The International Olympic Committee’s (IOC) decision earlier this month to allow Tokyo to host the 2020 Summer Olympics was greeted with jubilation across Japan, and earned the nation congratulations from around the globe. To many, the upcoming 2020 Games will provide a much-needed boost for the economy and the country’s morale, similar to the role played by the 1964 Tokyo Olympics. Touching on these sentiments, Prime Minister Shinzo Abe predicted that hosting the 2020 Olympics would be an “explosive agent” for the national economy and would place Tokyo at “the center of the world.”
The celebratory rhetoric is understandable, but the promises made, particularly those involving tangible costs and benefits, demand a more sober scrutiny, even as the champagne corks pop. With the event itself years away, there are few repercussions for those who promise the moon today if, almost a decade later, their assurances prove to be hollow. The consequences for residents of the city, however, can be substantial.
Aside from worries about the Fukushima nuclear plant leak, there are at least three other challenges Tokyo will confront as event preparations begin in earnest, and which have bedeviled other host cities. These involve debt accumulation, infrastructure construction and post-event utilization, and finally, concerns about residential displacement and deepening inequality.
Increasing attention to costs and benefits in recent years is due in large part to the noticeable shift towards awarding major events to countries struggling with poverty and inequality. India, China, and South Africa have each held events in recent years, and Brazil will soon host both the World Cup (2014) and Olympics (2016). Yet, as we saw with London in 2012, the global recession and a turn towards austerity policies have made spending large sums of money on short-term events more difficult to sell than in earlier years, even in wealthy nations. A boost in status alone is no longer sufficient justification, and proponents – as with the case of Abe earlier this month – increasingly must frame these events as economic opportunities that will generate profit and contribute to the development of the host city.
While this shift encourages a welcome scrutiny of the economic value of major events, it is in fact notoriously difficult to make a meaningful calculation of total expenditure versus total revenue, especially years before the event takes place. Pre-event estimates of costs, in many cases from reports commissioned by government agencies, are filled with rosy predictions and often read like public relations documents. Years of research, on the other hand, reveal how often these reports vastly underestimate the costs and inflate the benefits of the event.
As Kevin Rafferty recently reported in The Japan Times, initial estimates for the cost of the London Games hovered around £2.4 billion yet in the end reached almost £9 billion. Estimates for the 2014 winter games in Sochi began at around $12 billion but are now predicted to hit $50 billion. Two recently concluded events demonstrate just how misleading early predictions can be. Official estimates for the 2010 World Cup in South Africa began at $500 million in 2004, but in the end the cost reached almost $5 billion. And the 2010 World Expo in Shanghai was originally estimated to cost $4.2 billion, but by some post-event calculations eventually exceeded $50 billion. Addressing the Olympics, Rafferty notes: “Cost overruns for the Olympics have averaged 179 percent since 1960, and most games have made losses or tiny profits.”
The issue of revenue is equally important for assessing costs versus benefits. These too have a tendency to disappoint. A report from 2010 on the recently concluded America’s Cup race in San Francisco, commissioned by the city, made what it repeatedly called a conservative estimate that the race would lead to increased economic activity totaling $1.4 billion. This was a conservative estimate compared to the $9.9 billion estimate from earlier reports but even so it is unlikely the event generated anything close to that amount. The current official word on the London Olympics from the Organising Committee is that the 2012 games will only break even.