The Economic Impact of the Olympics

Christopher J M Beer Impact of Olympics 154148 Research Project on Economic The Economic Impact of the Olympics Beer, C Loughborough College, Radmoor Road, Loughborough UK, LE11 3BT Accepted 20th March 2012 On July 2005 the International Olympic Committee awarded the right to stage the 2012 summer Olympic and Paralympic Games to London The decision to bid for the Games is politically antagonistic, with many arguments that support the benefits that such “mega sporting events” bring and many arguments that highlight the unfavourable effects that they can incur This political decision is further complicated by the existence of groups in society that benefit from the hosting of such events and other groups that lose out because of them; and because of pressure groups that exist on both sides of this argument This paper examines the economic benefits and of hosting the Olympics, in parallel with other studies that have estimated other social and environmental benefits The objective is to use the most appropriate form of methodology to examine the net economic consequences of hosting the Games for both the UK as a whole and for London The net benefits are found to be positive, and large relative to the investment in the bidding process, although little evidence shows a positive economic impact for the years following the event Key Words- Olympic Games, Economic Impact Introduction Christopher J M Beer Impact of Olympics 154148 Research Project on Economic The Olympic Games began in 1896 as a accepted bribes, further distorting the small tradition fusing athletic feats and incentives international unity Over time, the Games 2009).However despite the IOC‘S bidding have evolved into a display of wealth and process and overestimated benefits, some economic development The myths of economists believe hosting the Olympics economic prosperity and development still has significant benefits (Humpreys and (Humpreys and Plummer, 1996) have Plummer, become prominent only after the 1984 Los benefits, has its own set of challenges Angeles Olympics, the only time in which First, the economic effect and benefit a city did not face competition from other need to be defined to include costs and bidders Economic impact studies attempt revenues, otherwise known as benefits, to measure the costs and benefits of which exist because of the Olympics For hosting the games; however they use example, in order to host the Olympics complicated modelling systems and not there is often a large amount of account the construction completed solely for the to Games This is a cost of the Olympics As potentially induce cost coverage and with any structure, ones used for the distort incentives, which may lead the Olympics will then be occupied, which can studies to incorrectly model the economic then generate revenue One way the costs and benefits of the Olympics The Olympics IOC solicits bids, and as Giesecke and through consumer spending, otherwise Madden (2011) show, it appears host known as expenditures People who come cities bid away all or almost all future to the host city for the Olympics will benefit because the IOC “can induce host spend money on activities such as hotels, cities and governments to underwrite the Games, eating and shopping, all of most of the costs while keeping for itself a which generates revenue Additionally, large part of the revenues” because of the Olympics, people may later for International the impact Olympic of Committee to 1995) benefits host (Szymanski, Evaluating are these measured is visit the host city/ or firms that may move Given the IOC’s actions it seems that there, leading to more construction becoming an Olympic host city diminishes activity that can be seen as a benefit of the positive economic effects originally the Olympics Thus the economic effects anticipated at the beginning of and Christopher J M Beer Impact of Olympics 154148 Research Project on Economic of the Olympics for this study are created Labour Market and the impact on stock by markets changes in the growth and development of Construction, Tourism, However as will be discussed; calculating Economic impact studies and provide a the benefit of hosting the Olympics goes better picture of the relative economic beyond the initial costs, such as the cost costs and benefits that host cities receive of construction, and revenues, such as the Giesecke and Madden (2011) use a more visitor spend in the host country There accurate Computable General Equilibrium are complicated pitfalls that can lead to modelling A CGE model is one of the most overestimated benefits that we will rigorous, discuss further in this essay methods to evaluate the impact of cutting-edge quantitative economic and policy shocks -particularly A number of authors have created post- policy reforms- in the economy as a Olympic studies using different methods whole Because of its nature, this tool is and variables to show the inaccuracies in significantly useful for policy design Literature Review Giesecke and Madden (2011) use economic impact studies Their study is Computable General Equilibrium (CGE) for most a post- Olympic study, which makes it evaluations because it uses the same more accurate than predictive studies, modelling methodology to best evaluate however complicated predicted and actual benefits, although mathematical calculations, and will likely they have two scenarios: Sydney hosting produce some inaccuracies within the the Olympics and Sydney not hosting the model The paper examines