world growth

world growth

Monday, August 11, 2008

The Olympic Economy

The Olympic Economy
By STEPHEN GREEN
FROM TODAY'S WALL STREET JOURNAL ASIA

http://online.wsj.com/article/SB121805418763418003.html?mod=googlenews_wsj

Never in the history of sports has so much money been spent in 15 days. The $43 billion official bill for this month's Beijing Games is one-and-a-half times bigger than the previous five Olympics' bills added together. It works out at $2.9 billion per day, or $140 million per event.

And that is just the official spending. Beijing has laid down a lifetime of infrastructure in just three years, including several new metro lines, 37 new stadiums and a rather fabulous new airport terminal. Some $400 million has been spent on information technology alone. Then there are the other, less obvious, costs, including the several hundred temporarily shuttered factories, the tens of thousands of laborers unceremoniously sent home, all the air travel by sports fans and journalists, and a huge security budget. No expense has been spared for the Beijing Olympics. Literally.

Despite all this, for us economists, the Olympics is one big nonevent. We will enjoy the sports -- especially the beach volleyball in Chaoyang Park -- as much as the next spectator. But a couple of weeks of sports, even on this scale, will not boost China's growth or cause the economy to slow when it finishes. Neither will China's stock market take much notice.

To understand why, think about that $43 billion in context. Official investment spending in China in 2007 totaled $1.6 trillion. So assuming Olympic investment spending was spread out over three years, it hardly reaches 1% of annual investment spending. Many of the projects, like the metro, were needed anyway -- and that will remain the case in 2009 and beyond, as more work is done in Beijing and other cities, as well as in the countryside, to build out the railway infrastructure and the suburbs, the new locus of economic growth.

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