The Olympic Potemkin Village

Journalists arriving in Sochi are finding that things are not quite ready for primetime:

In the Ekaterininsky Kvartal hotel, the elevator is broken and the stairway is unlit, with stairs of varying and unpredictable heights. Outside the Chistya Prudy, there is a bag of concrete in a palm tree, leaking grey down the trunk. Inside, some of the electrical outlets are just plates screwed into drywall. …

My Postmedia colleague Cam Cole’s bathtub came loose from the wall, and therefore rocks like a ship. He has a shower curtain, though. In the Rosa Khutor section of the mountains, Stacy St. Clair of the Chicago Tribune was told by the front desk that if the water worked, “do not use on your face because it contains something very dangerous.” When it did come out of the tap, it looked like a lot like cloudy urine.

But they don’t have it quite as bad as the people displaced to build the Olympic village:

Thousands of residents of Sochi’s Imereti Valley were evicted from the land that would become the Olympic complex, and despite their legal challenges and protests (including hunger strikes), were resettled in nearby Nekrasovskoye, a village built from scratch. Residents were promised that it would be lovely, with parks, a playground, a tennis court, and a Sochi Cultural Center that would prove a big draw for Olympic visitors. Everything certainly looked lovely in the state-approved photos of Vladimir Putin’s visit to Nekrasovskoye. (Thumbs up, Vladi!)

But then you look at some photos of Nekrasovskoye, taken Jan. 27. There is no park, no playground, no tennis court, and the Cultural Center is just a concrete skeleton[.]

This despite the fact that the games are the most expensive in history:

To take a round figure they look like costing $50bn. Up to now the most expensive Games have been Beijing in 2008, at some $40bn. The London Games of 2012 cost a bit over £9bn, say $15bn. You would expect Winter Olympics to cost perhaps half that of Summer ones and Vancouver came in at $7bn. So Sochi is huge.

Put it in the context of the Russian economy and it is even huger. [British] GDP in 2010 was £1,460bn, so the Games cost 0.6 per cent of GDP. (There were longer-term offsets and you can argue that overall the economy probably ended up ahead – but that is a separate debate.) Russian GDP this year will be about $2,100bn, so the cost is equivalent to 2.5 per cent of GDP. An entire year’s growth, maybe two years’, is being blown on one event.

Surowiecki explains why such projects are so corruption-prone:

Sochi is emblematic of Russia’s economy: conflicts of interest and cronyism are endemic. But the link between corruption and construction is a problem across the globe. Transparency International has long cited the construction industry as the world’s most corrupt, pointing to the prevalence of bribery, bid rigging, and bill padding. And, while the sheer scale of graft in Sochi is unusual, the practice of politicians using construction contracts to line their pockets and dole out favors isn’t. … And a recent report from the accounting firm Grant Thornton estimated that, by 2025, the cost of fraud in the industry worldwide will have reached $1.5 trillion.

What makes construction so prone to shady dealings? One reason is simply that governments are such huge players in the industry. Not only are they the biggest spenders on infrastructure; even private projects require government approvals, permits, worksite inspections, and the like. The more rules you have, and the more people enforcing them, the more opportunities there are for corruption.

Jonathan Mahler points out that every Olympic host overspends, and proposes a solution:

Designate permanent sites for both the Summer and Winter Games.

This would prevent countries from going on self-destructive Olympic spending sprees. (Montreal spent 30 years paying off its $1.6 billion debt from the 1976 games.) It would have attendant benefits, too: No more Olympics next to war zones, for instance. It may not be possible to divorce politics from the Olympics altogether — if the games were held in the U.S. this year, international civil rights advocates would probably be protesting the NSA — but you could at least mitigate the effects, maybe by awarding the Winter Games to neutral (and rich) Switzerland?