whether Olympics The comparison of the Olympic predicted economic benefit existed for the model to the non-Olympic model allows 2000 Sydney Olympic Games by examining the authors to compute relative costs and Australia and New South Wales state benefits by providing outcomes for all through CGE modelling, the same type of possible scenarios By using the same type modelling typically used to conduct of modelling post-Olympics, the authors still requires comparable to pre-Olympic Christopher J M Beer Impact of Olympics 154148 Research Project on Economic are able to correct for modelling errors their study still requires measuring for the such as visitor spending methodology that substitution effect, although beneficial to cause inaccuracy in the CGE models used some (i.e discount retailers), in general, for the final bid The study also derives the substitution effect is very negative in data from multiple authors, who might nature, as it limits choice This is true not have and only for products, but also for services measurement methods, which makes the Examples of the substitution effect in data and variable interactions overall less action can sometimes be observed over viable With such a complicated model the winter holiday season, where, in lean there are many ways data can be economic times, discount retailers often contaminated and lead to less accurate hold results While Giesecke and Madden http://www.econmodel.com/classic/terms (2011) provide a comparison to most /substitution_effect.htm, economic impact studies by using more 08/03/13) different data collection up well ( accessed accurate post-Olympic CGE modelling will evaluate overall economic effects from a variety of viewpoints All of the Giesecke and Madden’s (2011) model variables measure the real level of costs uses variables that show the economic and benefits from the Olympics on the city impact of the Olympics at both city and and country in a financial sense However, countrywide level The variables are ones given that almost every study is composed that “encompasses the four key economic differently, there could be some level of financing; (iii) spending by interstate bias among the variables that could hinder visitors to the Games in the Olympic year; the outcomes and (iv) spending by foreign visitors in the Games Year.” (Giesecke and Madden, Rose and Spiegel (2011) use a country 2011) By examining the four major to country comparison methodology economic dimensions allows the authors instead of CGE modelling to provide a to test important costs and benefits that more relative evaluation for the economic effects of hosting the Olympics By comparing the country of a host city to the country of a candidate city, the Christopher J M Beer Impact of Olympics 154148 Research Project on Economic authors are able to see whether the Rose and Spiegel’s model is based on benefits of hosting the Olympics are country data Because of this, it is very negligible country possible that the Olympic or candidate receives similar benefits Rose and Spiegel city has little overall effect on the results, (2011) of the because the country has other big cities Olympics through increasing exports by and the Olympics is such a small quantifying the differences in trade percentage of the city, let alone country openness between finalist and host revenue that may not be visible While countries for 1956-2006 Rose and Spiegel this model creates a relative comparison (2011) show while trade benefits exist to a candidate country, it therefore for the country in which the Olympics bypasses more complicated mathematical takes place, they similarly exist in modelling required for CGE, comparing countries with a finalist host city Because trade openness at a countrywide level of this, the cost of the Olympics becomes may cover up any effect from host and more apparent as well as the amount of candidate cities that could be seen benefit received by the host country through a city level comparison if the candidate examine the effects attributable to the Olympics However benefits relative to a control city, because regional and country confounders, which For greater accuracy, Billings and are an unseen variable that is also Holladay (2011) use city level comparisons correlated with two other variables, are to illustrate the relative economic effects not included in the data, which could hide of hosting the Olympics for specific or dilute the effect of the host and control variables The authors compare host and cities One issue comparing host cities to candidate cities to test whether the host finalist cities is potential confounding city gains long term economic growth effects, such as countrywide events that attributable to the Olympics Their use of effect one country and the costs or city level comparison provides the most benefits outcome, but not the other direct picture of real economic costs and Confounding effects make the Olympic or finalist city data seem more significant compared to the other While the authors Christopher J M Beer Impact of Olympics 154148 Research Project on Economic may need a better account for use of city level comparison provides the most specific relative comparison model potential confounders in their model to produce the most accurate results their The variables used by all the authors previously mentioned take form a full picture and understanding of slightly the relative cost and benefits of the different approaches in an attempt to Olympics at a city level with population measures, and at a