Tag Archives: Bird Nest

Summer Games: The New Economic Stimulus?

The Chicago Tribune reports that Mayor Daley and the City Council have given unanimous support to fund any expense overruns should Chicago win its bid to host the 2016 Olympic games. This decision gives the city a fighting chance to be selected to host the games, keeping it in the running with Madrid, Rio de Janeiro, and Tokyo, all of which have secured similar financial guarantees.

Afterward, aldermen and Mayor Richard Daley gave themselves a standing ovation. The vote reauthorizes Daley to sign the Olympics host city contract in advance of the Oct. 2 vote in Copenhagen by the International Olympics Committee on which of four finalist cities gets the Summer Games in seven years.

This decision by the city’s leadership may not represent the desires of Chicago citizens who, a Tribune poll shows, have dwindling support for the city to host the games, largely because of concerns about taxpayer liability.

After the vote, many of the aldermen gave quotes to the press:

Ald. Ray Suarez (31st) said he initially “had some reservations.” But Suarez said he now feels the Olympics would bring jobs, housing and a new global reputation to Chicago.

“It will make Chicago a world-class city,” he said.

Of course, Chicago residents and leaders may have many reasons for wanting to host the 2016 Games, but it is uncertain that the event would be an economic boon to the city.  A study conducted to analyze the potential economic effects of the 2012 London Olympics found that historically while some host cities have benefited economically, others have suffered losses as tax dollars used to fund the games are not always recouped during the course of the event.

Adam Blake of the University of Nottingham Business School found that the event was likely to benefit London in 2012 and that increased growth is likely to last until 2016, but that in the years before and after this bracket the results are less certain.

Short-lived, costly events such as the Olympics often result in the construction of facilities that will have limited use after the games are over.  For example, the Bird’s Nest that became symbolic of the 2008 Beijing Olympics is today underutilized, making revenue today only from tourists who wish to see where the athletes competed.

A USA Today reporter speculates:

In other countries, the Bird’s Nest might be revealed as a white elephant — an expensive possession with little commercial value. But in China, the government and state-controlled media are unlikely to advertise the fact and citizens will never know the real cost.

Ex ante, we do not know if the 2016 games would benefit or harm Chicago in the long run, but looking to past cases gives reason to question whether or not host cities benefit in the long run.  Perhaps a more reliable policy to promote economic growth and tourism in the city would be to lower its notoriously high taxes. The Economist recently found that Chicago has the greatest tax burden for tourists of any American city.  The cities’ leadership would be wise to consider how this tax climate would impact potential visitors’ decisions to attend the games before speculating that increased tourism would certainly benefit residents.