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Home > Blogs > Economy Watch > London 2012: Has Money Killed The Olympic Spirit?

London 2012: Has Money Killed The Olympic Spirit?

Finance Blogger:  Economy Watch Economy Watch

The Olympics is no longer all about sport, but rather a corporate jamboree for the elite super-rich. The same pattern repeats itself every time as host nations are forced to follow the International Olympic Committee’s rule book.

Ever since French baron Pierre de Coubertin began the modern Olympics in the late 19th century, the International Olympic Committee (IOC) has been run by the world’s economic and social elite.

In 1896, Coubertin gathered together fellow barons, along with princes, counts and lords to run the Games; and not much has changed in the intervening 116 years.

Today, royalty still make up a large share of the 105 IOC members, with Europe’s Princess Nora of Liechtenstein, Prince Frederik of Denmark, Prince Albert II of Monaco, the Grand Duke of Luxembourg and the Prince of Orange all part of the exclusive group.

Away from Europe, a number of IOC delegates too come from royal lineages, including Malaysia’s Prince Tunku Imran, the UAE’s Princess Haya al Hussein, Jordan’s Prince Feisal al Hussein and Prince Nawaf Faisal Fahd Abdulaziz of Saudi Arabia.

But while the other committee members may not be royals, they still expect to be treated like they are, claims Canadian Professor Chris Shaw, the author of Five Ring Circus: Myths and Realities of the Olympics.

According to Professor Shaw, “nearly all of them (IOC committee members) belong to the super-rich, with the odd Olympian and token representative thrown in.”

There are no cabbies, or steelworkers, in the IOC…The Games are put on by the 1 percent for the 1 percent, reflecting growing corporate power and income inequalities. It’s no longer about sport, but about spectacle.

“The opening and closing ceremonies are what everyone wants to see and it costs a fortune to get in. The 1 percent can afford it, but they will get free tickets anyway,” Shaw claims.

And as for the Summer Games in London, from July 27 to August 12, the IOC can continue to expect extended privileges, both politically and financially.

Specially designated “Games Lanes” for instance have been drawn up on public roads at the expense of the British people who are funding the game through tax hikes. These lanes, which criss-cross the whole of London on public roads, allow for 4,000 chauffeur-driven BMWs to shuttle 40,000 Olympic officials, bureaucrats, politicians and sponsors between five-star hotels and cordoned-off VIP lounges at arenas. Wealthy tourists too can use them, but only if they purchase £20,000 package trips.

Additionally, the IOC’s enormous profits from London 2012 will be protected from the U.K.’s taxmen. The committee insists on imposing temporary tax rules on host nations and, when Team GB won the bid, it had to agree to “a temporary exemption from U.K. Corporation Tax and U.K. Income Tax for certain non-resident companies”. The exemption applied to corporate sponsors as well, although McDonald’s waived its right after a massive online petition.

With most its income derived from broadcasting rights and an aggressive sponsorship programme – which grants ‘The Olympic Partners’, including, McDonald’s, Coca-Cola, Dow Chemicals, Visa and Panasonic, the rights to use the IOC’s trade-marked Five Rings and flood markets with merchandise – the Swiss-based IOC is projected to earn revenues of £2.7 billion from the London Olympics, with the U.K. set to lose an estimated £600 million in tax revenues.

“There’s nothing unique about the way the IOC is operating in London,” says Professor Shaw. “What the IOC demands it generally gets…Otherwise, it will take the Games elsewhere,” he noted.

London Calling

According to Professor Shaw, bidding to host the Olympics is “like the Survivor series, [where] the backdrop changes, but otherwise the product stays the same.

During the bidding process, host cities often understate their initial expected costs, as the true sums, if they were known too early, would cause too much controversy.

The all-time champion of cost overruns of course was the 2008 Olympics in Beijing: it was supposed to have a price tag of US$1.6 billion, but cost a staggering US$40 billion, according to economist Brad Humphreys, an expert on sports economics of at the University of Alberta.

Similarly, the cost of the 2004 Olympics in Athens was predicted to be at just US$1.6 billion, but ballooned to 10 times that figure, which some analysts now believe to have contributed to Greece’s debt crisis.

And the London Olympics is following the same inflationary formula. In 2005, the British Government promised that the Olympics would cost just £2.4 billion; but that figure soon doubled, then trebled until it was fixed at £9.3 billion in 2007.

But while that sum remains the official estimate, a recent Public Accounts Committee (PAC) report said that the costs could rise to £11 billion. Other experts, including Jack Lemley, the former chairman of the UK’s Olympic Delivery Authority, place the costs even higher. Lemley believes that the final bill could reach up to £20 billion.