country level with real GDP per capita and trade openness Methodology This paper will quantify the economic comparative analysis instead of CGE value by examining Construction, Tourism, modelling for greater precision, because Labour Market and the impact on the there is less chance of an error occurring stock markets, to determine if there exists and a greater economic overview of an economic payoff by comparing Olympic hosting the games can be provided host cities While the study planned on Comparing the hosted city of London to providing greater specificity in order to the previously hosted games dating back produce a more precise evaluation of the to Los Angeles in 1984, offers a somewhat London Olympic Games economic effects precise through same-country sister city analysis, attributable to the Olympics, because the methods of record keeping does not these effects are held constant which may provide the necessary data for city level offer a more precise model than Billings comparisons This study will still use and Holladay (2011) Methodological Considerations picture of economic effects Christopher J M Beer Impact of Olympics 154148 Research Project on Economic Economic impact studies are predictive or overstates the substitution effect, and have inherent bias because they are (Matheson, 2006) understates or ignores created in favour of hosting the Games, the “crowding-out” effect (Blanchard, misrepresenting and overestimating many 2008), especially in already popular tourist benefits and destinations, and incorrectly calculates the mathematical errors Olympic impact effect of expenditures by overestimating studies used to be computed by simplistic the Input-Output models (Kasimati, 2003), but (Kasimati, more recently economists have been intangibles such as tourism or personal using CGE models, which are relatively utilities, the majority of cities describe more accurate, but still have a large their reason to host based on urban number of deficiencies (Lofgen, Harris and economic development, or the potential Robinson, 2002) Matheson’s (2006) work to increase on International awareness “Mega-events: The Effect of the World’s However, given modelling inaccuracies Biggest Sporting Events on Local, Regional, and the IOC’s role in bidding, cities will and National Economies,” examines the often not obtain their desired outcome main effects that the modelling used in (Matheson, 2006) through theoretical mathematical 2003) money Aside multiplier from the impact studies Modelling typically ignores Matheson (2006) noted that after the games conclude Therefore when coming nine-year period, the Olympic effect to analyse data post London 2012, there eventually becomes ambiguous after the will not be four years’ worth of data as this study is being undertaken a year after the event Ethical Considerations Christopher J M Beer Impact of Olympics 154148 Research Project on Economic Certain research designs often raise the study, and the use of the data important ethical questions that need to supplied Consent is obtained via an be addressed; this should be considered ethical consent form (see appendix) The before commencing any form of data subjects were given the right to withdraw collection (Gratton and Jones, 2004) The from the study at any given time best approach to take is that of informed Informing the participants of the nature of consent Each participant, Michael Evans the study, could invalidate the results in the vice chairman of The Goldman Sachs some way (Gratton and Jones, 2004), Group and Matthew Syed of The Times therefore the participants were informed have been informed as to the nature of after the data collection Data Collection While this paper aims to examine the time Olympic development takes place, monetary impact of London 2012, through hundreds of other buildings and projects the potential increase in Construction, are happening at the same time If games Tourism, Labour Market, GDP and the related construction is a small part of the Stock Market at a comparative city level, city’s construction GDP, change will be any changes attributable to the Olympics even harder to establish Overall, for all may be too small to see As all of the host the industries studied in this paper, the cities have large economies, factors Olympics are only a small proportion of beyond the games can also drive growth that industry’s GDP relative to other In construction for instance, at the same factors and the overall economy However the main factors that drive similarly impact the industries before and Construction, Tourism, Labour Market, after the Olympics Most people will GDP and the Stock Market are in a sense similarly visit and move to host cities held almost constant because they will completely independent of the Olympics, as they did before the games were announced Christopher J M Beer Impact of Olympics 154148 Research Project on Economic This report will use qualitative data as appropriate in certain situations As Yin a source for collecting primary data This (1994, P.80) notes, the interview provides will be in the form of two interviews, one perceived casual inferences from the from an economist from Goldman Sachs participants rather than the researchers and the other source being provided by a point of view This allows the respondent columnist from The Times Gratton and to become more of an informant, Jones (2004) state that interviews can providing collect data concerned with concepts that perspective, which is often desirable As are difficult to