the city's residents practice lining up (this is done on the 11th because the number 11 looks like two people standing in line).

When all is said and done, I think on the books, at least, this spending spree in Beijing will appear to be a loser. I also think that China knows this, but is willing to put up with a loss on paper in order to cement their image across the globe. They want to be seen as a modern world power, and what better stage on which to make this statement than the Olympics? They are being smart with a lot of the budget, putting it towards things such as infrastructure, however at the same time, they are building this infrastructure in a manner that is probably not the best long-term. One example of this is that they build brick buildings quickly and cheaply, then encase them in glass so that they look modern. They are being a tad more extravagant then they really need to be, and the infrastructure they are building is likely being maximized for Olympic venues. China is a growing world power; they know it, and they want the world to know it. The Olympic Games will likely prove this point, and for that, China is willing to waste a few billion dollars.