London pips Paris at the finishing line

Jul 6th 2005
From The Economist Global Agenda

In one of the closest contests in the history of the modern Olympics, London has been chosen to host the 2012 games, edging out Paris in the final round of voting. After Athens’s soaring costs and its struggles to get the venues ready in time for the 2004 games, should Londoners really be celebrating?

THE original Olympics, in Ancient Greece, were protected by an “Olympic truce”, in which the warring kingdoms that sent teams to the games suspended hostilities for the duration of the competition, so their athletes could travel safely to and from Olympia. There has been little sign of a truce in the past week between the quarrelsome French and British, whose capitals were the front-runners of the five cities shortlisted to host the 2012 games. Still smarting from his recent clashes with Tony Blair over the European Union’s budget, President Jacques Chirac reportedly made disparaging remarks about British food, prompting complaints that he was trying to undermine London’s chances. The French, in turn, cried foul when an official linked to the London bid questioned the suitability of Paris’s Stade de France, flouting a rule forbidding criticism of rival bids.

When the International Olympic Committee (IOC) convened in Singapore on Wednesday July 6th to hear the five cities’ final presentations and make its choice, the voting was as close as Jacques Rogge, the IOC’s president, had predicted. It went to four rounds of balloting, with Moscow, then New York, then Madrid being eliminated. Despite Mr Chirac’s impassioned plea, delivered in person to the committee, to “put your trust in France”, the final round went in London’s favour, by 54 votes to 50. Celebrations broke out in Trafalgar Square—built to commemorate an even more famous British victory over France exactly 200 years ago—and Mr Blair, who had already flown back from Singapore to host the Group of Eight summit in Gleneagles, called it “a momentous day for London”.

London has hosted the Olympics before, in 1908 and 1948, though on both these occasions it was simply awarded the games without having to bid. Mr Blair’s government had at first dithered over whether to back London’s bid—and the finance minister, Gordon Brown, was said to be against it. Among Londoners there has been strong, though not overwhelming, support for hosting the games. Some of the capital’s residents, including The Economist, wonder if the supposed benefits will justify the predicted £2.4 billion ($4.2 billion) public subsidy that will be needed to build new facilities. There are also worries that London’s already overcrowded metro and commuter-rail services will be unable to withstand an extra half a million or so visitors.

A large chunk of the subsidy is likely to come from the national lottery—which at least is voluntary. But the rest will come from a surcharge on Londoners’ residential-property taxes. The London bid’s organisers insist there will be no repeat of the near-fiasco of the 2004 Athens games, in which some of the main facilities only just got built in time and the event ended up costing €8.8 billion ($10.5 billion)—almost double the original budget. But Britain’s track record in completing big infrastructure projects on time and on budget is hardly impressive.

Mr Blair said the London games would regenerate the Lower Lea Valley, a part of London’s East End which has seen little of Britain’s long economic boom. An Olympic village, including several of the event’s main stadiums, will be built there, though the best of the city’s existing sports venues will host some events: the archery competition will be held at Lord’s cricket ground, and Wimbledon will stage the tennis tournament. Besides the spending directly related to the games, the government and London’s mayor, Ken Livingstone, are promising to spend a further £18 billion or more to improve the city’s transport system—widely seen as the weakest point in its Olympics bid. However, while a new high-speed rail link to the Channel Tunnel will be ready in time for the games, the much-needed new Crossrail line, running from east to west across the capital, will probably not.

Costs and benefits

Since the early 1970s, the summer Olympics (held every four years, with a winter games halfway between) have typically made an operating profit, with around half of revenues coming from the sale of broadcasting rights ($1.5 billion in the 2004 games). However, this is before accounting for the cost of building new facilities, which has often wiped out the operational surplus. After the financially disastrous Montreal games in 1976, which left the Canadian city with enormous debts, important lessons were learned: use existing facilities where possible; and get the private sector to pick up as much of the tab as it will accept. The glitzy, commercialised 1984 Los Angeles games successfully demonstrated how this could be done. According to Holger Preuss, a German academic who studies sports economics, all subsequent summer Olympics avoided losses, after accounting for construction costs, until the 2000 Sydney games, which suffered only a modest loss.

However, assessing fully the costs and benefits of hosting the Olympics means adding in many other, harder to measure factors. Backers of an Olympics bid often stress the boost to the local tourism trade, and local tax revenues, from receiving tens of thousands of competitors and officials, and hundreds of thousands of spectators. But some tourists who might have come to London anyway may stay away in the summer of 2012 to avoid the crowds. Will the expensive new accommodation and stadiums give a long-term boost to the East End like that enjoyed by Barcelona’s waterfront, regenerated for the 1992 Olympics? Or will London be left with a herd of white elephants like the Millennium Dome, just across the Thames? It depends on how useful the new facilities prove to be after the games are over. To their credit, the organisers have already drawn up plans to turn the Olympic village into 3,600 flats for lower-paid Londoners, such as nurses and teachers.

Then there are such imponderables as the boost to London’s and Britain’s prestige from hosting the world’s most important sporting occasion—and the boost this will give to Londoners’ morale. For sceptics, such arguments may well apply for developing countries (like China, which is to host the 2008 games) and derelict post-industrial cities desperate for an image makeover, but London is already prosperous, littered with prestigious buildings, and near the top of any tourist’s itinerary. With the city now committed to putting on the games in 2012, it can only be hoped that they will bring enough benefits to compensate for the crowding and disruption, the security risks and the potential financial losses.

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