Economics and epidemics: The two threats of modern-day Olympics

Ever since the coronavirus outbreak (with its resultant Covid-19 disease) was declared a pandemic on March 11, there were calls from various quarters on the need to postpone or ultimately cancel the Tokyo 2020 Summer Olympics.

Last Monday, the Japanese Premier Shinzo Abe, told the House of Councillors’ Budget Committee in Tokyo that the Olympics cannot be held under the current circumstances and that there was need for postponement, which eventually happened when the Games were pushed to next year.

His statement came after the International Olympic Committee (IOC) had initially withheld the decision to call off the Games by four weeks.

And as the numbers of new coronavirus infections started doubling overnight, countries like Canada and Australia announced they won’t send contingents to the Games should they run as scheduled from July 24 to August 9.

This was the a very clear signal that all was not well.

However, last Tuesday, the inevitable happened and the Japanese organisers requested the IOC to postpone the games.

This must have been one of the hardest decisions for the Tokyo Olympic organisers to make considering the almost $30 billion (about Sh3 trillion) spent to prepare the venues and other ancillary infrastructure needed to host the global sports showcase.

Sponsors and broadcasters too must have been putting pressure on the hosts not to throw in the towel.

Even though the Japanese are not known to give up easily, the disease and mortality burden of the Covid-19 pandemic can stop even the most determined of humans. The XXXII Olympiad in Tokyo will now be held “not later than summer 2021”.

This isn’t the first time the Olympics are being postponed or cancelled.

In 1940, the Summer Olympics scheduled to be held in Tokyo was cancelled due to World War II and it took another eight years for the Olympics to be held in London.

Japan had to wait for 24 years for their chance to host the event in 1964.

The current postponement (not cancellation) was informed by both the accelerating rate of infections of the pandemic and its effect on athletes’ preparation.

For instance, Eliud Kipchoge trains for between five to six months before a major marathon.

With the pandemic, his training schedule has been disrupted and he wasn’t going to give his best during the Games.

The same can be said of arch nemesis — Ethiopian Kenenisa Bekele — and other global greats like American gymnast Simone Biles, American sprint sensation Christian Coleman and American multiple tennis Grand Slam winner Serena Williams.

The decision to postpone rather than cancel the Olympics could have also been informed by the economic implications of cancelling an entire games to both the host and the legion of sponsors that put in millions of dollars, the participating countries and athletes in general.

Historically, the modern Olympic Games, established on June 23, 1894, was to be “a symbol of universal peace, fair play and global understanding through sports.”

Economically, hosting an Olympic event is an enormously expensive venture and often without profit.

This is the reason why most of the initial Summer Olympic Games were hosted by countries that already had existing infrastructure such as stadiums and accommodation.

In the 1976 Montreal Olympics, it is estimated that the initially projected hosting cost of $124 million (Sh12.9 billion) was surpassed in billions leaving. It left the Canadian city with a debt of $1.5 billion (Sh156 billion) that took up to 30 years to pay off.

It was only the 1984 Los Angeles Olympics that returned a profit of $215 million (Sh22.4 billion) because they relied majorly on existing infrastructure and got additional revenue from television broadcasting.

The profitability of the Los Angeles Olympics spurred more cities to bid for the Olympics from 1988.

Countries such as China, Russia and Brazil aimed at using the event to showcase their economic progress on the world stage. It is estimated that the Beijing Olympics of 2008 cost $45 billion (Sh4.7 trillion) while the Rio Olympics of 2016 cost $20 billion (Sh2.1 trillion).

Another costly feature of the Olympics is the provision of security to the thousands of athletes and tourists who attend. Previous records indicate that approximately $1.5 billion (Sh157 billion) was used in the provision of security in the 2004 Athens Olympics. This and construction cost of the facilities could have contributed to the Greek debt crisis.

Because of IOC’s cognisance to this economic history, the world Olympic body had to postpone the Games, because cancellation could have set a negative precedent for future bidders whose interest has diminished due to the economic challenges many countries face.

From an epidemiological point, the risk of hosting major global events is the likelihood of transmission of infections across the guests. At any one moment, there is always a raging epidemic if not several somewhere on the globe.

Travel with disease

These athletes and tourists could end up travelling back to their host countries with the disease and cause an unprecedented disease burden.

The epidemic fear came to light ahead of the 2016 Rio Olympics when Zika virus posed a risk to the global sports showcase.

As opposed to Covid-19, which is transmitted through coughs and sneezes, Zika is an arbovirus transmitted by mosquitoes. Several entomologists and public health professionals were mobilised to manage the risk of disease transmission making the Rio Olympics see the light of day.

Unfortunately, the scope and mode of transmission of Covid-19 has caused a global health challenge that could not allow the event organisers and other stakeholders to proceed with the Tokyo 2020 Olympics.

Secondly, published epidemiological studies on the pandemic have raised questions on the inconclusive data regarding risk factors and timing of transmission, severity and attack rates.

Other factors are severity pyramid, risk factors for severe outcomes and the infectiousness timing and intensity.

With all this information trickling in as the pandemic progresses, it is safer being cautious.

The pandemic is also occurring in pockets.

Initially the East Asian countries were the most affected and now heading towards remission, while European countries are seeing a peak in the disease incidence.

North American countries and those in Africa are also witnessing new case reports of the disease.

Since there is scanty projection data on remission timeline, reduction of transmission is the best option.

If the current raging pandemic is anything to go by, then sports is about to face its first recession in decades.

As of March 24, approximately 180 major global sports events, some of them being Olympics qualifiers had been cancelled with the worst being the Olympics themselves.

The true cost of the pandemic on sports and the Tokyo 2020 Olympics may be hard to calculate as at now. But for sure it will be enormous even though, some aspects of the costs we may never really quantify.

However, the good news is that sports business has over time proven to be recession and shock proof.

Sports has a unifying effect like no other and after this bad episode is over, each sport needs to play some celebratory matches to usher in a new era.

This should be in line with the Tokyo 2020 motto of: “United by Emotion.”

For many who had thought this might be their last Olympics and were looking forward to a happy retirement in 2021, they might have to wait one more year before they can call it a day.

Life has its ways of making itself interesting. Adversity also brings the best of humanity.

The biggest challenge for the IOC is to get a date when global sports leagues will be on break, since all sports have been affected by Covid-19 and postponed their events.

It will take great negotiation skills to get the Games hosted.

Lastly, since Covid-19 did not enter every country at the same time, it will disappear in phases and that will affect the preparation of the athletes from the affected countries. Therefore, the race is on for every country to be declared Covid-19 free.

As it currently stands, China is leading the race.