“They always lie by low-balling the figures,” said Professor Shaw. “The 2007 Rand Report on the London Olympics said costs were typically underestimated so as not to scare the public. The report said no one has ever demonstrated quantitatively any financial windfalls from the Olympics.”

“[And] the IOC’s cookie cutter carves out the same patterns at every Olympic Games. There are always massive cost overruns and the PR spin employed to manage the overruns is remarkably similar. The IOC must have a book called Olympics for Dummies with all the stock phrases required of their hosts.”

Professor Shaw first noticed this pattern of flagrant wasteful spending when he was observing the run-up to the 2010 Vancouver Winter Olympics in his home country of Canada.

The IOC back then had complained that it would take too long for athletes to travel between sites and asked the Canadian Government to expand the Sea-to-Sky highway from Vancouver and Whistler at a cost of Can$1 billion. As a result of that project, and several other infrastructure projects, the cost of the Vancouver Games soared from Can$2 billion to Can$6 billion.

“We were spending money like drunken sailors,” said Professor Shaw. “The athletes’ village was a train wreck. The company that bought it was a bit shady and went into receivership so the City took over and shelled out Can$500,000.”

And apart from public infrastructure, another reason why hosting costs have spiralled over the last few games is due to the IOC’s insistence on building new stadia and venues. London for one, had magnificent stadia, such as football’s Wembley, rugby’s Twickenham and cricket’s Lord’s, prior to the games; but these were deemed inadequate and new venues had to be built in accordance with the IOC’s host city agreements. Till today, the £500 million Olympic stadium is still unsold and could turn into another one of the many Olympic white elephants.

”It’s (the need to build venues) a type of blackmail. The IOC technical team visits and makes ‘recommendations’, which are really orders. If you don’t commit to doing them, the chances of your bid winning are slim,” said Shaw.

Post 9/11, the IOC’s paranoia over a potential terrorist incident has also driven up security costs.

At the London Olympics, over 13,500 soldiers will be deployed throughout the city, which is 4,000 more than those already deployed in Afghanistan. An aircraft carrier will also dock on the Thames and surface-to-air missile systems will scan London’s skies. RAF Typhoon Euro-fighters will fly from the RAF Northolt base, while a thousand armed US diplomatic and FBI agents and 55 dog teams will patrol an Olympic zone partitioned off from the wider city by an 11-mile, £80 million, 5,000-volt electric fence.

London has not seen military and security forces on this scale since the Second World War.

“The costs of security always rise massively on initial estimates. In Vancouver (for the 2010 Winter Olympic), it went from Can$175 million to a billion. The IOC are terrified of all eventualities. If they think there’s a danger of a paleolithic dinosaur emerging from the Thames and eating the prime minister, they insist on a contingency plan for that,” said Shaw.

“The other side is that security firms are pushing their agenda in the same way that real estate firms drive the initial Olympic bids. The military, and especially the police, will get Christmas stockings full of new goodies, such as quiet equipment, armoured cars and sound devices,” Shaw added.

Accordingly, the U.K.’s spending on security has followed the familiar pattern of cost underestimates, accompanied by steep price hikes. Locog (the London organising committee) recently decided that it required 23,700 security guards, far more than its original estimate of 10,000. As a result, security costs have roughly doubled from £282 million to £553 million.

The Olympics In London: Boon Or Bane?

In the run-up to the Games, successive British governments had claimed that they would avoid the pitfalls, which befell previous host cities. Politicians were also keen to emphasize the economic and social boost that the city would receiving from hosting the games.

Yet back in 2002, even before its bid to host the games was successful, the U.K. government’s own analysis suggested that the Olympics would not provide the alleged benefits set out in its proposal. The 250-page official Game Plan report said that the Games would cost £15 billion and dismantled all the arguments in favour of playing host. Additionally, the report noted there would be no significant boost to the economy while regeneration would be minimal – tourism would barely rise and a spike in sports participation would not occur.

The report, written by 10 academic experts, concluded that, if the London bid succeeded, the main motivation should be “national celebration” because the “economic rationale is weak”. It concluded:

The quantifiable evidence to support each of the perceived benefits of mega-events is weak...they appear to be more about celebration than economic return.”

Game Plan was buried as an “inconvenient truth”, according to one author, Stefan Szymanski, a professor at Cass Business School. A few months later, Prime Minister Tony Blair – who had signed off the report and written an introduction endorsing its findings - insisted the Games would “pay dividends for all of us”.

The current British Prime Minister David Cameron is sticking to the same script as Blair. Cameron recently made the groundless claim that the Olympics would benefit the UK’s economy to the tune of £13 billion.

