Why Spending on the London Olympic Games Is Good for the Economy - Case Study Example

Politicians justify spending on the London Olympic Games as “being good for the economy”. Explain their reasoning. Introduction Summer this year in London will see the opening of the XXX Games of the Olympiad. The games are set to start on the 27th of July to the 12th of August and will mark the third time that the city will host the games. The city was selected as host city after winning over other bidders like Moscow, New York City, Madrid and Paris in 2005. Due to this event, various developments and redevelopments have been and are being carried out in London. Venues which were considered include the Wembley Stadium, Wembley Arena, Wimbledon All England Club, Lord’s Cricket Ground, the O2 Arena, Earls Court Exhibition Centre, and the Excel Centre among others. With the onset of the games, government officials are declaring that the games would be good for the economy and justify spending because of the benefits which the games can bring to the city and the country in general. This paper shall explain the various justifications being made for the spending on the London Olympic Games. Body In general, the Olympic Games is a major sports event which has a significant scale and can potentially bring about economic developments for the host city or for the host country as a whole. The games usually unfolds for a few weeks only however, the preparations for the games usually takes place months, even years before the event and would require considerable investments from the government and the private sector. Its impact on the economy soon after the games can also be significant and sustainable for years after the event (Pricewaterhouse Coopers, 2004). This potential can also be seen with the London Olympics. The exact economic impact of the Olympic Games to the host country or city is spread out over years and is seen in three stages – before, during, and after the games. Government officials are justified in spending for the games because it draws in investments from private investors who can assist in preparing the city for the games (Davies, 2005). This can therefore boost tourism within the months leading up to the event, especially with the expectation of watching the games (Pricewaterhouse Coopers, 2004). In effect, the city would now have a higher profile among tourists as well as proper venue for any other potential sports events. During the games, economic activities within the city would also increase through the tourists and through the athletes attending the games. Finally, after the games, the Olympic legacy potentially would keep drawing in more tourists and investors because of the infrastructures and the other attraction which the city can now offer (Pricewaterhouse Coopers, 2004). Tourism is one of the major benefits of the Olympics, one which can be seen before, during, and after the games. The Olympics provide a special avenue which draws local and foreign tourists to the city. Visitors who are involved in the games, including the athletes, coaches, and other team officials, as well as the spectators, media, and sponsors are to be accommodated within the city (Booth, 2009). The promotion of the games would also draw in the tourists due to the media exposure and enhanced international reputation. The visitors would start to trickle in within a few months from the games and would swell to bigger numbers during the games. Therefore, the Olympics can sustain the city’s economy for several years after the Games (London Development Agency, 2008). Tourists can increase demands on the regional and local economy with visitors spending money on food, accommodations, transportation, and tickets for the Games. The revenues from the media broadcast and sponsors will also accrue to the city; and the IOC would generally profit from these revenues (Pricewaterhouse Coopers, 2004). Secondary effects would also be seen with money being spent within the host country. This is known as the multiplier effect where additional activities and employment opportunities related to the games are made available to the people, to local businesses, and companies (Owen, 2005). Financing the construction projects which would accommodate the different sports events would be costly, however, in the long-term, the host city would also benefit from these projects. The productivity of the city is potentially increased through improved transport services and the enhanced sports facilities can also increase the city’s potential to host other national and international games in the future (Blake, 2005). It can also engage the participation of residents in trying to make the city a more attractive city to live in. The preparation for the Games can also lead to the renovation of rundown areas and these developments serve as an important legacy to the city. The Games also potentially offer business contacts for the local businesses which may later develop into long-term partnerships (Glynn, 2008). The media exposure during the Games can also support the city’s reputation with attractive business centres drawing in new investments and trade for corporations. The preparations made for the Games also increase the city’s human capital with employees given additional training in fields of telecommunication and language (Pricewaterhouse Coopers, 2004). The government announced that it is expected to offer 30,000 new jobs from 2009 to 2012 with the construction force for the Olympics. This number is expected to add about 6000 more construction jobs by the end of 2009 (Halper, 2009). As for job distribution, about 24% would most likely be local residents with 58% coming from London and 9% from unemployed sector. The London Development Agency also set out to plan regeneration for the five boroughs which would directly be involved in the hosting of the Games (Halper, 2009). These boroughs include: Greenwich, Hackney, Newham, Tower Hamlets, and Waltham Forest. These plans are set to continue even beyond the 2012 Olympic Games with benefits seen for 10,000 new homes, added to the 3000 homes for the Olympic village (Halper, 2009). There will also be a National Skills Academy for Sports in the Olympic stadium which would host the creative and technical industries. Beyond London, various development agencies also foresee various economic benefits. In the East England Development Agency volunteers are also set to gain skills and experience for future paid work. Moreover, supply chain opportunities are expected