Some of the commenters here are upset that so many Samizdata contributors object to the Olympic Games being staged in London, as if we are all anti-sports or just plain miserable old farts. Not so. Writers David Carr and Michael Jennings of this parish, for example, both like sports like football and cricket. As do I (I play a bit of cricket and golf, besides other sports). The root cause of our hostility is simply that barring a miracle, the Games will end up costing the taxpayer a lot of money, and as believers in capitalism and limited government, we don’t think sport is a legitimate government spending item in the way that say, defence is. In fact, if we cannot cut sports or the arts, say, from public spending, how can we honestly hope to roll back the state to the extent that we would like?
But to be more positive about all this, it is surprising that more has not been written about how the Games, and similar events typically paid for out of taxes, could not be made entirely reliant on the private sector. The Games will create a new set of facilities in East London, which hopefully can be used for decades. Great. Then let the expected future streams of revenues generated by said facilities be used as collateral for things like bonds to pay for the project.
Asset-backed securities are an increasingly common source of funding in our capital markets. Even pop star David Bowie, demonstrating the sort of business savvy common in the pop world, has issued bonds using his record sales as collateral. Why not issue “Olympic Bonds” with 20 or 30-year maturities to pay for the Games? Pension funds, which are hungry for long-dated, reliable income, would jump at them.
But of course the rub is that the backers of the Games may lack the confidence that the event will generate the kind of economic returns used in the sales pitch in the run up the vote on Wednesday, which is why there is a high chance that the taxpayer will have to fork out for the Games.
If any budding Olympic entrepreneurs out there want to prove me wrong and show how the Games can be entirely self-supporting, then comment away.