In contrast, a recent report on the Olympics by the archly capitalist credit rating agency Moody’s, said:

“Overall, we think the Games are unlikely to provide a substantial macro-economic boost to the UK during 2012. However, a number of individual sectors and creditors [banks] look well-placed to benefit from the short-term fillip that the Games should provide.”

Their report goes on to say that those who will benefit most are the corporate sponsors, rather than the wider economy, or society at large.

As one of the most eloquent defenders of the Games however, Professor Ricky Burdett, the principal design adviser to the London Olympic Delivery Authority and professor of urban studies at London School of Economics, insists that the benefits must be assessed over a much longer time span.

“Is it appropriate that the UK should be spending £9.3 billion on this project? My answer is yes, definitely, just as long as you don’t measure the return on investment in the next 12 months, but over the next 30 years,” he said.

Burdett argues that the legacy to some of the poorest parts of London will justify the cost. He focuses especially on the Olympic Park, which will be transformed into the Queen Elizabeth Park in 2013 and provide 100 hectares (250 acres) of parkland, wetlands and gardens for the public.

“The site was also decontaminated at great cost. There were layers and layers of pollutants from old railway yards and other industries. Now, if a child plants a carrot it won’t emerge as radioactive. We have also erected two bio-fuel plants to improve sustainability,” he said.

Additionally, the long-term sporting legacy east London will also be extraordinary, claims Burdett. Four of the Olympic venues will remain as permanent public facilities. They are the £570 million Olympic Stadium itself, the £269 million Aquatics Centre, the £93 million Velodrome cycling track and the £44 million multi-purpose arena known as The Copper Box.

“The Velodrome is especially important for the legacy,” said Burdett. “London has not had a Velodrome before and this is one of the world’s best. Britain is doing well in cycling sports and likely to win gold medals so there is bound to be a new generation of cyclists keen to use it.”

And another major transformation post-games will be the conversion of the Olympic Village into homes. The Village cost £1.1 billion and provides accommodation for 17,000 athletes and officials over the course of the Games and will leave 2,818 new homes for Londoners as part of the Olympic legacy. A consortium, including the Qatari government, has signed a £557 million deal to own and manage the village.

Nonetheless, the true picture may be far more complex than Burdett suggests. For a start, £2.2 billion of lottery finding is being used to pay for facilities. This siphons off money from other areas of the economy. For example, the Arts have lost around £300 million and £675 million was re-allocated from charities in 2007, on the understanding the money would be returned to its originally intended recipients shortly after the end of the Games, using the proceeds from the selling off of Olympic assets. But Government ministers have now said that the money will not be returned to the charities for at least another decade

The rhetoric about the creation of thousands of houses and 35,000 jobs in the disadvantaged eastern part of London does not stand up to scrutiny either. The area was already a target for a massive £9 billion of investment as part of The Thames Gateway, Europe’s biggest regeneration project, which extends from east London into parts of Essex and Kent.

Some £4 billion of investment has been earmarked to turn Stratford town centre, near the Olympic village, into a new metropolitan centre for east London. With so much regeneration, the necessity of having the Olympics in east London is questionable.

"The spending in the UK all seems to be in the South East, in London, or nearby,” says Professor Shaw. “It draws all the economic benefits to the capital city and there’s very little economic benefit for anyone else. Just imagine what could be done for disadvantaged parts of the UK, in the North or Midlands, with these billions of pounds.”

“Speaking about London, they said it was so well-known that the potential for increases of tourism, or business, was minimal. Its 2000 years of history provide all the publicity it needs. Smaller cities, such as Manchester, or Birmingham, might have derived financial benefits, but not London,” he added.

Burdett’s argument about the long-term benefits of building a Velodrome doesn’t hold water either, according to Professor Shaw.

“If you need a Velodrome why not build it anyway at vastly reduced cost rather than requiring the billions to be spent on the Olympics as a pretext?” he said.

The Future Of The Olympics

And Shaw sees no sign of the IOC jamboree ending. The 2016 Games will be held in Rio, in Brazil, where the same pattern is set to repeat itself.

“In Rio, President Lula is making all the same noises as Blair and Cameron and building ever more spectacular infrastructure,” he said.

“You would think they would have woken up to the whole circus by now and put the brakes on. But a weird logic takes over when you get the Games. It becomes a runaway train,” he said.

"The Government says, ‘we’ve gone this far and if we don’t finish it, we will look stupid in the eyes of the world’. Semi-rational people lose all caution and abandon sense of holding onto reins.”

This article was written by David Smith and originally published on Economy Watch under the title: London 2012: Has Money Killed The Olympic Spirit?

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