Vancouver Olympics – Can we afford it?
By Deirdre McMurdy
All the hype about the Vancouver Olympics recalls the last stock market bubble. The resilience of the human spirit is a remarkable thing.
Author Oscar Wilde was probably right when he quipped that “the basis of optimism is sheer terror.” But it seems that almost no amount of bitter experience, no degree of exposure to the often – cruel uncertainties in life, can ever quench the stubborn flame of optimism. There’s a deeply held conviction that this time, it will all be different. This time, the story will have a happy ending. For anyone who doubts that the stock market will suddenly, some day roar back to life, just consider the recent hullabaloo about Vancouver winning the bid to host the Olympics in 2010.
Blast From The Past
The debilitating municipal debts of the past are forgotten. The shabby, crumbling concrete piles of former Olympic installations are ignored. This time around it will be a glorious triumph. Facts are eclipsed by the sheer will to believe. Just as they were during the frenzied days of the high tech stock bubble. Just as they someday will be again when everyone buys into the next “paradigm shift,” the next innovation that promises to revolutionize life as we’ve known it. What is particularly remarkable about the euphoria over Vancouver’s Olympic score is that in the midst of a period of almost unprecedented uncertainty – not to mention an increasingly sluggish economy, so many people are so thrilled at the prospect of spending billions of dollars on an event that takes place in seven years.
One heck of a lot can change in seven days, let alone seven years. Just consider what we’ve endured in the first half of this year:
• a war in Iraq,
• a serious rift in Canada’s relations with the United States,
• the outbreak and economic devastation of SARS,
• the panic over a case of Mad Cow Disease,
• a faltering North American economy that languishes in the face of all conventional stimulative tools
Some Number Crunching
While construction companies and hotel owners rub their hands with glee at the prospect of the business activity that will be generated, it’s clear that no one is looking terribly hard at the numbers involved. A study of the bids’ economic impact suggested the 2010 Winter Games could add $2 billion to $4.2 billion to Canada’s gross domestic product. They could also generate 45,000 to 99,000 new joYou don’t need to be terribly handy with a calculator to figure out that’s a pretty wide – ranging estimate. So wide as to be almost meaningless, especially when you factor in the number of variables that will inevitably come to bear on the initiative. The geo-political sandbox isn’t the orderly place it used to be, as 9/11 and subsequent events should have taught us by now. The other consideration is that all the rosy forecasts of business benefits do not include the roughly $600-million cost of expanding the perilous highway between Vancouver and Whistler. And then there’s the $1 billion required to build the proposed rapid transit line between Vancouver Airport and the city’s downtown core. That’s $1.6 billion on top of a planned $1.3 billion budget for the games.
Right now, in the after-glow of defeating international rivals for the privilege of hosting the event in 2010, no one seems to be terribly worried about a few hundred million dollars here or there. When a television reporter attempted to ask Prime Minister Jean Chretien about the budget for the Vancouver bid, he was shooed away with protestations that it was something to celebrate regardless of cost. He also uttered the fateful words that the winter games would be “done right.” Anyone who has ever renovated a house will shudder at those words – and confirm that once you start upgrading one part of a structure, it’s pretty much a given you’ll extend the breadth and cost of the project “while we’re at it.”
It’s precisely the same mindset that’s been playing out in stock markets and corporate board rooms lately. When the momentum is strong and things are looking up, we tend to deliberately overlook the nagging details that might dampen our collective rush. When things go wrong, however, the backlash always focuses on the numbers – which explain the recent investor obsession with corporate accounting standards, audit committees and “transparent” quarterly reports.
There’s no question that winning its bid, will give British Columbia’s weakish economy a boost, especially on the psychological front. Confidence and commonality of purpose can be a bracing force, especially after such a prolonged period of bad news and uncertainty. On the other hand, at the risk of sounding apocalyptic, there’s always a day of reckoning if the numbers aren’t given careful consideration from the outset.
And if you don’t believe me, I’ve got a block of Nortel shares to sell you.
By Deirdre McMurdy