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7 Going for Gold The Financing and Economic Impact of the Olympic Games T HE OLYMPIC GAMES are among the largest and most visible athletic events in the world. Every two years, the world’s best athletes from some two hundred countries come together to compete in lavish new venues in front of thousands of spectators. Hundreds of millions of sports fans worldwide watch the Games on television. The “Olympic Movement,” which the International Olympic Committee (IOC) defines as “all those who agree to be guided by the Olympic Charter and who recognize the authority of the International Olympic Committee,” is the driving force behind the Olympic Games. The stated goal of the Olympic Movement is to help build a better world. Although Pierre de Coubertin, who founded the modern Olympic Games in the nineteenth century, may have had altruistic , idealistic notions of pure amateur competition, unsullied by This essay is based on Brad Humphreys and Andrew Zimbalist,“The Financing and Economic Impact of the Olympic Games,” in The Business of Sports, ed. Brad R. Humphreys and Dennis R. Howard (Westport, CT: Praeger, 2008), 101–124. 118 ▪ Chapter 7 financial motivations in mind, the Olympic Games have become a big business. The participants are effectively professional athletes; the organizers are highly compensated, professional bureaucrats; hosting the Games involves huge construction and renovation projects that may take over a decade to complete; and these expenditures are usually justified by claims of extraordinary economic benefits that will accrue to the host city or region as a direct result of hosting the Games. This essay examines the financing of the Olympic Games, the sordid details of how the awarding of the Games became a highstakes contest to see which country could shower the IOC with the most gifts and perks, and the economic impact of the games. We focus primarily on the evolution of the financing of the Olympic Games over the past thirty-five years and the assessment of the economic impact of the Games. Financing the Olympic Games The modern Olympic Games began in 1896, but it was not until 1976 that a watershed event shook up the financing model for the Games and set them on their current economic course. In that year, the city of Montreal hosted the Summer Games. Montreal incurred a debt of $2.8 billion (approximately $10 billion in 2010 dollars) that was finally paid off in 2005.1 Annual debt service created a large budgetary hole for the city for three decades. By the end of the Montreal Games, the 1980 Summer Olympic Games had already been set for Moscow, but no city wanted to bid for the right to host the 1984 Summer Games.2 After some scrambling , Los Angeles agreed to host the 1984 Summer Games, but only on the condition that it took on no financial obligation. With no alternative, the IOC accepted this condition, and Los Angeles was awarded the 1984 Summer Games on July 1, 1978. 1978 also marked the first significant relaxation of Olympic amateur rules under then–IOC president Lord Killanin. In that year, Rule 26 of the Olympic Charter was modified so that athletes were allowed Going for Gold ▪ 119 openly to earn money from endorsements, if the money went to their national sports federations or their countries’ National Olympic Committees (NOCs). The receiving organization was then permitted to pay the athlete’s expenses, including “pocket money.” “Broken-time” payments for time away from the athlete’s regular job were also authorized if the athlete had a regular job. But the rule continued to declare that professional athletes were ineligible. During the 1980–2001 reign of IOC President Juan Antonio Samaranch, the complete professionalization and commercialization of the Olympic Games were promoted by further liberalizing the amateur regulations. In 1982, the amateur rules were revised to permit payments into a trust fund that provided expenses during the athlete’s active career—and substantial sums thereafter. Eventually, decisions about accepting professionals were left to the International Federation (IF) of each sport. The new professional era was heralded during the 1992 Summer Games in Barcelona, when the United States sent its dream team of NBA stars, which, unlike their more recent incarnations, went on to win the gold medal. Nominally, for the 2004 Summer Games in Athens, boxing was the only sport that did not accept professionals, but even this distinction is dubious, because the NOCs of many countries gave their boxing medalists cash prizes. These changes also led...

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