Japan is to economics what Axl Rose is to music business.
They both rocked in the late 80s and beginning of the 90s, then they started losing ground
and nowadays, anytime they try to make a comeback, the results are… pretty disappointing.
I know what you are thinking… from the first glance, Japan doesn't seem to be that bad,
right?
They have the videogames, the anime movies and world class tech behemoths.
And their capital, Tokyo, looks like a Scy-Fy city.
It is the World's biggest metropolis, with over 30 M people, and they have the fastest
trains, the most modern TVs and even human-like robots.
Nonetheless, this country has been 2 decades without no economic growth.
And this is not the worst!
Japan is the most indebted country in the whole planet.
They owe more than twice their entire GDP.
And their population is decreasing faster than anywhere else, which poses a big problem
in order to pay retirement pensions.
This is one of the reasons why Japanese workers make crazy hours and have almost no vacations.
And those good old technological juggernauts like HITACHI or PANASONIC are falling behind
the more modern companies from China or America.
But hold on just a second because things might change!
Yes, I'm talking about the TOKYO OLIMPICS, 2020.
A peerless opportunity to make to showcase the whole country and get the world's attention.
Yes, my dear viewers… since Japan won the Olimpic bid, in the year 2013, tourism has
skyrocketed from one day to the other.
And the same goes with private investment.
By that year 2020, Tokyo will have 45 brand new skyscrapers.
Nothing more and nothing less.
And companies like PANASONIC will set state of the art solar cells all over the place
so people can charge their electric cars.
If this was not enough, SONY will launch their brand new 8K TV screens.
Yep, you heard that right.
If 4K was not enough, now we will have 8K so you will be able to see even the microfiber
of the athletes Tshirts.
But hold on just a second because… not everything is as beautiful!
You see, when Tokyo won the Olympic bid, they budgeted them in 6.5 billion dollars.
But once they started with the building, the costs have doubled.
And they haven't even finished!
In fact, Tokyo's city hall has predicted the total cost might end up near the 20 billion
USD.
So the question is… would this Summer Olympic Games be an opportunity for Japan… or the
opposite?
Are Olympic Games as good for a country's economy as some people say?
Today we are gonna answer all of this questions but, before, let's take a look back at history.
AN OLYMPIC FALACY?
Few things spark nacional pride as much as Olympic games.
Of course, we all like to brag about the gold medals our country has.
But what really inflames patriotism the most is to become an Olympic host.
The excitement it generates is so big that everyone, regardless of their ideology, seems
to think that organizing an event like this is a good thing for the country.
Nonetheless, inside the economists field, things are not that clear.
In fact… the arguments in favour of hosting Olympics are a little bit like… hmm… how
should I say?
They are so inconsistent they could be a tweet written by Donald Trump
According to a paper from the Bank of Japan, the effects of the Olympics are so good that
you can tell even before they have been celebrated.
More specifically, the same year the International Olympic Committee named Tokyo as the host
city, everyone started to see Japan as a perfect place for investment.
Remember that we are talking about a paper from an institution as prestigious as the
Bank of Japan.
This would be the Japanese equivalent to the American Federal Reserve.
This said, one of their main arguments is that, if your city gets to be an Olympic host,
the whole country can join all those big organizations every country would like to be a member of.
Want examples?
Here you have examples!
Barcelona got the nomination in 1986 and…
BOOM!
That very same year, they joined the European Union.
Beijing was nominated in 2001 and…
BOOM!
That year they joined the World Trade Organization.
What do you say?
It seems like nobody could argue this train of thoughs, right?
Well… wait a second because this is a textbook example of a correlation fallacy.
In other words, the fact that Spain joined the EU the same year Barcelona got chosen
as the Olympic host does not mean one thing caused the other.
In fact, Portugal also joined the EU on the same year without hosting anything.
And the same happened with China.
On the same times, other Asian countries joined the WTO without organizing no sport events.
But I know what you are gonna tell me now!
Hey Simon, what about the international attention?
During two weeks, the whole world is going to put their eyes in Japan.
We are talking about the biggest sport event in the world.
Or maybe not?
You see, the London Olympics 2012 got an average audience of, around 31 million people in America.
To make a comparison, this is twice as much as a Game of Thrones episode.
Yes, it's not bad.
But… what happened with the rest of the games?
For example, Sochi Winter Olympics, 2014, didn't even get to have 22 million viewers
in the States.
And Rio 2016 was around 26 million.
This might look big to you, guys, but is nothing if we compare it with a much cheaper event
like the SUPERBOWL.
The 2016 Superbowl surpassed 110 million viewers.
In other words, even though Olympics are watched all around the world, when you look at the
audiences country by country, the figures are not so impressive.
And this means that the perception that people have about a country does not change.
