The Most Dangerous Games: The Madness of Hosting Big Events like the World Cup or Olympics

In the 1982 film Fitzcarraldo, the titular character is possessed by a feverish, insatiable, maniacal dream: to erect an opera house deep within the heart of the Amazon. His descent into madness is actually marked by an ascent. Exploiting the strong backs of the natives, he hatches a scheme to haul a 350-ton steamship up a 40-degree mountainous incline, in pursuit of his quest to lure tenor Enrico Caruso to the jungle.

And yet, reality transcends fiction, even on the set of this very film. Director Werner Herzog and star Klaus Kinski attempted, multiple times, to murder one another. The director pulled a gun on Kinski. He plotted to set Kinski's home ablaze and was only chased off by the actor's dog. The Indian actors mistreated by Kinski's character on-camera enjoyed him even less off-camera; their chief offered to kill him for Herzog.

This offer was declined. Herzog later made a documentary about Kinski: “Klaus was one of the greatest actors of the century,” Herzog said at that film's premiere, “but he was also a monster and a great pestilence.”

Crazy actor, crazy director, guns, matches, jungles, booze — hey, stuff happens. But now, at this very moment, the plot of Fitzcarraldo is being re-enacted in pursuit of a feverish, insatiable, maniacal dream — which once again exploits the natives.

As part of this year's ongoing World Cup, the Brazilian government erected a 46,000-seat, $270 million stadium on the public dime in the remote Amazonian locale of Manaus, a city largely inaccessible by land. In fact, the stadium's components had to be steamed in from Portugal, though, thankfully, none of these ships were hauled up a mountainside. Following the Cup, the stadium will, presumably, revert to the local club team, which draws 4,000 spectators per match.

In the capital city of Brasilia, the showcase stadium cost (at least) $900 million. That city has no professional team. Conservatively, the Brazilian government has poured upwards of $11 billion into infrastructure to host a four-week party.

Scholars studying the economics (or lack thereof) of “mega-events” have spent decades producing stadiums full of analyses. And, at this point, a politician who promises an economic windfall from a forthcoming massive sporting spectacle is on equal footing with climate change deniers and Young Earth creationists.

And yet, they do. They always do. Again and again. And so, Mayor Ed Lee recently announced that San Francisco had landed on the short list for potential American host cities of the 2024 Summer Olympics. He did so late on a recent Friday, quietly and almost surreptitiously; you could barely hear the natives starting to tug at that steamship.

Per Lee, a San Francisco Olympiad could “positively transform our region, accelerating and delivering tremendous long-term benefits… including thousands of units of new affordable housing, improved transportation, jobs, new parks and athletic facilities for our residents.”

And the economists laughed. They've seen this opera before.

Once in every economics paper, at the very least, you'll run into an equation with 10 variables and odd, squiggly symbols resembling the sort of thing you'd find at a UFO crash site. And yet, the essence of whether a mega-event works for a city or is a publicly funded debacle hinges on two of the simplest concepts an economist will ever be asked to explain: monopolies and supply-and-demand.

In most money ventures, there's healthy competition. There are options. But sometimes, for the biggest-money ventures, the options are limited. At the level of a mega-event, you're dealing with truly monopolistic entities. When it comes to the Olympics or World Cup, the International Olympic Committee (IOC) and Fédération Internationale de Football Association (FIFA) possess unlimited market power.

And this is where supply and demand comes in. On the heels of terrorists marring the 1972 Munich Olympics and Montreal incurring $1.2 billion in debt on the '76 games (paying it off required 30 years), cities weren't exactly lining up to host the event. So, when Los Angeles won the '84 Summer Games, it was the sole bidder. And, as such, city and state officials called the shots. Rather than erect superfluous, opera-in-the-jungle stadiums, L.A. dropped everyone into the same elegantly crumbling arenas that hosted the '32 games.

Olympic backers banked hundreds of millions in profit. And that has been the undoing of every city since: Seduced by the promise of a windfall made possible only by a lack of bidders, a glut of bidders leaped into the fray and wrecked the equation. The balance of power is now back with the IOC, and the result has been bribery scandals, spectacularly elevating financial burdens, astonishing corruption, and herds of white elephant sporting facilities.

“What do you do with a velodrome after a couple weeks riding bikes around it? Roller derby?” asks University of South Florida economist Philip Porter. Heavy investment in sporting facilities and the roads and buildings necessary to serve them hasn't worked out well for prior Olympic hosts. The housing erected for the 1996 Atlanta games, Porter notes, was given to Georgia State University — and has since been demolished because it turned out to be too chintzy to even serve undergraduates. The aquatic center inherited, gratis, by Georgia Tech required millions in school funds to enclose it and allow people to swim in the winter months.

And herein lies the great paradox of a potential San Francisco Bay Area Games, points out Holy Cross economist Victor Matheson: This region, blessed with strong transit, three international airports, hotels on top of hotels, legions of Airbnb fauxtels, and gobs of modern, high-class sporting facilities, “is extremely well-positioned to host the Olympics.” And yet, Matheson continues, the IOC isn't interested in existing conveniences. It wants new ones.

“Any bid that makes economic sense probably won't win favor from the IOC,” Matheson says. “And any bid that wins favor from the IOC probably won't make economic sense.”

If overly rosy economic predictions are the pickup lines that get cities to hop into bed with mega-event organizers, then post-facto analyses are an STD test. And most cities, it turns out, would rather remain ignorant.

Economists, however, have run the samples. Porter's study of taxable sales for six different south Florida Super Bowls showed no measurable impact on the region's economy. Matheson and Robert Baade found, over the course of three decades of Super Bowls, the average economic boost for a region was $92 million — less than a third of the National Football League's minimum promised windfall. But averages can be deceiving: Host cities are five times as likely to lose money or make none than they are to reap the $300 million the NFL touts.

The San Francisco region, of course, will host the 2016 Super Bowl. Local politicos are happily parroting the $300 million baseline, provided by the same firm that promised a $1.4 billion America's Cup jackpot. (After that race, the figure was quietly downgraded to $364 million — but the economists who crafted it told your humble narrator they can't say whether this total is any greater than the amount tourists would have generated regardless of a regatta on the bay).

The costs of hosting mega-events, meanwhile, have skyrocketed. Matheson says that for, say, a mere $1.5 billion total, San Francisco wouldn't do so badly. But Athens spent that much and more on security alone in 2004. London disgorged perhaps $20 billion on its money-losing Games — during which tourism numbers actually dropped. Beijing spent $45 billion. The reported number for the Sochi Games in Russia exceeded $51 billion.

As such, developing nations and authoritarian kleptocracies are increasingly bidding for, and winning, the rights to host the Olympics and World Cup. In places such as these, no one has to vote on how to spend precious resources or answer to the electorate afterward. In places such as these, protesters can be dealt with as leaders see fit.

Feverish, insatiable, maniacal dreams don't come cheap. And they don't come easy. But our city, like so many others, is apparently all too willing to haul that steamer up the mountain. The 2024 Olympics may yet be one of the greatest of the century. But it may also be a monster and a great pestilence.

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