Commentary on Political Economy

Wednesday, 5 May 2021

 

Japan should cut its losses and tell the IOC to take its Olympic pillage somewhere else

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A boat sails past illuminated Olympic rings floating in the waters off Odaiba island in Tokyo last month. (Toru Hanai/Bloomberg)

Japan’s leaders should cut their losses and cut them now, with 11 weeks left to get out of the remainders of this deal. The Olympics always cost irrational sums — and they lead to irrational decisions. And it’s an irrational decision to host an international mega-event amid a global pandemic. It’s equally irrational to keep tossing good money after bad.

At this point, money is the chief reason anyone is even considering going forward with a Summer Games. Japan has invested nearly $25 billion in hosting. But how much more will it cost to try to bubble 15,000 visitors, with daily testing and other protocols, and to provide the security and massive logistics and operating costs? And what might a larger disaster cost?

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Suppose Japan were to break the contract. What would the IOC do? Sue? If so, in what court of justice? Who would have jurisdiction? What would such a suit do to the IOC’s reputation — forcing the Games in a stressed and distressed nation during a pandemic?

Japan’s leaders have more leverage than they may realize — at the very least, they are in position to extract maximal concessions from the IOC for hosting some limited or delayed version of the Games, one more protective of the host.

The predicament in Tokyo is symptomatic of a deeper, longer-lasting illness in the Olympics. The Games have become a to-the-very-brink exercise in pain and exhaustion for everyone involved, and fewer countries are willing to accept these terms. Greed and blowout costs have rendered it an event that courts extreme disaster. In September, a report out of Oxford University’s business school found that the IOC has consistently “misled” countries about the risks and costs of hosting. Example: The IOC pretends that a contingency of about 9.1 percent is adequate to cover unforeseen expenses.

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The true average cost overrun on a Summer Games? It’s 213 percent.

The IOC understates these risks for a reason: because fewer and fewer countries want to do business with it after seeing all the pillage.

The IOC intentionally encourages excess. It mandates elaborate facilities and events for the sake of revenue, most of which it keeps for itself while dumping the costs entirely on the host, which must guarantee all the financing. The IOC sets the size and design standards, demands the hosts spend bigger and bigger — against all better judgment — while holding close the licensing profits and broadcasts fees. Tokyo’s original budget was $7 billion. It’s now four times that.

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