At least, it doesn't change… for good…
In a study of the impact of the 2000 Olympics in Sydney, Australian researchers interviewed
people one year before and after the Games.
They found little change in perceptions, with one surprising wrinkle: South Africans had
soured on Australia "because of the way in which the Aboriginal issue was highlighted
and portrayed by the South African media,"
Nonetheless, there is one thing where it seems fair to agree: Olympic games kickstart your
tourism industry.
Actually, since Tokyo was chosen as the Olympic host, tourism in Japan has skyrocketed.
They almost didn't have tourists in 2013 and now they surpassed 24 million people last
year.
You can say a brand new industry has been born in Japan.
And this is an industry that attracts lots of foreign money…
Who wouldn't be happy with this?
Well… hold on a minute because even this figures can be argued.
Of course, tourism in Japan has increased a lot.
But… do you know of other countries with a booming tourism sector? Chile and Thailand.
They have grown at a similar rate as Japan.
And… don't even google it because I will tell you here: none of this two countries
is planning to host any Olympics.
The Thailand example is pretty paradigmatic.
They get 6 million more tourists than Japan with half of its population.
And their tourism growth is directly correlated to that of the Chinese middle class.
In other words, as Chinese people have more money, they want to do sight seeing… and
where do they go?
Of course!
They go to countries that are nearby and have beautiful things to see!
But I know what you are thinking!
Despite the Olympics not being that profitable as they seem… what's the problem if Tokyo
wants to have Olympics?
Who doesn't like to have a giant stadium on his city, huh?
Well… let's have a look at this right now.
GOLD MEDALLIST…
IN SPENDING!
We all know it…
Olympics are costly.
From one day to the other, Tokyo will have to build an Olympic Stadium to host more than
80,000 people.
And also, they have to impress them with lights and colors.
But it doesn't stop here!
They need other special venues for the many competitions that are held at the same time.
Each of the sports have its own specifications.
Athletism requires different things than swimming or canoeing.
In summary, 31 venues will be built or remodelated for this Tokyo 2020 Summer Olympic Games.
Add to this the media centre, which is another big White Elephant and, on the top of it,
the Olympic Villa.
This is short of a small town where more than 10,000 athelets will live during the time
the Olympics are held.
And, as you can imagine, this will not be cheap, either.
The total cost for this was meant to be 6.5 billion USD.
At least, this is the figure given by the local authorities to the International Olympic
Committee in 2013.
But, you know, one thing is the theory and another thing is the reality…
Tokyo 2020 Olympic Games costs just keep rising
By December 2017, Tokyo City Hall had already spent over 12 billions.
And just a couple of months later, the local authorities said that, at least, they will
end up spending 20 billiones!
And maybe, this figure will keep rising before they burn the Olympic flame…
In fact, nothing of this is a surprise.
Since we have memory, every Olympic Games have cost overrun.
And we are not talking about little pennies here!
Rio de Janeiro 2016 ended up being 51% more expensive than expected.
But the record, so far, is Montreal 1976, that costed 700% more than the initial budget.
Yes, you heard this right.
This is 8 times more that what it was planned at the beginning.
And now you might wonder…
All this billion dollars are little or big money for a government?
I mean… compared with the normal spending in a big city hall… is this a big number?
Well, the answer is a big YES.
For a better understanding, with 20 billion USD you could build, for instance, a highway
that connected the extreme north of Japan to their extreme South.
But wait a minute because this is not the worst of all!
You see… an airport or a highway can and up being a waste of money.
But, still, you can always reutilize it.
A country with better infrastructures and communication can have better companies in
the future, brand new industries or better public services.
But what do you do with an Olympic stadium that can host 80,000 people?
Well… if we look at past examples, the answer is pretty much bitter…
Rio Olympic venues already falling into a state of disrepair
Rio de Janeiro example is pretty harsh.
Despite having Olympics, they still have entire neighbourhoods that are not even connected
to the city centre by a bus line.
And the place where the Olympic Villa has is becoming a slum.
But wait a minute because this is not the only example.
Athens Olympic site in ruins 10 years on from 2004 Games
Add to this the fact that Japan is the most indebted country in the planet.
They owe a sum equivalent to 230% of their GDP.
The government is already struggling to pay the retirement pensions and they have been
2 years without any economic growth whatsoever.
So now this is your turn…
Do you think the Tokyo Olympics 2020 will mean the ruin of Japan?
Or maybe, against the odds, Japan will take some advantage of hosting this event?
Please, leave your answer in the comment section below.
And if you wanna know more about this Japanese failed economy, click on this video.
Also, visit our friends from RECONSIDER MEDIA at RECONSIDERA MEDIA.COM, this is the podcast
that provided the voices on this audio that are not mine.
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