This post was originally published as the LinkedIn Weekend Essay on August 12, 2016.
This weekend, the final curtain will be drawn on the 2016 Summer Olympics, and life in Rio de Janeiro will begin to return to normal. Athletes, fans, and support staff will return to their home countries.
Temporary venues will be disassembled. Security gates, trashcans, and port-o-potties—all returned to storage. But while the Olympics may be over, its legacy will live on. The question for Rio residents is what shape this legacy will take.
If the past is any indication, the Rio 2016 “legacy” has a low bar to clear. Being selected as the host city for the Olympic Games is supposedly a high honor; in reality, it can leave some cities in worse shape than they were before. In retrospect, for example, the triumphant return of the Games to Athens in 2004, and the $9 billion that funded that effort, is now emblematic of the broader economic and fiscal crisis in that country, especially as many venues lay dormant, the government unable to afford even basic upkeep.
Before evaluating the prospects for Rio’s post-Olympic future, it’s helpful to first consider how hosting the Games might benefit cities. By our count, there are three potential benefits: a short-term stimulus to a city’s economy thanks to increased economic activity and tourism; a medium-term boost to a city’s international stature and brand that results from being featured prominently on the world stage; and finally, the long-term impact of what are typically substantial infrastructure investments and upgrades throughout the metropolitan area.
In practice, achieving a ‘surplus’ in any of these areas proves difficult.
Multiple economic studies have shown that there is no consistent or significant short-term positive effect of the Olympics games on local or national economies. In his 2015 book on large-scale sporting events, Circus Maximus, Andrew Zimbalist notes that the costs of hosting are rarely factored into bid budgets, meaning that the disruption of business, the construction of both sports and non-sports infrastructure, and the indirect costs of overcoming political gridlock often outweigh the more abstract benefits of feel-good nationalism and unity. A 2012 study by the University of Oxford found that every Olympic Games since 1960 has experienced cost overruns; the Rio Olympics are already predicted to have an overrun of $1.6 billion. Los Angeles, which eked out a profit in 1984 thanks to its use of existing venues, is the oft-cited exception that proves the rule.
If recent Games are any indication, there is also a negligible increase in international prestige as a result of hosting. Most media coverage in the run-up to these large-scale events seems to focus on the negatives—construction delays, cost overruns, and even labor and human rights issues. (See, Athens, Sochi, Beijing, London, and, yes, Rio.) And during the Games themselves, attention is, rightfully, on the athletes themselves.
Still, a few cities have successfully leveraged the bidding and hosting process to catalyse needed infrastructure improvements, urban redevelopment projects, or other investments that can provide substantial benefits in the long term. In my mind, this is the most significant potential benefit to hosting–If done right, the Olympics can be a galvanizing opportunity not just to attract investment, but also to upheave and replace decaying systems of transport or governance, to increase public participation in urban planning processes, and to accelerate the regeneration of older industrial or underserved areas of a city.
In the run-up to these Games, boosters including Mayor Eduardo Paes often cited Barcelona as a model for Rio. And, indeed, the ’92 Summer Games there came around at just the right time, as Barcelona’s economy was already emerging from a mid-century malaise that ended along with Franco’s regime, and with just the right plan to convert Olympic investments into long-term gain. The redevelopment of the Poblenou port district in Barcelona didn’t stop with the Olympics; in fact it accelerated after with the creation of the 22@ Innovation District, which now is home to over 4,000 tech-focused companies.
Similarly, London used the 2012 Olympics to undertake a large-scale urban regeneration project, with a focus on long-term economic development in the city’s East End. While still too soon to fully evaluate the lasting impact on the city, the neighborhood has experienced massive amount of public and private investment, the venues have found a second life as well-used public facilities, and there are the beginnings of a tech and creative district centered around Here East. This was a redevelopment project that needed to happen with or without the Games, but as former mayor Ken Livingston put it, the Olympic bid was “the only way to get billions of pounds out of the government to develop the East End.”
It’s worth noting that in both of these cases, the development and infrastructure projects could have been done more cheaply without the requirements of hosting the Games. But cities seem to value the bid as an “action-forcing event” enough to swallow this “Olympic tax.”
So where does this leave Rio?
First, as our colleagues from the Latin American Initiative at Brookings suggest, it’s important to remember the context in which Rio was bidding to host both the Summer Olympics in 2016 and the World Cup in 2014. Brazil and its second largest city appeared to be on a trajectory of unstoppable ascendancy, even among the competitive BRICs. With a booming economy and a growing international presence, hosting these events seemed like a key step in showing “how Brazil would like to be perceived by the world.”
