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Economic Monthly Report

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Sport: both competition and business

Tue, Jul 22 2008, 07:17 GMT
by La Caixa Economic Research Dept.

La Caixa

It is now only a few weeks before the start of the XXIX Olympic Games, the world’s most important sporting event. Some 16,000 athletes will meet in China’s capital with the hope of bathing in the glory of the winners’ podium after years of effort and rigorous training. This is the big festival of sport, the only event capable of bringing together and uniting, if only for a few weeks, nearly all countries of the globe.

But sport cannot be seen only as a noble activity of body and spirit. Today, Baron de Coubertin’s Olympic ideals involve multi-million-dollar contracts for television coverage rights, vast investment in infrastructures and major commercial interests. Modern sport, that arose with the Industrial Revolution to become a product of today’s society, has evolved from an amateur activity into an economic sector that, in the developed countries, if we add together sports centres and clubs, facilities and equipment, materials and management, rights and marketing, involves between 3% and 5% of gross domestic product.

This Monthly Report gathers together some aspects of the relationship between sport and economic activity. For example, the debate about the cost and benefits of organizing the Olympic Games. Does it work out financially to act as the site of the Summer Games? To judge by the many candidates that every four years opt for selection (now including the city of Madrid) the reply must be in the affirmative. Following its experience in 1992, very few citizens of Barcelona would state otherwise. The people of Montreal, however, still look back bitterly at the financial costs left behind after the 1976 Games. The fact is that the city hosting the Games must provide the facilities for holding 30 different contests as well as lodging the huge group of participants, support personnel, journalists and tourists. All of this requires investment in pavilions, competition areas, lodging, highway and transportation improvements, among other factors. The spectacular Olympic stadium in Beijing, where they plan to hold the opening and closing ceremonies, cost 500 million dollars. Many people feel very positive about such investments as they generate new jobs and drive the country’s economy, even if this increases government debt. Nevertheless, sooner or later, this increased debt must be faced and it is therefore fundamental that such investment not only provide benefits during the Games but subsequently can be made profitable.

All this money becomes involved because sport today has become a mass spectacle and this is largely due to the fact that the results are unpredictable. Will it be Nadal or Federer? Ferrari or MacLaren? Man Utd or Liverpool? This Monthly Report makes no attempt to predict the final allotment of Olympic medals but rather to point out that there is some relationship between success in sport and economic development, although here we must make some provisos. Other aspects dealt with in boxes are television coverage rights (who sells what to whom?) and the payment of the athletes (why should the winner take all?), two distinct questions but ones that again underline the close interdependence of sport and business. In spite of the fact that the dynamic of sporting activity often depends on the logic of the economy, sport still remains something apart, an individual or team activity that brings many people together, a symbol of health, a means of education and an instrument of social integration.

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Published on  Tue, Jul 22 2008, 07:20 GMT