Don't Believe the Hype--Little Economic Benefit from Olympics

Olympic impact hardly substantial from 2003-08

By Vaughn Palmer, Vancouver Sun, November 6, 2009

It was billed as "the most comprehensive study" ever undertaken into the impacts of the 2010 Winter Games or any other Olympics.

"No previous study has approached measuring the impacts of the Games in so many ways over so long a time," announced the covering report released Thursday by the provincial and federal governments.

The four-part study by the PricewaterhouseCoopers (PwC) accounting firm was not a look ahead at what may or may not result from Games-related activity in 2010 or afterwards. Rather this is an impressive attempt to calculate actual impacts, starting in 2003 when the province was awarded the Games and continuing up to the end of 2008, a period of six years.

So what did taxpayers reap from their considerable investments in bringing the Olympics to B.C, as reckoned by the two most important economic indicators, growth and job creation? The answer, tucked inside the more than two hundred pages, may come as a surprise to readers familiar only with the claims of politicians and Games boosters.

For the authors calculate that Winter Games spending increased economic growth by between 0.10 per cent and 0.13 per cent annually in the years examined. Yes, you read that correctly. The economy grew by one tenth of a percentage point per year more than it would have done without the preparations for the Olympics.

Job creation was on the same scale. The authors' middle-of-the-range estimate is that Olympic spending created 18,362 person-years of employment. Keeping in mind that this was over the same six years, it translates into an average of 3,000 jobs per year at a time when 2.3 million British Columbians were employed.

Haul out the pocket calculator -- and I did check my math with the folks at PwC and was assured that it was "correct" -- and you will discover that the Games boosted employment by about one tenth of one per cent.

Now you can spend a lot of time searching media reports and you'll still not find a politician justifying the amounts spent on the Olympics because they will boost economic growth and job creation by -- take a deep breath, ladies and gentlemen -- "one tenth of one percent."

On the contrary, when asked about the economic payoffs, Premier Gordon Campbell and his ministers tend to go Carl Sagan on us, talking about "billions and billions" worth of impact.

Those claims are grounded in some less authoritative earlier studies, which extrapolated the Games impacts over years and even decades. The most widely quoted study lumped in the reputed economic spinoffs from the new Vancouver Convention Centre up to the year 2037(!), never mind that the Liberals refused to count one dollar of the close to $1-billion cost of the place as an Olympic expenditure.

It remains an open question to what extent actual benefits will materialize in the future. As a representative of PricewaterhouseCoopers told reporters, "we tried not to get into the projection business."

Nor will those looking to compare the costs and benefits to date find any satisfaction in the study. "It is not a cost-benefit analysis," says the covering report. "It was not intended to address the question as to what the net balance would be between economic and social benefits from hosting the Olympics and the costs incurred. The report was not intended to address the issue of return per dollar spent."

The study also raises the likelihood that the Olympic preparations, being undertaken during a boom, may have to some degree displaced other economic activity.

"If an economy is already operating at or above capacity, the impact of the new aggregate demand may simply displace competing projects or drive up material costs and wages as firms compete for scarce resources," say the authors.

B.C. was undergoing just such a surge in the years covered. Consequently, "significant cost pressures in the B.C. economy likely forced some projects to be delayed or abandoned."

None of which says that Games spending had no effect. If governments spend hundreds of millions on the Olympics, it has a positive impact, particularly if you happen to be in line for some of those dollars as supplier, contractor or worker. But the overall benefit may be no greater than if the government had spent the money on something other than a sporting event.

"There is no positive correlation between sports facility construction and economic development," said a report commissioned by the British government in advance of that country's successful bid for the 2012 Summer Games. Rather, the demonstrable benefit was what the report's authors called "the feel-good factor," meaning the boost in morale, public spirit, and other wholesome things.

Premier Gordon Campbell said much the same thing during one of his more realistic sales pitches: "The Olympics is about the future. It's about sport, it's about youth, it's about excellence, it's about showing B.C. off to the world."

Those making more grandiose claims on the economic front should keep things in perspective. One tenth of a percentage point is nothing to crow about.

vpalmer@shawlink.ca