measure, and tend to well as this interviews allow unexpected provide much richer data than for data example, a questionnaire survey There interviews are many different types of interview, important themes that may not emerge however semi- from a more structured format, thus structured interview will be used, this enabling the subjects to reveal insights approach uses a standard set of questions into their attitudes and behaviour that (see flexible may not be readily apparent Analysis of approach to data collection, and can alter the data may be difficult to interpret the sequence of questions or probe for compared to the questionnaire As Frey more subsidiary (1998, p.47) suggests that the spoken questions (Gratton and Jones, 2004) This word always has a residue of ambiguity, is applicable to this project due to certain no matter how carefully the questions are levels both worded Thus the strengths of the interviewee’s contain, so a level of probing interview need to be consolidated and the was undertaken to acquire the relevant weaknesses information The interview method has a possible for this appendix) However, information of project, with knowledge a a that data to from emerge allow the eradicated their own Semi-structured emergence as much of as number of advantages that make it and effect relationships, describe characteristics that may form due to For secondary sources of data hosting the Olympics, a consensus on a quantitative research will be undertaken particular issue and finally be used to Therefore identifying evidence of cause make further recommendations Christopher J M Beer Impact of Olympics 154148 Research Project on Economic Some academics suggest that Triangulation of data which uses multiple combining the two forms are incompatible forms of data collection to explore a single as they rely on differing epistemological hypothesis These two types of data will assumptions (Creswell, 1994) However complement Nau (1995, p.1) suggests that blending quantitative data will describe my data qualitative and quantitative methods of and the qualitative data will help gain a research can produce a final product greater understanding of the quantitative which data can highlight significant each other, as the contributions of both This is called Economic Results In terms of the economic impact of as a tourist venue and a potential location hosting an Olympics, there are short-term for investment) The less tangible benefits benefits that derive from the additional are, by their nature, more difficult to expenditure in and around the Games estimate but this doesn’t mean they are itself and long-term benefits that are less less important to quantify tangible (such as the promotion of the UK Accordingly, even though a local resulting from hosting the Olympic Games Organising Committee for the Olympic (Ahlfedt and Maennig, 2009) Carlin Games (OCOG)may break even or have a (2007), which finds a positive impact of small surplus, the greatest likelihood is sports facilities on real estate values that the host city itself experiences a fiscal within two miles of a new facility The deficit from the Games ( not all OCOGs evidence is not encouraging On the other broke even: the Albertville OCOG lost $57 hand, million: Burton, 2003, p.3) On the other together with any private support, must hand, the only tax revenue would accrue pay for facility construction, upgrade and to host governmental bodies would be infrastructural improvements necessitated from incremental by the Games sales and income 10 hosting governmental bodies, Christopher J M Beer Impact of Olympics 154148 Research Project on Economic To visualise the impact of the Olympic the stock index returns when host announcement, the chart (4.1) shows benchmarked against the MCSI World returns following the last eighty Olympic index for the winning country over a three host announcements The chart calculates day period, following the announcement Chart (4.1): Returns after announcement and during the Olympics Source: Goldman Sachs Global Economic Research, 2012 While there is variation among the host bombing, causing the FTSE to fall 1.3%, nation stock markets, all but China and before rebounding The chart above also the UK have positive returns in the three shows returns above benchmark during days following the announcement The the two weeks of the Games, albeit with Greek stock market stands out as the top no obvious pattern China’s winning bid performer: the announcement coincided with turbulent benchmark by almost 8% after the 1997 markets in the midst of the global announcement for the 2004 Games For downturn in July 2001, while the Olympics London, the in August 2008 took place on the brink of announcement in 2005 was the July the financial crisis (Goldman Sachs, 2012) it the outperformed day following 20 Christopher J M Beer Impact of Olympics 154148 Research Project on Economic To see longer term effects of the between announcement and the opening Olympics, a measure of the performance ceremony of the Games, as well as the of the host stock market against a world returns in the year following the Olympics benchmark over the six to seven years (see chart 4.2) Chart (4.2) Source: Goldman Sachs Global Economic Research, 2012 The equity markets in China, Korea, the The latter three stock markets each US and Greece outperformed leading up suffered from headwinds in the global to the Olympics, whereas those in Spain, cycle leading up to the 1992, 2000 and Australia, and the UK underperformed 2012 Olympics Interestingly, all