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The proper functions of a liberal state

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.

25 comments to The proper functions of a liberal state

  • Richard Thomas

    It befuddles me to see how mnay people are unable to understand the concept of a principled stand.

    After the recent US elections, many left wing commentators expressed confusion that the less-well-off “Nascar Dad” segment would vote for an administration whose (espoused) policies (low taxation, reduced social spending) would not directly benefit others.

    This is the heart of the message: “Taking other peoples money to fulfil your own goals is wrong”. That applies for my own goals as much as anybody elses.

    The olympics are just plain stinky anyway though.


  • In 1996, the Olympics were held in Atlanta on a commercial basis, and they were not underwritten by any government. The games had certain logistal problems at times, and they had the misfortune of having a nutter explode a bomb half way through them, but they were held successfully, they didn’t make money but more or less broke even, Kieren Perkins swam magnificently to win the 1500m freestyle despite dreadful form leading up to the final, and everything was good. However, the IOC found fault with certain logistical issues (principally the transport), and the weird self important wannabe aristocratic neo-fascist neo-corrupt culture of that body objected to what they saw as the crassly commercial aspects of those games. (Street vendors selling souvenirs of the sacred Olympic symbols. Heaven forbid). The IOC then made it a precondition of bidding for the Olympics that bids be underwritten by government and that bids would eschew some of the more commercial aspects of the Atlanta games.

    Essentially, bidders agreed that the state would provide a financial guarantee to the games, and they also agreed that they would not try terribly hard to make a profit. As there have in recent years been plenty of cities that want the games and that were willing to go along with these preconditions, the IOC have been able to get their way, and as a consequence in their present form the Olympic games are a horrible statist monstrosity. They also invariably turn into one of the leading opportunities in the world for pompous politicians to parade themselves self importantly at public expense.

    I don’t have any objection to the games themselves. In fact, as a sporting spectacle I always enjoy them. However, regardless of profit or loss (although it is always a loss) I object very strongly to the state financial guarantees that are always made when bids are submitted, and which have been made by the British government in this instance. Underwriting events like this and spending taxpayers’ money on them should simply be no business of the state.

  • I was in and around Atlanta in 1996 when the games were there. As Michael said, they were self supporting, and the city was left slightly in the black. The only people who were not happy, besides the morons that took out mortgages on their homes to open a T-Shirt shack, were the IOC, who frankly came to town with a chip on their collective shoulders.

    They objected to Atlanta building a stadium that could be used for baseball after the games were over (as if it made sense to do anything else when Atlanta-Fulton County Stadium was falling apart.

    Before the bombing, they objected to the “intrusive” security measures. After the bombing, they objected to the lax security measures.

    They touted the economic benefits of hosting the games, but heaven forbid anyone (besides the government) actually see a profit from the whole thing.

  • HJHJ


    You may be surprised to hear that I agree with much of what you say. I think the state should be rolled back and also think that it would be better if the Olympics could be entirely privately funded without any state guarantee.

    However, I am in favour of the London Olympics. The reason is that we do not have the choice of an entirely private enterprise bid. We have a choice of no Olympics or one ultimately guaranteed by the government (although there is a large private sector funding element) – these are the IOC rules. You might take the view that two fingers should be stuck up at the IOC for this rule, but that would mean not holding the Olympics regardless of the economic benefits or otherwise.

    There are many international projects and organisations which are like this – should we automatically turn our backs on all of them? We have to face the alternatives in front of us even if we prefer that there were different alternatives.

    The majority of the cost of the Olympics is infrastructure (which may run over cost estimates hugely and cost the taxpayer a fortune) but the point is that the government is committed to this anyway (which you may think is a bad thing, but it’s going to happen). The income from the Olympics, on most estimates, will roughly cover the Olympics-specific costs (the bid people – hardly unbiased, I agree – forecast a profit). You’re entitled to believe that the Olympics-specific costs may overrun hugely, but this is still small fry compared to the infrastructure costs (which may overrun hugely more).

    In Sydney, the costs specific to the Olympics overran by around 50% (revenue was also higher than anticipated), but several independent economic studies since have confirmed a huge overall net economic benefit.

