From: The role of Mega events in urban competitiveness and its consequences on people, Carolina del Olmo, Universidad Complutense, Sept 2004
We are tired of hearing about the “Olympic legacy” and the official discourse is repeated again and again that when the mega-event concludes, the installations will remain in the city. But they never discuss what the use value of these infrastructures is, especially if we compare these “sinks” of public investments with other installations and services that could have been financed with the same amount of funds (or a lot less). Public funds are a scarce resource, especially today, in this zero-deficit scenario. In this restricted frame, to finance these kind of events and infrastructures involve a budget cut in other, more necessary, sectors.
Moreover, these kinds of infrastructure tend to require a lot of re-investments to avoid the threat of devaluation that comes with the interurban competition and the changes in trends. That’s why it is so common to see these installations languishing in a state of neglect years after the event.
The Barcelona case represents these aspects extremely well. The 1992 Olympic Games are recorded as a success, even if they didn’t fulfil the expectations they claimed. The Olympic investments (in the broad sense, including some roads, coastal area renewal, cultural outlets, etc.), reached near 6 million euros (£4.1m) and 53% of that budget were public funds. But the economic activity that this money generated didn’t have a positive impact on the economic indicators of the Barcelona area.
Between 1987 and 1991 the number of jobs created in the construction sector were only 33.000, a figure much lower than was expected considering that three quarters of the total investment went towards the construction sector. On top of this, all of them were temporary jobs. In the hotel and catering trade sector only 20.000 new jobs appeared and only lasted the duration of the event, again, much less than was expected. In the other sectors, the labour impact was zero (we tend to forget that the Olympic volunteers take on a great amount of tasks that would otherwise generate jobs). During 1992, the number of jobs began to fall.
If we take a look at trade, we will see that during 1992 the sales rate decreased and the number of tourists that visited the city (a million and a half) was lower than expected and spent less money than it was estimated (exactly the same has happened in Athens this last summer). Also, the Barcelona event resulted in a dramatic decrease in the number of people that visited other destinations in the Barcelona region.
Basically, the only economic indicator that experienced an important impact as a result of the Olympic Games were price levels. Since 1988, city price levels increased more than in the rest of the region and more than 1% over the inflation rate in Spain. In the year before the Games, prices rose more than 3% over the prices of the rest of Spain. And if we think that the city gains profit from television broadcasting rights, we should not forget that it is the Olympic Committee who collects this money. In fact, the progressive growth of this source of money has turned the International Olympic Committee into a big (and suspicious) enterprise.
How can we understand the minute economic impact and the lack of fulfilment of expectations? We could focus on the unbridled optimism that seems to encumber the people who do the impact studies, but, especially, we should focus on the limited frame in which the investments take place. If the demand related with the Olympic Games (or any other mega-event) takes up resources that would otherwise remain unused, it would be reasonable to expect an increase in employment, as well as an improvement of the economic indicators in general. Nonetheless, demand growth related with a mega-event doesn’t produce a net income, because it is a consequence of a mere change in the direction of the resource’s flow; that is, the resources go to a specific sector or a particular place but only because they are coming from another sector or place.
The same goes for private capital: it tends to reduce its investments in other sectors or in other spatial areas. If we pay attention to the recommendations that the economic impact studies use to achieve a real net increase in profits, for example, to make the labour market more flexible, it is clear that the aim of obtaining net profits loses part of its appeal.
Astonishingly, even if the mega-events don’t fulfil their expectations, this is never seen as a failure. Nobody seems to care for or to be surprised by this failure and the event ends with a sense of success. If we want to understand this incoherence, we should put aside the idea of competition as a heuristic tool and focus on the fabulous opportunity for businesses that follow urban transformations related with mega-events.
Indeed, even the need to attract tourism and the desire to improve the competitive position of the city in the urban hierarchy seems a petty and secondary question if we compare this with the local elite’s focus on an easy profit. Of course, I am not saying that urban governments don’t want to promote the image of their cities with the purpose of generating employment, attracting enterprise headquarters and so on.
Regrettably, one of our most serious problems is that urban governments seem to be convinced that, in a globalized world, there’s no point in promoting local enterprise development. They believe that the best they can do is to turn the city into an appealing zone for foreign investments. But the weakness of some of their strategies and the blindness with which they insist that these strategies actually work, make us question their genuine interests in the city.
