That was the case with Beijing 2008 (a resurgent China’s celebration of its arrival on the world stage) and Moscow 1980 (the still virile Soviet Union’s communist riposte to the capitalist West). And so it is with London 2012.
As a festival of sports, London is a resounding success. The athletes and fans are thrilled with all that London has to offer. The stadiums are packed, even for previously obscure events. Team GB’s medal-winning spree has sent the British media into a self-congratulatory frenzy. And, for once, the city is putting up a jolly and united front for the sake of the nearly two million visiting members of the "Olympics family". A perfect opportunity, as you can imagine, for unabashed politicians to bask in the glow of the feel-good games and make a grab for some of the reflected glory.
But what about the economics of London 2012? London won the right to host the Olympics in 2005 – just seven years ago if you go by Greenwich Mean Time, but a completely different epoch, if you consider what's happened to the British and world economies since then. When London's bid triumphed in a closely fought contest, it was hailed by many as the icing on the cake for an ebullient country riding high on the vertiginous success of its financial and property markets. And then, in 2007, came the crash.
So devastating has been the impact of the global financial crisis on the UK that exactly five years after its onset, its economy remains firmly stuck in the mire. Consumer and business confidence is shot to pieces. Unemployment is a looming spectre for most of the working population. To top it all off, the country's coffers are almost empty, forcing Her Majesty's government to push through the deepest public spending cuts in living memory.
And just when the country is beginning to get its mojo back thanks to the record-busting exploits of its Olympians, along comes Bank of England governor Mervyn King to poop the party. Yesterday, he cut his own 2012 growth forecast for Britain to zero, implying that the double-dip recession the UK finds itself in will only intensify over the rest of the year. “The big picture is that output has been flat for two years, and has continually disappointed expectations of a recovery,” he said. “We are navigating rough waters and storm clouds continue to roll in from the euro area. Unlike the Olympians who have thrilled us over the past fortnight, our economy has not yet reached full fitness.”
Consider what King’s sporting analogy means: instead of being 20-30% larger than what it was in 2007, the British economy is actually a fair bit smaller. And if the Bank’s latest predictions turn out to be accurate, it could take at least another seven years for the economy to crawl back to where it might have been today. Quite apart from all the misery this gloomy prognosis heralds for businesses, consumers, workers, pensioners and the unemployed, there is also an elephant in the room: the bill for the pleasure of hosting the Olympics. In the euphoria of winning the right to host it, ministers and officials assured the British public the games would cost the country a mere £2 billion, give or take the odd million. The final bill is likely to come in at around a whopping £10 billion.
Guess who is going to pick up the tab for the Olympics? You, dear British tax payer. So enjoy the Olympics while it lasts because when the fun and games are over, you will be waking up with one massive hangover.
The views and opinions expressed in this article are those of the authors and do not necessarily reflect the views of The Economist Intelligence Unit Limited (EIU) or any other member of The Economist Group. The Economist Group (including the EIU) cannot accept any responsibility or liability for reliance by any person on this article or any of the information, opinions or conclusions set out in the article.
