Economists have long argued that, rather than consumption, tourism and prestige, the games leave high debt, wasteful infrastructure and onerous maintenance obligations
SILENCE FILLS the official merchandise shop in Tokyo’s Aqua City mall, just steps from the Olympic village. It had hoped to do brisk business selling everything from T-shirts to traditional daruma dolls to hordes of fans. But the pandemic means that the games, which are due to open on July 23rd, will proceed with little fanfare. Sales are just 10% of what was projected, the shop’s manager laments.
. In a 2016 paper Victor Matheson and Robert Baade, two American academics, concluded that “in most cases the Olympics are a money-losing proposition for host cities.” The games this year offer plenty more grist for the sceptics’ mill. “It would have been better not to have them,” says Suehiro Toru of Daiwa Securities, an investment bank, expressing a sentiment common in Japan among economists and non-economists alike.
Calculating the economic impact of mega-events like the Olympics can be tricky. Organisers and critics argue over which costs are actually incurred by the games, and which are investments cities would have undertaken anyway. But one near-certainty is that the games blow the budget. Alexander Budzier, Bent Flyvbjerg and Daniel Lunn of Oxford University find that every Olympics since 1960 has overspent, by an average of 172% in real terms. Tokyo fits the pattern.
A Tokyo government study in 2017 projected that the returns would more than make up for the costs. It estimated that the games would generate ¥14trn of additional demand. Part of the boost comes from the construction of new infrastructure, though such projects can often crowd out investments in other, more useful areas. Another benefit usually comes from consumption around the games, on everything from tickets to food and drink.
Much of the gain is expected to come from the woollier category of “legacy effects”, such as increases in tourism and also the use of transport and other infrastructure after the tournament ends. But those projections are probably overstated to begin with, and the pandemic will erode much of them, argues Miyamoto Katsuhiro of Kansai University.
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