Indebted to Us All
In these times of financial crisis and turmoil, many of our habitual comforts become expendable. This goes for the microeconomics of a household and the macroeconomics of Global markets. What does any of this have to do with sports? Well, according to one savvy banker, a lot. Here's an essay written by a Dawson Creek banker about why the world could do without the Olympics right now.
Indebted to Us All
A young child sits in a shopping cart while her mother pushes the cart into the lineup at the cash register. A chocolate bar catches the little one's attention, and the child cries out for her mother to buy it immediately. But the child's father recently lost his job and money is so tight; the mother has budgeted down to the last dollar. She could use her credit card, but that will be her family's last lifeline if something catastrophic happens, so she scolds her child for asking for something that they can't afford. The little one slumps in her seat and pouts all the way home.
Like this mother, the BC government is a tightly run ship, with every penny being put to use. Programs that were once useful, if found to be bringing up costs get audited and the program is scrapped. Health care, education, roads, infrastructure, police, fire departments etc. all receive repeated annual budget cuts the second they start being more costly. But then, there are the Olympics. The Vancouver Sun reported that the operational cost forecast for the 2010 Winter Olympics is $6 Billion, and now the Olympic Village has gone from a prospective profit maker to $875 million additional cost to The City of Vancouver.
Call me crazy, but we are in a global recession, right? We all spent money we didn't have, to buy things we really didn't need, and it caught up to us. With all this Olympic-sized borrowing, one has to wonder when and how it will get paid back. China spent $42 billion dollars on the Beijing games in 2008, Athens drove Greece deep into debt with a $17 billion tab, Barcelona cost $7 billion, and the list goes on and on. Not including China's record setting spending, the past 2 decades of Olympics have seen costs of approximately $400,000 per athlete (accounting for inflation). All this for what? Games?
Of course, the Olympics are more than that, and that is drastically over simplifying. The Games promote unity, peace, comradery, and a sense of mutual appreciation for the hard work and effort it takes to do what these incredible men and women do. But as a global community, why are we letting one city every two years drag itself so far into debt that it takes more than two decades to pay off the tab (see Calgary), while we all take part in the festivities? In fact, even after the Olympics are over, the host city needs to incur new costs to properly facilitate continued use of the new infrastructures so that they get paid off. Kevin Walmsley, co-director of the University of Western Ontario’s International Centre for Olympic Studies says, “The Olympic Games are not a profit generator and never have been,” he said. “What is always consistent is, there are always cost overruns.” Furthermore, Vancouver now runs the risk of lowering it's credit rating and potential paying a higher interest rate on any new borrowing, not just Olympic related. We need to realize that the financial stability of cities all over the world effects all of us, and we all need to come to a consensus on how to continue having the Olympics without putting the price on the family credit card.
The Los Angeles Olympics were a pivotal Games. With costly Games like Berlin, Munich and Montreal to look back on, the Los Angeles Olympic Organizing Committee (LAOOC) commissioner Peter Ueberroth kept a tight reign on purse strings while selling endorsements and 'official' sponsorships for the Games. They relied on existing facilities, built little, and spread the Games over the entire Southern California region. When the rafters finished rattling the Los Angeles Olympics made a whopping $222.7 million profit. Television rights, commercial sponsorship and ticket sales resulted in most of the $768 million in revenue. Total expenses came to $546 million, 73% of which were administrative costs. Ueberroth was named Time magazine's 1980 Man of the year and more cities began to see The Olympics as a moneymaker again.
My solution? The IOC should act like a bank, offering all countries the ability to enter the Olympics at a fee based on a percentage of the country's GDP. Have two locations consistently host event after event (one for winter and one for summer). The fees collected by the IOC can be held in trust, invested in low and no risk investments, and used to maintain these two locations and their prospective venues. That way, we the world are responsible for the cost to continue the Games, and those that help with the costs get to be involved in the event. The Olympics needs to be stripped down and made new again, with global repercussions in mind. We need to remember that it's not how much we want to have the chocolate bar, it's whether we can afford it right now on our own.
Submitted by Geoff Kennedy