Yet in the period since their bid was selected, Brazil’s economy has stalled, largely due to a global slowdown in demand for commodities. The national government and the state oil company are embroiled in a wide-ranging corruption scandal that threatens to put President Dilma Rousseff behind bars. The outbreak of the Zika virus has only added to negative publicity, with some prominent athletes citing health risks as one reason to skip the Games.
These national crises have only exacerbated existing challenges for the Rio de Janeiro metro. A recent Brookings publication that included the city in an economic benchmarking analysis placed the city well behind its peers in economic growth, inequality, and education. Most starkly: over the past 15 years, Rio’s economy has experienced zero productivity growth. In this economic and social context, diverting precious public resources towards the Olympics demands a substantial return-on-investment.
Unfortunately, the economic history of the Games certainly points to a low probability of significant short-term economic surplus, especially in a city that already has a robust tourism industry. Indeed, it’s possible that some higher-value tourism spending could be crowded-out, as some evidence suggests happened in London in 2012.
The timing of the Games may have also brought international attention to Rio at exactly the wrong time, perhaps even damaging the city’s brand. Hosting the Olympics has turned into a self-imposed crisis of governance, economics and civil society. As Mayor Paes admitted to the Guardian last week, “This is a missed opportunity. We are not showcasing ourselves. With all these economic and political crises, with all these scandals, it is not the best moment to be in the eyes of the world. This is bad.”
Much of the weight of Rio’s Olympic legacy will fall on how it was remade physically. Initial reviews are mixed. Transportation and transit infrastructure has been a focus and significant investments have been made: a new light rail line opened just prior to the opening ceremony and extensive new bus rapid transit lines have been inaugurated through the city. There have already been results: the government claims transit use has increased from 18 percent to 63 percent in just the years since the bid, which doesn’t even take into account the just-opened light rail. And while Rio’s project have suffered from similar cost overruns to past hosts, roughly 40 percent of infrastructure spending has come from public-private partnerships, spreading risk beyond the public sector.
Yet, as our colleague Joe Kane makes clear, for a city that struggles not just from economic but also physical segregation, the Olympic investments have done little to better integrate Rio’s favelas in the north, apart from a new cable car connection to the city center and the broader transit system. BRT extensions into the North Zone has been more criticized for the displacement they’ve cause rather than praised for better integration to the rest of the city. Further, the city’s failure to deliver on promised environmental clean-up in the waters around Rio will leave not just in a spat of embarrassing news stories but also a continuing threat to public health.
Ultimately, cities in pursuit of an Olympic bid should ask themselves, “What problem are we trying to solve?” and make sure they have a good answer. In the case of Barcelona, the bid was a galvanizing event that successfully accelerated existing urban redevelopment plans. In the case of Athens, the attempt to shine on the world stage was a final straw on the path to bankruptcy. In Rio, they’ve made their bet that using the Games to substantially redevelop their transit and transportation infrastructure will be worth the “Olympic tax.” Time will tell if local leaders are right.
Perhaps the bid itself is one Olympic event where it’s better to come in second. A failed plan can force cities to develop the civic infrastructure and long-term strategy required for a planning committee without having to build excess venues or overspend on logistics and security.
Manchester, a runner-up for the Summer Olympics in both 1996 and 2000, has undergone significant regeneration along the East side corridor, thanks to extensive light rail and redevelopment projects that went ahead despite the rejection of their bid. These investments ultimately brought the (much smaller-scale) Commonwealth Games to the city in 2002 and, in the end, the process unified stakeholders across the city and metro area, which is now a model for metropolitan governance and autonomy within Britain.
Similarly, New York City’s failed bid for the 2012 Olympics resulted in a number of transformational changes to the city, including a massive rezoning of the West Side of Manhattan, the construction of a large affordable housing project in Queens on what would have been the site of the Olympic Village, and the development of Hudson Yards.
Clearly there is some value in civic-enabling and long-term economic vision that comes along with an Olympic bid. Done well, it can become the gift that keeps on giving.
Still, any city thinking about an Olympic bid must clearly and thoughtfully consider the costs and benefits. Or maybe, as Circus Maximus author Zimbalist suggests, the Games should just be in L.A. every year.
 Billings and Holladay (2012) showed no significant positive effect on trade or openness. Von Rekowsy (2013) demonstrated that mega-events like the Olympics or the World Cup offered no substantive lasting economic benefits. Hotchkiss, Moore, and Zobey (2003) found wage gains, but not employment gains in the 1996 Summer Olympics.