recent Olympic hosts Games, or is perhaps relieved to have the have outperformed the MSCI World index Games behind them Given the below- in the 12 months following the Olympics average performance in the UK since the (Goldman Sachs, 2012) This is true of Olympic announcement, UK investors may recent hosts regardless of the size of the hope for a continuation of this trend, economy development, looking forward to a positive year in suggesting either the local market is equities following the London 2012 boosted by the international profile of the Games (See Appendix, 5.2) or state of 21 Christopher J M Beer Impact of Olympics 154148 Research Project on Economic Discussion London 2012 will make a substantial announcement, during the games and up contribution to the UK GDP of 16.5 billion, to the second quarter of 2013 with the impacts occurring from the Blake (2012) shows that most of the spending on the staging itself is likely to effects to the UK’s GDP stern from contribute 6% (Oxford Economics, 2012) construction projects occurring before the At its peak effect the Games will also Games, this including the build of the create the equivalent of more than 62,000 Olympic jobs in London and across the UK (Oxford park In addition, a 12% contribution to GDP is from Games- Economics, 2012) related tourism during London 2012, while However this review reveals relatively gains from hosting the Olympic Games? A little evidence that hosting the Games careful examination of past experiences produces significant economic benefit suggest past 2013 If the economic gains are leveraging the Olympics: host cities need modest, or perhaps non-existent what can to make careful land use decisions and exploit the host city to maximise the potential the post-Olympic Games use of new and two important avenues for renovated facilities and infrastructure Successful Games, like the 1984 Los was reconfigured to a baseball stadium Angeles Games, utilised existing facilities immediately following the conclusion of as much as possible, consuming little the Games (Austen, 2010) Unlike the scarce urban land as possible The stadium Olympic park at Stratford which has yet to used find for the opening and closing ceremonies in the 1996 Atlanta Games a full time Economics, 2012) 22 occupier (Oxford Christopher J M Beer Impact of Olympics 154148 Research Project on Economic Clearly the impact of the Olympic Games will rely on significant outlay of Games will vary according to the differing public funds to finance the infrastructural levels of development in the host city and improvements country Properly planned, hosting the improvements can also be made without Games can catalyse the construction of a hosting the Games Thus it is relevant to modern transportation, communications ask whether the planning for the Olympics and sport infrastructure Such a potential produces an optimal use of scarce public benefit is bound to be greater for less monies (Carlin, 2007) These developed areas Even so, hosting the Conversely, in more developed regions, Games can occasion a gross misuse of where land is even scarcer during the land as well as provoke wage and resource initial bid planning and labour and price pressure leading to higher inflation resource markets are tight, hosting the Finally, it is important to recognize that considerable local and national pride, hosting the Olympics may generate particularly with the UK being in the worst significant non-pecuniary benefits to the recession since the great depression host city The residents of the host city are These factors are both important and likely to derive significant and sense of valuable even though researchers have community from hosting the Games found it difficult to place monetary value (Atkinson et al., 2008) Pulling off such a on them huge endeavour is a source of In the end, the economic and non- from one situation to another Simple economic value to hosting the Olympic conclusions are impossible to draw Games is a complex matter, likely to vary 23 Christopher J M Beer Impact of Olympics 154148 Research Project on Economic The Next Olympic Games in Brazil 2016 In recent years, Brazil has embraced a set of conventional 2009, and more than 100mn people are market-friendly now part of the middle class (Goldman macroeconomic policies that allowed the Sachs, 2012) Furthermore, the middle economy to overcome a number of class is expected to reach around 60% of structural imbalances and attract record the population by 2018 Rose and Speigel high levels of foreign capital This, in (2011) show that there are opportunities tandem presented with a favourable external by these transformations backdrop on average, has led to important should not be underestimated, as there social and economic gains over the last 15 are now as many middle-class and high- years (The Daily Telegraph, 14/03/13) The income earners in Brazil as the combined benefits of growth and overall macro- population of France and Britain In all, financial stability have trickled down the the days of large fiscal deficits, high income scale For example, the middle inflation class has grown significantly over the past imbalances, and economic booms and decade—an estimated 31mn people were busts have given way to smoother lifted out of poverty between 1999 and business cycles (Goldman Sachs, 2012) and debt levels, external Oxford Economics (2012) show that comparatively low levels of human capital, despite these advances, potential growth and a low degree of openness to trade In