India will win two golds, the host nation will see both medals tally and GDP jump, emerging markets will increase their bounty. But the whole jamboree would be much more fair if the likes of sailing and equestrianism made way for kabaddi and sepak takraw
In 2008, China topped the Olympic golds tally for the first time ever. But it will drop 18 of these this time, while Great Britain will add 11 to its gold tally and 18 to its total tally. This is because, on average, the host nation wins 54% more medals than typical. As for India, we can look forward to 2 golds and 5 total medals, and to moving up from the 50th to the 39th spot in the Olympic rankings.
The above forecast is courtesy a fresh Goldman Sachs report, The Olympics and Economics 2012. Spearheaded by Kamakshya Trivedi and Jos? Urs?a from the investment bank?s global group, loaded with fancy econometrics, it broadly addresses the links between Olympic performance and economic outcomes, and is interspersed with famous Olympic personalities casting light on the matter.
Michael Johnson, who is the only athlete to have won gold medals in both the 200m and 400m events, is asked, ?Historically, countries have found it hard to sustain high rates of growth for long periods of time. Does your experience of running suggest that it is more important to start steadily and accelerate, or maintain a high speed from the start?? Johnson says establishing consistency is key. But this is difficult when political changes dominate any ability to change the country. He adds, ?What?s happening here in the US, and in Europe, has an effect in both places, so it?s a lot more difficult to achieve that type of consistency when what happens elsewhere affects you.?
Matthew Syed, who has represented the UK in two Olympics, suggests the socio-economic impact of the Games is usually overestimated. Mohammed Ali inspired black people in the 1960s but what really helped them were the Civil Rights and Voting Rights legislations. If the Olympics are to become more democratic and inclusive, then old, aristocratic sports only practised in tiny leagues in the western world should make way for the likes of kabaddi and sepak takraw, which poorer countries have a much better chance of winning.
Against such pessimism, the report lines up hard data to lift the Brits? spirits. For example, as all recent Olympic hosts have outperformed the MSCI Word Index in the 12 months following the Olympics, UK investors can look forward to a positive year in equities following the London 2012 Games. Goldman also forecasts that the Olympic spending will boost the country?s GDP in the third quarter of 2012 by 0.3-0.4 of a percentage point, which could help the UK recover from its first double-dip recession since the 1970s. Sure, pre-Olympic studies in cases like Sydney were finally proved to have overstated the economic benefits of the Games. But the London Games are likely to provide a better economic return precisely because of the high degree of slack in today?s UK economy, in contrast to the capacity-constraints facing Australia in 2000. The report promises, ?The positive multiplier effects from this year?s Games could be larger than they have been in past Olympics, such as Beijing, Athens and Sydney (when the host economies were already operating close to full capacity).?
Hypothesising a synthetic Olympic currency (the real trade-weighted currency of successive Olympic hosts), declaiming that it has outperformed all individual currencies, the report suggests (perhaps not too seriously?) that the Olympics may be a simple tool to pick long-term ?winners? in the FX , market!
But Goldman doesn?t just seek to uplift the spirits of the hosts; even emerging economies will find pages of cheer here. Although the forecast lists five G7 countries in the top 10 ranks, although it acknowledges that countries like India and Brazil have been pushing below their relative economic weight in the Olympics, it helps us discover that emerging markets now win half of all Olympic medals. Hip, hip, hurray.