In short, we cannot forget that when a mega-event is organized, the money that really flows into a city is, in the first place, public money that falls into the hands of private businessmen. That’s why it is so difficult to understand where the city expects to obtain incomes by organizing a mega-event, and how little the urban government cares.
When asked about the profits the city of Madrid may gain from hosting the Olympic Games, a representative for the Olympic candidature discussed broadcasting copyrights (that, as I have previously stated, benefit Olympic Committee and not the city) and the tourist appeal that the city will gain. He referred to the Barcelona case as a big success and talked about the millions of tourists that have visited Barcelona in the last years as a result of the Olympic Games. What he forgot to mention is that the flow of tourists into Barcelona has not been an easy or inexpensive achievement. The strategy has only worked with the help of a continuous and huge public investment in private business, for example, in the hotel sector, dangerously close to bankruptcy –all in all, another typical episode of socialization of losses and privatisation of profits.
However, if we consider that the investors that promoted and financed a big part of the Olympic Games budget in Barcelona were real estate and construction companies, property developers, land speculators, finance companies and hotel and catering trade firms, we will understand that, indeed, the 1992 Barcelona Olympics can be considered a success. Of course, as a result of the Olympic candidature, Barcelona witnessed a frantic building activity, an increase in the housing and land prices and a huge urban transformation that entailed the conversion of a big amount of industrial land into service or housing plots.
In fact, urban renewal related to a mega-event is not as much a secondary effect as it is a fundamental raison d’être. The recent Forum Universal de las Culturas that has taken place in Barcelona this summer confirms this idea: instead of organizing a mega-event that could reuse the installations built ten years ago as a result of the Olympic Games, the Barcelona government and elite have decided to invent a new kind of event whose major aim, no one can doubt, is urban transformation. This multicultural event has proven to be an effective excuse to finally implement urban renewal in the last coastal area of Barcelona that still has a low income population. A made-to-measure operation for the private capital that has been a real fiasco for the city.
The Spanish case is especially serious since in Spain the construction sector represents almost 18% of the GDP, and 60% of the investments in fixed capital formation. It also employs two million people. After a huge process to merge enterprises, the building sector is now dominated by six big firms, five of which are numbered among the ten largest construction companies in Europe. The sector has become a safe allocation for investments due to the housing price boom and to the approval of huge public infrastructure plans.
Even if the present economic climate differs from that of Barcelona 92, the results that we may expect from Madrid 2012 may be very similar. In Barcelona, between 1986-1992, the construction boom and the rise in prices were partially caused by the recent entry of Spain into the European Union, consequently causing an influx of foreign capital into the country, especially into the real estate sector.
Nowadays, the potential rise in prices and the worsening of the speculative bubble will come from the fact that we are passing through a difficult period for stock exchange investments. And these bad times for the investors have turned the real estate sector into a safe haven that takes up more than 40% of foreign investment in Spain. In fact, in the last years, banks, investment funds and thousands of corporations had entry into the sector in search of a higher profitability.
From: The role of Mega events in urban competitiveness and its consequences on people, Carolina del Olmo, Universidad Complutense, Sept 2004.
More at: Carolina del Olmo
See More at: Barcelona housing demo
In the case of the Barcelona Games 'the market price of old and new housing rose between 1986 and 1992 by 240 percent and 287 percent respectively' (Brunet, 1993 in Wilkinson, 1994:23). A further 59,000 residents left Barcelona to live elsewhere between the years of 1984 and 1992 (Brunet, 1993 in Cox et al., 1994)
From: Page 108, Mega Events and Human Rights, Brent Ritchie, University of Canberra, Michael Hall, University of Otago, NZ and Sheffield Hallam University, UK.
In: HOW YOU PLAY THE GAME Papers from The First International Conference on Sports and Human Rights, 1-3 September 1999, ISBN 1 86365 566 2, Published 2000,
Download: 'How You Play the Game'(PDF) at ; Sports & Human Rights
To watch recent video clips about protests against housing conditions in Barcelona go to: housing protests in Barcelona
See also: Barcelona housing protest videos You do not have to speak Spanish to understand what the struggle is.
See also: The Spanish Housing Crisis
Submitted by Martin Slavin on Sun, 19/11/2006 - 12:56.