The Olympic Hangover

  This summer, football enthusiasts all over the globe will be in for a real treat. Not only will June see the kick-off of the highly anticipated 2016 Euros in France, but also the Centennial Copa América in the US and finally in August, the Olympic Games in Rio. This historical summer, boasting three major…

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This summer, football enthusiasts all over the globe will be in for a real treat. Not only will June see the kick-off of the highly anticipated 2016 Euros in France, but also the Centennial Copa América in the US and finally in August, the Olympic Games in Rio. This historical summer, boasting three major championships will surely leave fans all over the world with an unprecedented post-championship depression. But as recent history tells us, the worst post-championship experiences might be reserved for the countries hosting the tournaments. Will 2016 be any different?

Media often describe these tournaments as huge parties and times of magic and love. While that may be true, it is nothing but tough love that faces the taxpayers paying for the party. Investing in infrastructure, top-notch sporting stadiums and other facilities to accommodate all the visitors is costly, especially if these facilities turn into White Elephants. A White Elephant is a term that denotes an object that is hard to get rid of, and that also costs much more than it contributes, if it contributes anything at all. . The 2004 Olympic Games in Athens and 2010 World Cup in South Africa, are often cited as horror examples that left the hosting countries with multiple white elephants and considerable economic hangovers. Brazil 2014 was not exactly a lucrative deal either.

One of the main problems with these tournaments was that several stadia, built for the championships, lacked a plan for use after the tournament. For instance, the Peter Mokaba stadium was newly built for the World Cup and hosted four games. After that, it had no real use. It cost approximately 150 million USD to build. Naturally, this seemingly mindless spending of taxpayer money received considerable critique. Another problem apart from the construction cost is the maintenance cost. In Greece, which has been in the spotlight for its economic troubles, the maintenance of the Olympic stadia costs about a staggering 500 million pounds a year. Knowing costs such as these might arise, how do the hosts reason the championship might be a good investment?

The driving factor, usually, is the expectation that the tournament will market the country in a positive way and subsequently bring about a rise in tourism. The immediate positive economic effect of the championship visitors and future tourists will eventually offset and motivate the initial investment. Not unusually, these estimates tend to be far too optimistic, for example, South Africa expected 450 000 fans to visit the 2010 world cup, in reality only 309 000 came.

Another important economic factor is that a considerable piece of the revenue ends up in the hands of IOC or FIFA; as these organizations own all rights. When FIFA claimed the 2010 world cup was a financial success, it was true, but only to FIFA. South Africa did poorly from a financial viewpoint. Partly because of the lower number of visitors, but also because FIFA and its sub-organizations (CONMEBOL, UEFA, etc) retain important and exclusive sales rights that boosts their revenue, rather than the revenue of the host.

The 2014 FIFA World Cup in Brazil became the most expensive world cup of all time. In just 2 years, Rio de Janeiro is now poised to host the summer Olympics. Although there may be synergies to be found, hosting the biggest sporting events in the world in just 2 years is quite costly, and the timing couldn’t be any worse. Brazil is currently in a deep economic recession, and Brazilian politics is currently in a state of turmoil as President Dilma Rousseff faces impeachment for corruption.

Rousseffs’s administration was wildly criticized for taking on the heavy cost of the 2014 World Cup, especially after the traumatic 1-7 elimination of Brazil at the hands of the eventual champions Germany. Some critics consider the championships a propaganda campaign aimed at turning away focus from Brazil’s domestic problems. Furthermore, preparation for the 2016 Olympics is going slowly, some of the facilities even risk not being completed in time. Obviously, that is not a good economic deal, and has turned additional attention to the cost-benefit analysis of hosting major sporting events.

With the 2016 Euros coming up in France, how is dealing with these challenges going?

First of all, France intends to use mainly current stadia. Of the four ones being constructed prior to the tournament, all have future tenants in top flight football teams that are need of stadia of a capacity of 40 000 +. Thus, these newly constructed arenas will turn into white elephants. In addition, France doesn’t need major investments in infrastructure since it is already in place. The major concern for France though, is security. Scarred by the Charlie Hebdo and Paris attacks, the 2016 euros will surely be the most heavily guarded sporting event ever. Apart from the direct cost of the security, will the threat deter any vistors?

That remains to be seen, as will the economic impact of the tournament, but it seems as if France at least has taken steps to prevent the Euro party leaving a massive economic hangover.

Having witnessed the negative economic outcomes of previous tournaments and games, fewer and fewer countries are willing to host future games. This is a considerable threat to unpolitical ideals of sport, as the only countries willing to host tournaments eventually will be either highly developed countries, such as the US or countries with a political motive. Sadly, there seems to be a trend towards the latter, demonstrated by FIFAs appointment of the 2018 and 2022 world cups to Russia and Qatar over England and USA. Both Russia and Qatar have been subjects to considerable critique and allegations over human rights abuse.

Surely, the big sporting tournaments are huge parties, but as with most parties, they don’t come without hangovers, and the nations considering hosting them should seriously ponder how they will feel the day after.

About Nådiga Lundtan

Founded in 1948 and has since been an important part of student life in the economics program at Lund University. Nådiga Lundtan covers a wide range of topics related to economics, society, and politics, as well as careers, entrepreneurship, and innovation. It is a platform for students to share their ideas and opinions on economics and related fields.

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