At the risk of sound glib, I believe the quadrennial fervor over the Summer Olympics is at least partially a function of the seemingly timeless nature of the competition. Set against the backdrop of the financial crisis in Rio de Janeiro, however, the games have become far more interesting, albeit tragic.
Sprinters this year will run the same 100 and 200 meter events that Jesse Owens ran in Berlin in 1936—though not under the specter of world warfare. Boxers are competing on the same stage that Cassius Clay did in Rome in 1960—though perhaps with a different set of crooked judges depending on exactly who’s hosting.
The feeling of the Olympics as a public finance boondoggle, however, is a recent development, and Rio’s financial crisis brings the issue to the forefront.

Wait, the Olympics Are a Drain on the Host Country’s Economy?

It was not long ago that hosting the Olympics was viewed not only as a source of immense national pride but a boon to the economy. (The feeling that hosting any athletic competition—playoff games, the NCAA basketball tourney, and the like—brings substantial local economic benefits is still a pernicious myth to dispel, but that’s a different discussion for a different day.)
If the embarrassment that is the 2016 Summer Olympics in Rio de Janeiro can have any lasting positive effects, it is in the broad public acceptance of exactly how fiscally ruinous hosing an Olympic Games can be.

Countries Are Literally Bidding for Financial Crisis

The pertinent question moving forward, however, is how countries can continue to justify bidding for the burden opportunity of hosting future Olympic Games.
To be fair, many delegations have started to withdraw their bids to host future games out of fear of the enormous financial commitment.

  • Last year, the USOC withdrew its bid for Boston to host the 2024 Summer Games over financial concerns.
  • Rome and Stockholm cited financial concerns when withdrawing their bids to host the 2020 Summer Games and the 2022 Winter Games, respectively.
  • Referenda in both Munich and Moritz failed to pass with local voters, again with regards to hosting the 2022 Winter Games. We are witnessing a broader acceptance of the economics of hosting so-called mega-events.

Nevertheless, we still see cities jockeying for the nominations. The process of justifying an Olympic bid highlights the difference between costs and benefits from a political perspective as opposed to an economic perspective.
In many countries, unfortunately, politics trump economic well-being.

Why Hosting the 2016 Summer Olympics Hasn’t Paid for Rio de Janeiro

Hosting an Olympic Games takes resources.
Cash is a fine place to begin, but more directly resources include concrete to build the infrastructure, steel to build the venues, and laborers to do the actual work.
This last resource is a political gold mine. Politicians can—and frequently do—point to job creation as a substantial economic benefit of hosting the Olympics. And in a vacuum, the statement is trivially accurate—Rio stands to have more Olympic-specific jobs created by hosting the Olympics than if they did not host the Olympics.
Further, it’s hard to find a better political opportunity than leading interested parties around a host of in-progress venue construction sites. (The post-Olympics photo-ops aren’t as lucrative.)
The problem, of course, is that we do not live in a vacuum.
Resources have many other uses (in economics-speak, resources have opportunity costs)—and Rio has shown this truth with remarkable clarity. While Olympics venues receive billions of dollars in funding, schools, hospitals and the police and fire departments all complain about a lack of funding.
The easily seen increases in activity around Olympic-specific projects are dramatically offset by a hidden lack of activity elsewhere.
As such, the political benefits from hosting are nothing but an illusion—what politicians count as an upside to hosting the Olympic Games are in reality a cost, and a substantial one at that.