    So I don’t agree with your assertion that that ‘barring a miracle the games will cost the taxpayer a lot of money’. The infrastructure might, but if this is your argument, then it would perhaps be a more productive use of time to argue against the west coast main line at £10bn – all to save a small percentage of the population an hour (or thereabouts) off the time to travel between London and Glasgow.

    Over two thirds of the sports facilities for the London games either already exist or are under construction regardless of the bid. Most were privately funded (my sport is rowing, which will be held at the entirely privately funded Dorney lake). Foreign Olympic associations will spend hundreds of millions on training camps and facilities all over the country – at no expense to the UK taxpayer and many facilities will be hugely uprated as a result. Remember, there was a recent parliamentary select committee report which criticised the government for taking far more in taxes from sports clubs than it ever gives back (I can confirm this is true from my own rowing club’s accounts).

    I agree with you that opposition to the Olympics comes not just from sports haters (although there are plenty of those here, most of whom fail to substantiate their assertion that it’s a “sports subsidy”). I know sports coaches who are against the Olympic bid. But plenty of people with no sports interest whatsover are in favour of the Olympics (Livingstone, for one – much as I hate to agree with him) because they believe in the economic benefits. If I genuinely thought that the Olympics would be economically detrimental, I too would be against it – but I have looked into this extensively and don’t think it will be. I might be wrong, but so might you.

    So I can’t prove you wrong, but I think I have demonstrated that you can genuinely believe in a liberal state and agree with the Olympics in London.

    Incidentally, I am very much against government funding for Olympic athletes – private sponsorship is the way forward here. If my small rowing club can get £20k p.a. sponsorship from local companies, I think that sports orgnisations should be able to as well (although in return, the government should stop taxing sports clubs and organisations so much)

  • Verity

    As I keep pointing out, Livingstone will be retiring that year and he wants to go out on a cloud of glory. And how illuminating that he and the equally naff Tony Blair think they will be riding to immortality on the ineffably vulgar Olympic Games.

    I was sorry to see London bid. As I said above, London has been an established, rich and powerful trading city, and a centre of the performing arts, for a thousand years. It should never have got involved in something so tacky as the Olympics, nor put itself out to please the cheap little crooks on the IOC.

  • GCooper

    Well said, Johnathan Pearce.

    Sadly, the point is lost, as it is whenever subsidies are discussed, on those who believe their turn at the pork barrel is a fine and perfectly justified thing, while in the very same breath they huff and puff about the next chap’s.

    It’s form of myopia. Untreatable, apparently.

  • Tim

    Just to let everyone know – I really love athletics. It’s probably my favourite sport to watch. Michael Johnson’s 200m, Lewis’ 4 golds and Coe’s 800m are indelibly printed on my mind.

    But I oppose the London Olympics on principle. That it is a staggering waste of public money. I have no objection to staggering wastes of private money (or private profits). This is my money, and the money of people from Cornwall to the tip of Scotland.

    Government should do the simple stuff. Fix the roads, nick criminals, keep the streets lit, make sure parks are planted nice, defend the nation, and maybe some low-scale infrastructure work that costs little and has a long-term general benefit (like Wiltshire CC paying for the ADSL exchange upgrade for many village exchanges).

    This isn’t an essential service. It’s a 3 week sporting event, which could be held in all manner of cities. With a little inginuity, it could use a number of stadia and facilities across the UK. Why not reuse the Manchester velodrome?

    The Olympics could and would be run for a profit if cities just stopped playing ball, and made a “low cost” games. No business build facilities costing so much for such a short period of time, if some existed that could be used. They’d make a deal to rent them instead.

    It stopped being about the sport years ago, and became about “infrastructure” and “regeneration”. Which basically means diverting money from one bunch of tax payers to pay for a load of white elephants that may help a few people in another area, but mostly helping consultants. And by taking money from people, ridding them of their own opportunities.

    Some of the money will come from the lottery, which means that instead of money going on things that might really make a difference, like youth clubs, it will go on this garbage.

  • We have a choice of no Olympics or one ultimately guaranteed by the government (although there is a large private sector funding element) – these are the IOC rules.

    Fine. The no Olympics it should be.

    And lets dispense with the euphemism of “ultimately guaranteed by the government.” We can speak plainly here. This will be largely paid for by the taxpayers, regardless of what their wishes on the matter might be.

