The Agony of Victory
Perhaps not. I have noticed a curious pattern in the economic history of countries that host the Olympics. Several years ago, I compared the performance of these countries before and after the Games. On average, host countries enjoyed an upswing in their GDP in the run up to the Games, maxing out at nearly 1.5 percent above average. Immediately after the Games, however, they suffered a small decline, relative to their average GDP.

This pattern makes sense. A host country—in the months or years before the Games—will invest massive resources into the construction of infrastructure for the Olympics, giving the economy a short-term boost. After the Olympic flame burns out, the stimulus is gone. The Games may leave the host with significant bills to pay as well.

Of course, I did not account for the full range of economic factors that also affect GDP. In a country like the United States, the Games might prove to be only a blip on the economic radar screen. However, the Olympic effect on a small country such as Greece may be profound. Countries also differ to the degree that they rely on various sectors, such as tourism, and this helps to determine how hosting the Games will affect their economies.

Tourism accounts for approximately $30 billion (or roughly 15 percent) per year of Greece’s GDP. An upswing in this sector could prove a financial windfall for this small nation. However, the Games do not always yield bumper crops of tourists, and the economic impact on host nations is not always unambiguously positive. There are significant risks to a host nation, especially one as small as Greece.

For example, there have been construction delays at some of the major venues in Athens. Although the International Olympic Committee (IOC) has reported that all facilities should be finished on schedule, builders have certainly earned no gold medals. The swimming arena, for example, will have to host events without a roof. Greek builders failing on the world stage might actually hurt the country’s manufacturing exporters, who would be—perhaps unfairly—tainted by their countrymen’s very public failure.

Terrorism represents another peril. According to the Washington Post, the IOC has purchased a $170 million insurance policy in case it must cancel the Games due to terrorism or natural disaster. If there were an incident, and foreign visitors came to perceive Greece as unsafe, it would certainly hamper tourism. The relatively small bombing incident at the Atlanta Games demonstrates how easy it is for malicious individuals to distract attention from the Games, and to taint the image of the host.

Debt is another sticky issue. Due in part to its spending to prepare for the Olympics, Greece exceeded the European Union’s 3 percent budget-deficit limit for governments, posting a 3.2 percent gap in 2003. Many predict a similar shortfall this year. This exacerbates the nation’s already-high debt level, which exceeds 100 percent of GDP. Fortunately for Greece, this has not yet affected the credit ratings on its securities.

While it might be too late to play in the construction game, those interested in investing in Greek debt might still have a race to run. After all, Greece will be paying for these Games long after the last Olympic medal is awarded.

John S. Irons is an economist at OMB Watch, a Washington, D.C.-based government watchdog organization, and founder of ArgMax.com, an award-winning economics website.

Art by Matt Mahurin