is still low in absolute terms and in this regard, hosting two very large global comparison with other more dynamic EM sporting events presents an opportunity and fellow BRIC economies This is a to boost investment in infrastructure (See reflection of structural impediments to Appendix, growth that have yet to be addressed: a estimates suggest that up to US$50bn large infrastructure deficit after years of (about 2% of GDP) will be spent over the low investment, low domestic savings, a next seven years in preparation for these high and distortionary tax burden, high two large events (Goldman Sachs, 2012) levels of labour informality, still 24 5.2) Brazilian government Christopher J M Beer Impact of Olympics 154148 Research Project on Economic Appendix Interviews: “The Economic Impact of Olympics” (5.1)Matthew Syed a British Journalist and is currently a columnist for The Times Date: 31/1/13 Time: 12.00pm Q: Economists often build projections of what can happen in the future, such as the BRICS projections out to 2050, originally made in 2003 and updated recently What will the Olympics be like in 2050? MS:” Long-term projections clearly have a lot of uncertainties, but one thing I would say is that the Olympics survived for over a thousand years in ancient Greece I think sport will exist in some form in 2050 and in a hundred years, and that we will continue to be interested in it In terms of the Olympics, all sorts of different things could happen Young people today are very interested in video games and who knows what they will be interested in 10 or 15 years’ time The Olympics will need to change consistently to retain the interest of each new generation and I don’t know what form that will take It is possible that the nostalgia alone of having things such as javelin, archery and fencing will be enough to sustain people’s interest But I suspect we will need to change in terms of the composition of the sports to keep people fascinated The Olympics, like any other institution, will have to change to thrive” Q: Related to that, how you see the impact of emerging markets on the Olympic Games evolving in line with the global economy? MS:” At the moment, many sports are rather difficult for those in lower income groups or countries to get involved with, such as sailing or equestrianism If they change sports to make them more democratic, then poorer countries and even those in early stage of economic development have a much better chance of winning In fact, the composition of sports hasn’t changed much Most of them are old, aristocratic sports put in by the founders, and many are still there even though they are only practised in ting leagues in the western world I would like to see sports become more democratic and inclusive” “Britain has quite high per capita spending on elite sports for a western democracy Sailing is a perfect example- boats are very costly For equestrianism, you need a horse For rowing, you need a boathouse, boats and oars.” 25 Christopher J M Beer Impact of Olympics 154148 Research Project on Economic Q: These Games came at a difficult time for countries Do you think the Olympics can contribute to making life a bit more restored? MS: “ By and large, people tend to overestimate the significance of sports in terms of creating social change There are lots of different strands to this One is that sportspeople are inspirational and therefore get young people watch them amazing things This is often said in a particular social context: for example, Cathy Freeman inspired aborigines or Mohammed Ali inspired black people in 1960’s America There is a tiny bit of evidence to support that idea But it is a mistake to think that sport, and the iconography of sport, is anything like a substitute for genuine social and political action What really helped black people in 1960s America were the Civil Rights Act and Voting Rights Act” “The other idea that leading athletes inspire young people to get involved in sports is not very credible either What tends to happen is that the ‘already active’ just pick up a particular sport that they watch or migrate from a different sport There is not much evidence that great sporting feats get the inactive off their sofas and into sport Certainly in this country, the number of people playing sport has remained pretty static for the last 10 years The success that Britain has had in sport through the lottery funding has done little to boost participation” “The other thing worth mentioning is that playing sport does not itself lead to great social outcomes and does not produce things like punctuality or reduced delinquency It’s the fact that there are inspirational people within the sporting context giving messages and tools that youngsters can benefit from The Greenhouse Charity is one example of where sport is being used as a tool to improve the behaviour of young people But it isn’t just about getting lots of young people to play sport without any deeper thought about what to say to the children in that context One has to think very clearly about what kinds of interventions are going to make a difference, and Greenhouse does that very well” (5.2)Interview with Simon McGregor is a vice chairman of The Goldman Sachs Group, Inc and global head of Growth Markets for the firm Date: 01/02/13 Time: 9.00 am Q: Do you think there are any parallels in which economies and businesses prosper? SM: “The parallels are considerable When a country’s politicians and economic leaders maintain a coordinated orientation toward policies that foster