Absolutely Favelas: Rio as a catalyst for sustainable growth

Blog posts

5 Aug 2016

Sam SwiftSam Swift, Research Officer

Brazil’s transition to a major cultural and economic power might be said to receive a further boost today, as it plays host to the opening ceremony of the games of the 31st Olympiad. This year in particular, the greatest show on earth will be examined more microscopically than usual, due to fears over the Zika virus, the ongoing Russian doping scandal, and health and safety concerns about venues and the athletes’ village. What’s more, it plays out in front of a backdrop of political and economic turmoil, and the disjuncture between the bemedalled participants and the poverty of the nation around it will be a troubling juxtaposition.

However, such is the appeal and cultural impact of the games that it could have wide-ranging positive effects, stitching together the fractured nation into an altogether better whole. The alternative, however, is that economically and socially the Olympics can be disastrous. They could be expensive and unsustainable, and heighten Rio’s social inequalities between the haves and have-nots. This article seeks to speculate how the Olympics and attention it brings can be positively harnessed, with the spoils going towards stabilising and empowering a precarious society.

It is hoped that the festivities of the Olympics will provide respite to a nation with major and nascent political, economic, and social problems. Crime rates are high, and recent economic and political turmoil has led to regular protests and demonstrations, some of which have had a violent overspill. Indeed, the Olympics appears to have lit the touch paper on this, with hostility growing in recent days. Forty million people live below the poverty line, and inequality is rife: a member of Brazil’s richest 10 per cent is on average 40.6 times richer than the poorest 10 per cent - the 12th highest ratio in the world. Politically, Brazil is in crisis, with its president recently impeached. In addition, Brazil has been in recession since 2015, and dissatisfaction with corruption and mismanagement recently led to the impeachment of its president, Dilma Rousseff. This is the backdrop of turbulence the Olympics will be played out in front of, and shows the great need for a positive boost to economy and society.

There is evidence to suggest the Olympic Games can provide such a boost. The UK’s Purchasing Manager’s Index (PMI), recently gaining attention post-referendum as a good economic predictor, has tracked growth accurately in recent years. In August 2012, whilst GDP increased by around 0.1 per cent, the PMI shot up by around a fifth. Increased consumer confidence and economic activity gave a positive uplift to London in particular, but with knock-on effects around the whole country. Given this considers production, employment, and orders of goods and services, a positive effect can be seen broadly across the economy. Whilst it may not be a direct driver of growth, this increased confidence and consumption can be prepared for and harnessed to generate positive impacts.

Unfortunately the evidence suggests the long-term economic effects of hosting an Olympic games are negligible. A paper from the ever-excellent Freakonomics blog found that, since the profitable 1984 Los Angeles Games, host regions have not developed or grown any faster or more successfully than equivalent control regions in the same country. The rigmarole and razzmatazz of the Olympics provides a boost, but in the end continued development catches up to this. Indeed, in wary economic times, we’ve got to the point where hosting a major sporting tournament can be seen as a white elephant. Euro 2020 is to be shared around the continent in the absence of credible bids, the 2022 Winter Olympics saw four of its six bids cancelled, and last year the people of Hamburg voted in a city-wide referendum not to bid for the 2024 Olympics. This makes grim viewing for us optimists, but there is a gold, silver, and bronze lining to this cloud.

The reason the Brazilian case may be different is the very issue that causes it problems; the political and economic fragility. When the eyes of the world turn upon you, one should at least put a tie on, and the Brazilian government will wish to promote all that is good about its great nation. Amidst unrest and political turmoil, the Olympics could provide a reset button, invoking national pride and togetherness and moving the country forward. Economically, Brazil’s status as a still-developing country sets it apart from any other Olympic host city in recent years[1], and the rapid pace of development compared to Sydney or London may alter the expected gains. There is also an employment effect in sectors such as construction, hospitality, and perhaps also sport as the Brazilian Olympic authority builds on the legacy of the games. Additionally, lessons learnt from the build-up to the games have potential to provide sustainable improvements to employment practice, an area IES has explored in the past.

Our work in 2012 showed how wide-ranging improvements to labour standards can be generated from preparing a major city for a major sporting tournament. One study focused on occupational health and safety, which is pertinent; soberingly, 11 workers have been killed during the construction of Rio’s Olympic venues. Preventative measures towards workplace illness and injury carry a strong return on investment, and the Olympic Games gives a laboratory to trial these, with multiple venues and measurable outcomes over the construction period. Our second study found the Olympics provided an opportunity to assess innovative approaches around leadership and worker involvement, finding that strong emphases on wellbeing increased worker engagement. The preparation for the Olympics can provide space for innovation and improvement in labour practices, and the lessons learnt are highly transferable.

This Olympics feels more like a watershed than possibly any previous games. Brazil is a bit of a wildcard, with its fractious society and politics raising concerns about these games. A weaker global and national economy could dilute the spectacle of previous games, and general scepticism about the long-term benefits of hosting such an event are beginning to crystallise. Rather than an eager demonstration of a nation’s character and culture, this feels more like a distraction from social discord, and the games will have a different role in that respect. It is this very different feel that gives me cause for cautious optimism, that the nation could be reunited and reshaped in a more sustainable way, with the scrutiny providing new standards and benchmarks. Rio can buck the trend and prosper, having a knock-on effect on the rest of the country, and from this we should take heart and hope. Politicians and decision-makers in Brazil could capitalise on the opportunities the games will provide, and in Olympic spirit use them to help Brazil develop faster, higher, and stronger.

[1] With the possible exception of Beijing, which is not really a comparable case due to differences between the cities and countries.

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Any views expressed are those of the author and not necessarily those of the Institute as a whole.