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Olympic Extravaganza

It’s Time for the Games to Have a Home

As athletes converge on Sochi for the most expensive Olympics ever, an old idea is due for revival: Find the games a permanent home.

Russia has spent about $50 billion to build a ski resort from scratch in Sochi: not just trails and snow-making machines, but also roads, rail links, hotels, even a power plant. It’s a remarkable achievement, not least because the Winter Games are less than a third the size of the Summer Games, and London spent only about $14.5 billion in 2012.

No doubt these Olympics will produce their share of indelible memories, consisting of something more than toilet mishaps. Still, it is clear by now not only that this bid should never have been accepted, but also that the selection process is irredeemably wasteful and corrupt.

President Vladimir Putin is hoping his investment will pay off over time, that Sochi will become a Russian Courchevel or Aspen, attracting skiers from around the world. Too many Olympic hosts have used this kind of wishful thinking to justify excessive costs; the projected benefits rarely if ever materialize. The question for Putin is this: If it made such good sense to build a major ski resort around Sochi — a subtropical Black Sea beach resort at the western end of the war-torn North Caucasus — why wasn’t it there already?

Overspending on the Olympics can do real economic harm to national economies and has little impact on the quality of the competition. Montreal spent 30 years paying off its debt from hosting the 1976 Summer Olympics. Greece spent $16 billion on the 2004 games in Athens, piling up debts that contributed to the collapse of its economy six years later, even as Olympic venues rotted in disuse.

Russia, unlike Greece or Montreal, can afford to pay. Yet the opportunity costs for a country that faces vast unmet development needs and slowing economic growth are impossible to justify. The decision by Russian anti-corruption blogger Alexei Navalny to display the cost of each Sochi-related investment in terms of the MacBooks, broadband access and highways it might have bought for the rest of Russia is telling.

The selection process for the Olympics has become a perverse form of auction, in which contestants bid one another up before judges whose interest in putting on the biggest, most eye-catching show possible is utterly divorced from the economics involved. With each successive tale of financial woe, sports economists and athletes have called for a single, permanent venue for the Summer and Winter Games.

Olympia in Greece, which hosted the games for almost 12 centuries from 776 BC, is often proposed for the Summer Games — indeed the Greek government offered 1,250 acres near Olympia in 1980. The Winter Games could take place in Japan, say, or Switzerland. At these permanent locations, the investment in state-of-the-art facilities would make financial sense. The venues could be carved out on neutral soil, much like the United Nations in New York, and operated using revenue from tickets, TV rights and merchandise.

Another reason to find the games a permanent home is politics. Sochi has attracted controversy for Russia’s laws against promoting homosexuality. The Beijing Games in 2008 were a concern for many because of China’s poor human-rights record. And the tit-for-tat U.S. and Soviet boycotts of the games, in Moscow in 1980 and Los Angeles four years later, did huge damage. (In 1984, Congress debated a resolution in favor of a fixed Olympic home, precisely to end such boycotts. It passed Congress — and into oblivion.)

To meet the criticism that grounding the games would favor one part of the world over others, maybe there could be five permanent venues, in Africa, Asia, Europe, and North and South America, and the games could rotate among them. Which solution is used to end Olympics inflation, and the corruption it encourages, is not so important. What matters is that one is chosen — and that the selection merry-go-round stops.

Bloomberg News