long-term growth, the results can be dramatic South Korea is a prime example Policymakers there have consistently pursued a pro-growth philosophy in policies on industry, openness to trade, infrastructure, technology, education and financial markets The results include substantial human capital, a large manufacturing base and wealth creation: since 1980, per capita GDP has risen more than fivefold Moreover, Korea’s openness has put the economy in a position to benefit from growth elsewhere in Asia This approach doesn’t preclude political disagreements; certainly South Korea has its share But a pro-growth psychology tends to transcend political squabbles” 26 Christopher J M Beer Impact of Olympics 154148 Research Project on Economic “Confidence is equally important for a successful economy Particularly in the world’s developed economies, I think we’re seeing some erosion in confidence driven by uncertainty and a lack of trust in prevailing systems The underlying issues are significant: prospects for growth despite high debt; the burden of entitlements in an environment of strained funding; the commitment to painful structural reforms; increased economic integration in some regions and a pullback in others Regaining confidence on these and other important issues isn’t sufficient for economic prosperity, but I think it will be a necessary feature of any broad-based global recovery” Q: The Olympics have taken place in difficult times before Do you think they can contribute improving things? SM:” The Olympics is one of the few truly global events that capture the attention of people on every continent In times of conflict, the Olympics can be a source of unity and an example of shared humanity The Games recognise national identities but transcend them as well Viewers see something universal in the effort and sacrifice of athletes from around the world That’s an extremely valuable contribution” “With everything going on in the world right now, a great London Olympics could potentially have an outsized impact on global sentiment” Q: How you think emerging markets have changed, and will continue to change, the Olympic landscape? SM:” At the core of our Growth Markets strategy is a point that many of us, including Jim O’Neill, have been making for some time: many economies in the so-called emerging world actually emerged long ago and are now pillars of global growth” “For China, this holds true on both the global economic stage and the Olympic medal stand China’s economy is now the second largest in the world We think it will surpass the United States by the middle of the next decade The Beijing Summer Games in 2008 provided a tangible display of china’s remarkable progress China’s economic development has also enabled investment in Olympic training programmes that have consistently and increasingly produced gold medal winners” “As other Growth Market countries continue their development, and the middle class grows, I would expect many to increase investment in Olympic programmes and produce more champions The greatest strength of the Olympics is the purity and continuity of the competition, the medal podium welcomes all comers” 27 Christopher J M Beer Impact of Olympics 154148 Research Project on Economic Q: What are the key aspects of Asia’s transformation from the Seoul Olympics in 1988 to the Beijing Olympics in 2008 that we are likely to continue to see going forward? SM:” Asia has witnessed significant growth in the nearly quarter of a century since the Seoul Olympics In 1990, the region accounted for about 24% of global GDP In 2030, we think that figure will be close to 40%, and Asia’s influence will expand commensurably” “The Asian financial crisis in 1998 was in retrospect a key turning point It produced painful structural reforms leading a number of countries in Asia to pursue prudent financial policies and build substantial foreign exchange reserves Many governments in the region are likely to continue this approach” “The crisis in 1998 also forced leaders in the region to examine the quality of past growth There was a realisation that an economic model driven purely by exports was unsustainable In time, this has led to policies that promote consumption The rise of the consumer in Asia is a very powerful trend, and we’re at a relatively early stage in its development” Q: What are some of the main connections you would like to see between the Olympics and Economics? SM: When infrastructure investment for an Olympics is done well, the Games can make a great contribution to the development of a city In 1984, reflecting on financial difficulties in prior years, Peter Ueberroth oversaw the Summer Olympics in Los Angeles as a business, without detracting at all from the spirit of the competition This set a standard for the modern Games as a source of growth and revitalisation for the host city Australia made substantial investments for the 2000 Summer Games in Sydney In particular, the Airport Line tunnel linking Sydney Airport with the Central Business District cut travel time between the two from an hour to about 20 minutes This has had a great impact on the city In addition to the investment in infrastructure, hosting the Olympics can raise the awareness and brand of a city or country The Beijing Games accomplished that goal Q: GS has been at the forefront of long-run economic research, projecting growth in the BRICs and other countries all the way to 2050 What you think the Olympics will look like in the future? 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