First the party, then the hangover

It’s shocking to think that the 2010 Winter Games are now exactly one month away. Yes, the banners are dropping down the side of downtown buildings; huge tents are being erected anywhere there is open space; advertising from any but the Olympic sponsors has all but disappeared (I hereby challenge any Olympic athlete to eat McDonald’s daily between now and your event).Whether you like them or hate them (personally, I find the lure of Olympic hockey irresistable), it’s gonna be a huge party, and the world is coming.

In fact, the Olympics are so big, so looming, it is difficult to think of anything else. For years preparations have been underway, as planners have made their plans, and new, gorgeous facilities have been built. It is hard to say how much these activities have increased economic activity in BC. Certainly, given the hot economy in recent years with low, low unemployment, there is a case to be made that most Olympics projects have merely crowded out other public and private sector capital investments. Some measure of Olympic Keynesianism could be cited over the past year as smoothing out the harsh impacts of the recession in Vancouver, but unemployment has still shot up to 8.4% in December, and is now about the same as the national average.

As for the Games themselves, the two-week party that is, there is a lot of money being spent on things like security, and a lot of money from higher-than-normal tourism during that period. I’ve seen some economists attribute a 0.5 percentage point increase in GDP due to the Games. But it seems to me that, like the upfront capital investments, there is a lot of displacement going on — most regular business is being put on the backburner, as projects and offices close down due to concerns about traffic and security perimeters.

My real concern, though, is what happens after the Games. BC will be tabling its 2010 budget shortly after the Games are done, and the big danger is that BC experiences a bad Olympian hangover. The rest of the province is in rough shape: resource industries have been hammered by the decline in US markets; while real estate is showing signs of exuberance, there is not much indication that new construction activity that creates jobs is returning to the highs of 2003-2008; tourism may get an Olympic bump, but a high Canadian dollar and weak income growth is keeping a lot of Americans at home. It is hard to imagine what private sector forces might drive a resurgence of economic growth for the remainder of 2010.

So we need the BC government to step up to the plate in its 2010 budget. Last year, BC brought in very little in the way of stimulus spending, preferring to free ride on federal stimulus dollars. This is at least part of the reason why unemployment rates have doubled in the past 12 months. That situation could get a whole lot worse if the provincial government is as neglectful after the Olympics.

There is a, er, golden opportunity, however. Since the 2008 budget that announced the BC carbon tax and a host of other climate actions, we have seen a whole lot of nada on the climate front. In fact, budget restraint in the past year has closed down some of those actions, like the LiveSmartBC program to retrofit homes to be more energy efficient. Anecdotally, this is drying up business for contractors who do retrofits. So now would be a perfect time, after Copenhagen’s disappointment, to get back on the green file, and make some investments that will create jobs and meet our climate objectives.

BC has a legislated target of a one-third reduction in emissions by 2020 (relative to 2007 levels), but currently we do not have a plan that gets us there. Now is the time for that plan. Think transportation. Think household energy efficiency. Think green power. But also think about avoiding double-digit unemployment.

2 comments

  • Is there any research on the post-olympic impact on GDP from Calgary, Albertville, Lillehammer, Nagano, SLC or Turin? It seems like a topic that might have seen some research already…

  • CCPA published an empirical study by David Green on the labour market effects of the Olympics:
    http://www.policyalternatives.ca/newsroom/news-releases/olympics-wont-bring-employment-boom

    From the release:

    Green says he decided to write the brief in order to provide the public with a reality check. “I looked at what actually happened in terms of net job creation before, during and after the last three Winter Games hosted in North America. The experiences of Lake Placid, Calgary and Salt Lake City tell us that we should expect about 10,000 person years of employment, equivalent to about 1,400 new jobs lasting seven years.”

    “Moreover,” says Green, “the evidence suggests that positive job impacts will be experienced before and during the Olympics, but will be offset by a reduction in employment after the Games. This is because some construction projects that would otherwise have occurred after the Games will have been moved forward in time to meet Olympic needs. It appears that with the Olympics, governments tend to use up their budgets for capital projects before the Games, and find themselves with limited capital budgets for several years afterwards.”

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