Over at Mises Canada, I’ve started the coverage of the Sochi Olympics. Countless sporting records will be broken in Sochi over the next two weeks. Surprisingly perhaps, the biggest record was already broken before the games ever begin.
With some estimates running as high as $65 billion, the Sochi Olympics are ten times more expensive than the last Winter Olympics, held in Vancouver. This price tag also beats the previous record for the most expensive Olympics by 50% – Beijing “only” cost a paltry $43billion. (Of course, as our grandparents would lament, that was way back in 2008, when $43 billion actually meant something!)
Of course there is all the commotion about the sensibility of holding an event which includes alpine skiing and bobsledding in a balmy beach resort town. Sochi is on the same geographical latitude as St. Tropez on the Mediterranean, and only very rarely do temperatures drop to freezing. Surely the location has something to do with the cost, but this alone is not the whole story. Remember that Vancouver’s Winter Olympics were the warmest ever, and averaged 3 degrees Celsius (38 Fahrenheit) for the event, and it still managed to keep the final bill to a ten-digit figure.
In Sochi’s case, perhaps there is a good dose of wasteful spending taking place. I’m sure the coming years will see an outpouring of stories of waste and corruption that will make the $30 billion already unaccounted for seem like peanuts.
Unfortunately, none of these revelations will do any good for those who face a very unfortunate reality. While the rest of the world lambasts Sochi for being ill-prepared, and revels in nationalistic pride when their countrymen win gold in such-and-such an event, 143 million Russians are left footing the bill. For many of them, like countless other times over the history of the Olympics, the cost will come not just in terms of higher taxes to pay for grandiose facilities that will go unused two weeks after the Games begins, but from government services not provided to them because of a lack of funding.
Consider that in Russia, as in most countries, the schools, hospitals and infrastructure of the country are all provided by the government. Rather than spending Russians’ hard-earned money on something they might actually get something out of , the government has decided to spend it on a two-week party in an attempt to promote its standing in the world.
The words of Daniil Galkin, an 88-year-old retired Russian architect, portray the problem best. “Our leaders want to bask in the limelight and immortalize themselves by means of funds that would have helped people… That leaves a horrible impression when you see the miserable hospitals, when you see that Russia still has almost no roads.”
The International Olympic Committee will be quick to point out that Sochi will make its money back, and then some. After all, think of all the tourists who will flock to the infamous city that hosted the XXII Olympic Games! (Just like all the tourists still flocking to such recent hosts as Turin, Albertville, or Lillehammer, all because of the cities’ Olympic pedigree, of course.)
Yet some people who should know a little something about paying the bills think otherwise. Credit rating agency Moody’s has reported that “increases in tax revenue from tourism are unlikely to be sufficient to cover the anticipated growth in budget expenditure.” It’s not even that Russia will not make its money off the games, but that it will have to increase spending in the future just to maintain the largesse it has created for your viewing enjoyment over the next two weeks.
While the Sochi Olympics set the record for the most expensive Olympic games before the opening ceremony was even over, there is one more record for which we will have to wait for to see if it can be broke. That record would be for the biggest loss incurred as a result of the Olympics.
Athens’ Olympic Games in 2004 resulted in a $14-15 billion loss (and counting!). The Montreal Olympics in 1976 lost a reported $2 billion, which is almost $8 billion today’s dollars. Montrealers still have to cope with a special tobacco tax, implemented as a “temporary” measure to pay off its Olympic debt.
Of course, maybe Russia won’t suffer the same fate as the previous hosts did. Then again, as the saying goes, the bigger they are, the harder they fall.
(Originally posted at Mises Canada.)