The Costs of Hosting the Olympics

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London was awarded the 2012 Summer Olympic Games Wednesday. But according to economist Andrew Zimbalist, it not necessarily a winner. Host cities often lose money on the deal.

RENEE MONTAGNE, host:

Time now for business news.

(Soundbite of business theme music)

MONTAGNE: New York, Madrid, Moscow and Paris may be disappointed, even angry, that the Olympic Committee awarded the 2012 Summer Games to London. Some economists say instead of being upset, they should be relieved. Andrew Zimbalist is an economics professor at Smith College. He says hosting the Olympics is hardly a guaranteed money-maker.

Professor ANDREW ZIMBALIST (Smith College): They have to invest in the facilities. They have to invest in infrastructure. They have to spend money for security. They have to spend money for sanitation. And when all is said and done, it's very hard to know exactly what the bottom line is.

MONTAGNE: Athens is experiencing the financial pain now. The price tag for last year's Olympics reached a record $13 billion, more than double what was originally budgeted. Greece has had to cut spending and raise taxes to help pay off the debt. So why do cities compete so aggressively for the host title? Andrew Zimbalist sees power politics at work.

Prof. ZIMBALIST: Certainly construction companies and development companies are very powerful. They themselves stand to gain enormous amounts of revenue and profit. The construction sector unions, certain parts of the hotel industry, the restaurant industry, will get behind the project.

MONTAGNE: Those groups pushed the bid forward. Whether the Olympics benefits the city as a whole is an entirely different question.

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