  • Castillon

    Michael Jennings,

    In trying to fight the commercial aspects of sport, the IOC is basically turning its back on how the original Olympics were funded, etc.

  • Is Montreal still paying down the 1976 Games? A big obligation like that is what London should be at pains to avoid.

  • Why do we have the Olympics in the first place? What is the point? It is a complete waste of time & money. I believe there is no possible way for a libertarian to support such a statist act as this entire saga. The Olympics is anathema to everything I stand for.

  • HJHJ – nicely argued.

    Tim – great to hear you are such a big athletics fan. I too enjoyed Michael Johnson’s 200m and Lewis’ 4 golds but unlike you I didn’t enjoy “Coe’s 800m” and neither did he – he lost the Moscow final to Ovett and won both of his Golds at 1500m.

  • Verity

    Andrew ID – You and me both. It is the ultimate in statism, which should be anathema to everyone within whom beats the heart of a libertarian.

  • HJHJ

    “whenever subsidies are discussed, on those who believe their turn at the pork barrel is a fine and perfectly justified thing, while in the very same breath they huff and puff about the next chap’s.

    It’s form of myopia. Untreatable, apparently. ”

    Can this be the same GCooper who argued in favour of the national taxpayer funding the tube (£500m p.a. for the forseeable future) because of its importance to London? I hope he/she will now refuse to use the tube as a matter of principle (though I rather suspect that he/she relies on it and so is afflicted by the same untreatable myopia he/she despises).

  • GCooper

    HJHJ/Bollo et al writes:

    “Can this be the same GCooper who argued in favour of the national taxpayer funding the tube (£500m p.a. for the forseeable future) because of its importance to London?”

    It appears that one of the consequences of running around in a sweaty vest is the inability to understand the difference between a bona fide infrastructure project, the commercial benefits of which can easily be calculated, and a £3.5 billion subsidy for the blazer brigade’s 17 day beanfeast, disguised as an infrastructure project.

    Interestingly, even the BBC’s Newsnight coverage couldn’t avoid some of the chasm-sized cracks in the official costings. How much for security?!?

    Get your hand out of other people’s pockets, HJHJ. You want the Olympics? Then pay for them yourself!

  • Julian Morrison

    The tax funding is bad, but it isn’t the worst aspect of the Olympics, to me. That would be the way that individual achivement is always overshadowed by national glory. However, it is possible to attack this. The best way is to praise winners by their name, and NOT by their nationality. This can be done by each individual person and make some difference – it’s much easier to do than persuading the organizers to fund privately!

  • Tim


    I was referring to Coe’s famous world record 800m run.

  • Matra

    Is Montreal still paying down the 1976 Games? A big obligation like that is what London should be at pains to avoid.

    It was mentioned on Canadian TV today that the city of Montreal will pay off its 1976 Olympic debt some time in 2006. Apparently smokers have paid a significant proportion of the total. In recent years close to 0.20¢ of every dollar spent on tobacco products has been used to pay off the debt.

  • Julian Taylor

    £2 Billion initial costs, i.e. Compulsory Purchase Orders on several hundred business premises, contract tendering costs and preliminary ground clearance. It was stated clearly on BBC 1 News At Ten this evening that obviously this would be majorly borne by London council tax payers.

    Now for the fun part. Anyone who has actually bothered to pay attention might wonder how management contractors like Sir Robert McAlpine and Laing Management could manipulate a colossal contract like the Millenium Dome into a massive profit, while delivering the keys late (actually almost within hours of the millenium) and bankrupting just about every contractor and supplier in the process. The Dome project was done by simply using contractors – Watsons of Bolton was used for steel provision for example – who could fairly easily be shoved into bankruptcy (as happened with poor old Watsons) thus delaying payment until a considerably discounted settlement could be reached with their administrators. Also by using favoured construction contractors you can block attempts by the government to speed up the project – again the Dome is a first class example of how this was managed. By using a “closed shop” (for want of a better phrase) within your industry you can set your own terms for contract delivery, Laing/TW Project Management/McAlpines and others were paid an astounding amount of additional public funds to ensure that the contract for the Dome was completed by 31st December 2000.

