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The Politics of Olympic Risk

- August 10, 2012

In introducing our man-on-the-street reporting from the 2012 London Olympics, I noted the conspicuos lack of writing on The Monkey Cage regarding the Olympics. Fortunately, this post caught the eye of political scientist Dr. Will Jennings, Senior Lecturer in Politics at the University of Southampton and a Research Associate at the Centre for Analysis of Risk and Regulation at the London School of Economics and Political Science. Jennings specialises in research on risk and mega-events as well as the quantitative analysis of politics, policy and society. His book, Olympic Risks, was published by Palgrave Macmillan in May 2012. This research was funded by the UK’s Economic and Social Research Council (RES-063-27-0205), and he was kind of enough to offer the following observations to our readers regarding the politics of Olympic risk:

In deliberations over whether or not the British government should support a London bid to host the 2012 Olympic Games, he later confessed in his autobiography, one of the thoughts that played on Prime Minister Tony Blair’s mind was the political risk that was involved: “…but suppose we get beaten and, what’s worse, we get beaten by the French and I end up humiliated?” (Blair 2010, p. 545). While Blair’s lobbying of International Olympic Committee members has been credited as swinging the vote in London’s favour, the political and economic benefits from winning the Games remain unclear, even today.

Indeed, there are great difficulties reconciling mega-events such as the Olympics with our conventional assumptions about political behaviour. These projects are inherently risky for policy-makers. They are complex and expensive, requiring high levels of public investment, tend to attract threats such as terrorism (and, at recent Games, cyber-attacks), and are a potential source of disruption to local businesses and local populations. Further, the economic benefits invariably are over-estimated (television audiences tend to be over-estimated too), and the costs are always under-estimated: in Olympic Risks, I show that since 1976 the average Olympics cost over-run is equal to around 200% between the bid book submitted to the IOC and the final outturn cost of the Games. In the case of London 2012, the total cost of the Olympics is now well in excess of £12 billion, far beyond the £1.8 billion quoted in an initial feasibility study. Beyond this, there is no psephological evidence to suggest incumbent governments receive a boost in the polls due to hosting the Olympics, and indeed the time horizon of planning from development of the original bid to the event itself is so long that political payoffs tend to accrue to future governments often of a different partisan colour (for London 2012, the current Mayor of London, Boris Johnson, has received plaudits for performing a ceremonial role during the Games but had no involvement in the original bid nor much of its planning).

There is a tendency to attribute this contradiction between the sizeable economic risks of hosting the Olympics and the low political returns to considerations focused upon ‘high politics’ on the part of decision-makers in government. There is similarly a view that systematic optimism bias in budgeting for mega-projects is evidence of ‘strategic misrepresentation’ (i.e. lying) on the part of planners, lowballing estimated costs to ensure that the initial bid is approved. I find these sorts of explanation unsatisfactory, most of all because intentionality often remains unproven (i.e. the recurring presence of cost overruns may provide proof of regularities in failures of cost controls but does not automatically mean that planners knowingly mislead in their original projections). Instead, these phenomenon can be viewed as the product of more prosaic processes, with decision-making distorted by high levels of uncertainty at the early bid planning stages. When bidding for the Olympics, senior officials in government have little motivation to attend closely to the details of policy given the low likelihood of being awarded the Games (keeping in mind that London’s victory ahead of Paris in the IOC vote in 2005 was a surprise to many). Instead, bids to host the Olympic Games often originate in local coalitions of civic entrepreneurs, sporting associations and business, with ‘high politics’ becoming involved in the process late on. Likewise, budgeting projections at the initial stage are often made in the absence of detailed stadium designs while key parameters of the project can remain unspecified until much later in the process. Such a lack of detail in scope definition is a well-established cause of cost over-runs in major projects. Because of this, the bid books submitted to the IOC perform the function of what Lee Clarke (1999) calls ‘fantasy documents’, i.e. representations of organisational reality produced to provide a demonstration of manageability and control to public audiences. It is no surprise, then, when the final cost of the Olympics far exceed predictions, but at the same time there is no evidence of a smoking gun, as proponents of ‘strategic misrepresentation’ would have us believe. Further one does not need to subscribe to arguments about ‘securitization’ of mega-events to recognise that decision-makers use planning documents, such as cost forecasts and economic impact assessments, to provide legitimacy to the adoption of these projects in the face of immense uncertainty. Indeed, that uncertainty may account for the attraction of supposedly vote-seeking, blame-avoiding policy-makers to risky and often uneconomic mega-events, similar to the idea of the Winner’s Curse: where in auctions subject to incomplete information, the winner will tend to over-pay. Over-estimation of the political and economic value of the Olympics, and systematic under-estimation of its costs, can thus be linked to the competitive procedure through which host cities are selected.