for about 75,000 businesses in different areas which would be required to provide goods and services for the Games (House of Commons, 2009). The Olympic Games Impact Study by the Pricewaterhouse Coopers as commissioned by the Department for Culture, Media, and Sport evaluated the financial impact of the Olympic Games and concluded that net benefits would be felt by London and England as a result of the Olympic Games. The report concluded that there would be an increase of London’s GDP by 5.9 billion pounds from 2005-2016 if London would host the Games (Pricewaterhouse Coopers, 2004). Half a billion pounds increase would be seen within the five boroughs covered by the Games. For UK in general, the net financial benefit is expected to ring in at 1.9 billion pounds. As to when this development would be felt, the report declared that the impact in terms of GDP would be seen as the construction for the Games would be carried out. For the UK in general, the effect on the GDP would be felt most over the period of the Games. These differences indicate the assumption that as compared to the hosting and the not hosting scenario for the Olympic Games, there are significant benefits and impacts which would be seen (Halper, 2009). These benefits would not be seen and felt if the Olympic Games would not be hosted by London and if London would also not allocate financially for the conduct of the Games. Inward investments would also be attracted with the hosting of the Games. London is already a top tourist draw in the international tourism scene, however it is also competing with other cities as a prime destination in Europe (Halper, 2009). By expanding the profile of London through the Olympic Games, the city can be promoted internationally; and such promotions can draw in investors. Various impacts would also be seen in terms of visitor spending during the event itself; it would also be seen in terms of the number of days tourists would spend in London which would also see a significant increase (Halper, 2009). With increased economic activities, the costs allocated by the government officials for the Olympic Games can only be beneficial for the city and the country in general. The major benefits for the city would be seen in the construction and the transportation developments which would be carried out before the games. Business services would be seen mostly during the actual Games itself. Spending for the Olympic Games would also be beneficial in terms of socio-economic considerations. For one, there is a greater job security which would be felt by the people of London, as well as higher levels of income, social cohesion, and improved access to housing and education. Amenities and transport systems would also have better availability (Gold, 2007). The people of London would also find a better balance in most aspects of their life, mostly arising from their social, economical, and emotional interactions with each other and their city officials. Spending for the Olympic Games is therefore justified because it can bring about economic, as well as social, health, and cultural benefits for London and the rest of the United Kingdom (Gold, 2007). Conclusion Spending for the Olympic Games by the government officials is justified because it can bring about significant economic benefits for the city and for the rest of the UK. Since London won in the 2005 bidding for the 2012 Olympic Games, government spending has been extensive in an effort to prepare the city for the hosting. These funds have been allocated mostly for construction activities for the various stadiums which would be used for the Games, as well as for the housing facilities which would be used by the athletes. These activities have created employment opportunities for many residents of London. The preparations for the Games have also drawn in various investors wanting to sponsor and invest in the various activities which were happening in the city. Tourists have been enticed to visit the city. London has been revitalized as a prime tourist spot because of the added prestige of hosting the Games. Tourists would continue to arrive in the city before and during the actual Games, as spectators and also as supporters for the athletes. Their entry would mean more business and economic activities for the city. The city would also benefit from the rebuilding, refurbishing and regeneration activities which the government would be carrying out. Although the government would likely spend millions for the successful conduct of the Games in London, money would also be well spent and justified because it would generate economic profits for the city which would be felt before, during, and long after the Games would end. References 1. Blake, A., The Economic Impact of the London 2012 Olympics, Nottingham University Business School Working Paper No. 5, 2005, accessed 28 February 2012 www.nottingham.ac.uk/ttri/pdf/2005_5.pdf 2. Booth, R., Olympics to sprint ahead with workforce of 6,000, The Guardian, 2009, accessed 28 February 2012 www.guardian.co.uk/uk/2009/jan/09/olympics-2012-workforce 3. Davies, E., The Olympics economic benefits, BBC News, 2005, accessed 27 February 2012 http://news.bbc.co.uk/2/hi/business/4657325.stm 4. Glynn, M., Configuring the field of play: how hosting the Olympic Games impacts civic community, Journal of Management Studies, 45, 6 (2008), 1117-1146 5. Gold, J. and Gold, M. (eds), Olympic cities : city agendas, planning and the world games, 1896-2012. (London: Routledge, 2007). 6. Halper, S. Sources about the likely economic impact of the Olympics 2012 on London, 2009, accessed 28 February 2012 http://www.bl.uk/sportandsociety/exploresocsci/businesseconomics/economics/articles/economicimpact.pdf 7. House of Commons, Olympic Games 2012: Greater London, 2009, accessed 29 February 2012 http://www.parliament.the-stationery-office.com/pa/cm200809/cmhansrd/cm090224/text/90224w0021.htm 8. London Development Agency, London Development Agency Shaping the Olympic Park Legacy, 2008, accessed 28 February 2012 http://www.lda.gov.uk/server.php?show=ConWebDoc.2501 9. Owen. J., Estimating the Cost and Benefit of Hosting Olympic Games: What Can Beijing Expect from Its 2008 Games?, The Industrial Geographer, 2005, accessed 29 February 2012 http://findarticles.com/p/articles/mi_qa4127/is_200510/ai_n15705690 10. Pricewaterhouse Coopers, The economic impact of the Olympic Games, 2004, accessed 28 February 2012 http://www.pages.drexel.edu/~rosenl/sports%20Folder/Economic%20Impact%20of%20Olympics%20PWC.pdf Read More