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Olympics or Bust

The Olympic rings hanging at the historic St. Pancras international railway station in London herald the arrival of the 2012 Summer Games.

/ Published July 25, 2012

As London prepares to host one of the most spectacular sports events in the world, the Summer Olympic Games, from July 27 to August 12, many observers are wondering if the Olympics are more trouble than they are worth.

If Andrew Zimbalist, the Robert A. Woods Professor of Economics at Smith, had his way, governments and communities would better analyze the benefits and costs before spending public money on dazzling sports events that are a source of enjoyment for millions of people but also a source of intense debate and controversy.

Zimbalist’s scholarship on the topic of spending and sports began with baseball and soon turned toward the mania surrounding the construction of new stadiums around the United States at the public’s expense. He has steadily broadened his gaze since then, recently co-editing the International Handbook on the Economics of Mega Sporting Events (Edward Elgar, 2012) with Hamburg University economist and former Olympic rower Wolfgang Maennig. The book includes more than four dozen contributors who analyze how extravaganzas like the World Cup and the Olympics are financed.

The bidding process that countries and cities engage in to win the right to host these quadrennial events often borders on hysteria and makes little sense to Zimbalist. When he crunches the numbers and compares the wider costs and benefits of the Beijing Summer Games four years ago, the London Games this year, and the Rio de Janeiro Games in 2016, Zimbalist sees that gains usually fall far short of expectations. An exception might be the 1992 Barcelona Olympics, and possibly the 1984 Los Angeles Olympic Games. In the case of Athens, host of the 2004 Olympics, there is speculation that the economic aftermath contributed to the dire fiscal situation that Greece now faces. The story is similar for the Winter Olympics, says Zimbalist, though on a smaller scale.

Cities often argue that hosting the Olympics adds luster to a city’s brand, promising rewards in terms of tourism and business that will extend far into the future. “The notion that you are going to put London on the map by hosting the Olympics is just farcical,” says Zimbalist, with his characteristic directness. “London is probably one of the five best known cities in the world and already is one of the most popular tourist destinations in the world.” Even the immediate gains in terms of attracting sports enthusiasts to England this year will be partially outweighed by the people staying away to avoid the crush.

Zimbalist needs to look no further than his own family, who would have vacationed in London this summer if not for the zoo-like conditions he fears. “There’s no way we’re going anywhere near London,” he says.

Andrew Zimbalist

Some London locals share his sentiment. “We have, collectively, osmotically, decided that we hate the Olympics,” A.A. Gill, the London-based critic and contributing editor for Vanity Fair, wrote in the New York Times in April. “Now the Olympics has come and dragged us all into the bright light, and a lot of attention is being given to London, and we’re not used to it. We’re not good at showing off. We’re not a good time to be had by all, we’re not an easy date....We will be pleased when all the fuss and nosiness has gone away.”

Even for a city like Beijing, which is still building its tourism industry, the net effect of welcoming the world in 2008 for a highly choreographed 16-day show reflected a host of negatives. “They were saying, ‘Come look at our country, look at what we’ve got going here,’ and thinking that would generate more tourism,” says Zimbalist, “but I don’t think the numbers are bearing that out. The overriding impression that emerged from the Beijing Olympics is that it’s an impossible place to live, that there’s unbearably thick pollution, that three months before staging the games they had to enforce rules that cars could only drive every other day, they had to close down parts of the city, and they had to shut down factories, all so that they could stage—literally stage, put on a performance of—the games.”

From a strictly monetary point of view, the hazards of a bidding process through which each city tries to outdo the other by promising spectacular facilities and targeted infrastructure improvements (that always result in cost overruns) means that the margins for economic gain are minimal, if not negative.

On the plus side, the games do bring in people and new money from abroad that can be expected to give the host economy a boost. “From there we have to look at what they have to do to get these people to come in,” says Zimbalist. “What are the costs for building new sports facilities, transportation and communication infrastructure, security, and all sorts of other costs?”

The next question is what the legacy of these investments will be. “Are they used afterwards, how often, and how much will be spent on maintaining them?” This is an important land-use question when considering the opportunity costs. “If I decide that I am going to take 20 acres in East London and build an Olympic stadium, that stadium is presumably going to be there for decades,” says Zimbalist. “Is that going to be more beneficial culturally as well as economically than, let’s say, a concert hall, an office building, or even a public park? You are talking about using scarce urban land that over time becomes even more scarce.”

London’s new eco-engineered 80,000-seat Olympic stadium was designed to accommodate a variety of sports events—including soccer games and auto races—when the Summer Games are over. By contrast, the stadium built in Beijing for the 2008 Olympics is now rarely used.

For example, Qatar, a small Arab Emirate, won the right to host the 2022 soccer World Cup with a proposal that included building stadiums that are to be dismantled afterwards and moved to poorer countries in Africa. “I think it’s loony,” says Zimbalist, noting that even soccer-crazed Brazil will not be able to support, over the long run, the 12 stadiums it is slated to build for the 2014 World Cup. “Even in a country where soccer is a crazy popular sport, it doesn’t work out.” Qatar, according to Zimbalist, will be burning through money it doesn’t know what to do with, suggesting that it would be wiser, and over the long haul more beneficial, to invest in equalizing disparities between the rich and poor.

Two years after Brazil hosts the World Cup, it will be the site of the 2016 Summer Olympics. Zimbalist expressed his concern that the Latin American country will become the latest victim of what he called “world sports boondoggles” in last summer’s issue of America’s Quarterly, a policy magazine that devoted a special issue to “sports, business, integration and social change.”

The Evolution of Scholarship

It has been two decades since Zimbalist’s scholarship and career took a sharp turn away from international political economy. He was an early arrival to the field of sports economics, being one of the first people to use tools of the science to study the impact of athletics on the economic health of a community. Now he is a sought-after expert on the enormous lucre associated with sports.

The tale that Zimbalist likes to tell about how his career shifted away from writing books like The Cuban Economy (Johns Hopkins, 1989) starts with the 1990 Major League Baseball (MLB) lockout. For 32 days the owners kept the players from spring training. Zimbalist’s young son Jeff, an avid Little League player at the time, announced “out of the blue” that he wouldn’t be playing either, challenging his dad to find out what was going on.

“It’s not every day that an 11-year-old tells his father what to do with his life,” recalls Zimbalist. So he went to the basement of Smith’s Neilson Library and discovered two things, one that nobody had written an accessible book about sports economics, and that in 1922 the Supreme Court gave the owners of baseball teams an antitrust exemption that was still in force. “On a lark,” Zimbalist dashed off a two-page proposal to an editor he had heard of and was surprised to receive a substantial advance to write what became Baseball and Billions: A Probing Look Inside the Big Business of Our National Pastime (Basic Books, 1992).

Literally within seconds of going on a National Public Radio talk show to discuss that book, Zimbalist started getting calls from lawyers wanting to enlist him on one side or another of a dispute. The calls haven’t stopped since, and his writings on the topic have come to include several books as well as dozens of scholarly and popular articles.