    Given that those same contractors will undoubtedly be employed upon the Stratford Olypmics I wonder not by how much the project will overrun but how much us Londoners will be forced to pay in council tax increases for this financial bottomless pit to ensure either Tony Blair or Ken Livingstone’s place in history.

    Oh, and for those who actually believe Tessa Jowell’s or Patricia Hewitt’s promises of jobs galore might I gently push you towards this excellent article in The Times last month?

  • Bill Gates

    Who else wants to make an effort to disrupt the UKs extortion-funded tranzi sports circus?

    How about
    a) Seeding the ground with Protected Orchids?
    b) Moving all manner of rare species locally?
    c) Constant FoIA requests?
    d) Bribing an insider to get all the scandals or getting an insider in the IT team to give you copies of all the internal docs and email to help with FoIA requests.
    e) Create faked press releases.
    f) Subscribing all emails of those connected to every mailiing list and spam list.
    g) Posting and Faxing fake invoices around.
    h) Arranging fake Sales visits with contractors and not showing up.
    i) Spoofing Emails.
    j) Buying up and Denying Internet site space.
    k) Discouraging potential sponsors.
    l) Publicising how to do all of the above online.

    Deflate Positive Publicity.
    Inflate Negative Publicity.
    Narrow internal communication.
    Hinder Coordination.
    Destroy Trust.
    Defer Progress.
    Divert Assets.
    Increase Costs.

    Treat these events like the you would if you were union member on strike. Lets use the traditional methods of the left.

    We probably won’t be able to stop these games but with enough effort we can prevent any future entertainment by extortion by making these a disaster.

  • GCooper

    Julian Taylor writes:

    “Compulsory Purchase Orders on several hundred business premises, contract tendering costs and preliminary ground clearance.”

    There was a sad little story on one of London’s radio stations today, concerning the oldest smoked salmon processor in the East End of London, which built a brand new factory two years ago and has been ruthlessly “bullied” (its boss’s term, not mine) to abandon its brand new factory in next to no time, as the space is needed… oh, I don’t know, probably for a sweaty vest drying facility, or a stress-fracture treatment unit or a BBC athletics commentator hysteria chill-out space.

    The problem, of course, is that our salmon smoking friend and his many employees have absolutely nowhere to go.

    But of course, he doesn’t mater, does he? And his many employees can, no doubt, find excellent employment for a full 17 days.

    And yes, the Arups, Laings and McAlpines are going to love this. As are the teeming ant-like masses of bureaucrats and Za-NuLabour quango apparatchiks.

    The rest of us, of course, don’t matter. We only exist to pay for their pleasure after all.

  • Verity

    I didn’t like your final sentence, G Cooper, because those are not your normal brave words. The rest of you, including the smoked salmon processor, matter more than the fleeting shadows of tony bliar and his ghastly crew, backlit to make them look larger. tony bliar, his wife vampira and the mental microbes in the cabinet have had a horrible effect on Britain, but temporarily, one hopes. All wounds heal and it is the day to day Britons who make Britain work who will see Britain back to normality once bliar and the bilge washing round his ankles – aka the British cabinet – and the slithy toves in the civil service have been bested. Just wait and Bliar and Imelda will rush headlong into formerly welcoming doors now being slammed in their faces – really painfully, one hopes. After all, time wounds all heels.

  • GCooper

    Verity writes:

    “I didn’t like your final sentence, G Cooper, because those are not your normal brave words.”

    I freely admit that I am ambivalent about the UK. Part of me feels that we might yet just manage to drive Bliar and his ilk into the sea.

    Then again, part of me agrees with your advice to get out, now, before the treacle of corrupt statism sets about our knees.

    Truth to tell, I’m damned if I know what to think.

    But then again, Bill Gates’s suggestions, above, offer delicious possibilities!

  • JonM

    I felt sorry for you Brits when I saw the news.
    It would have been cheaper just to build colossal gold statues of your politicians and be done with it. Really that’s what it’s all about, a monument to their glory in all it’s egotistical magnificence.

    The only reason to watch the Olympic Games is so you can see a poor Nigerian villager whollop a pampered, media worshiped full time career athlete who lives off the taxpayer like a leech.

  • Verity

    OK, G Cooper, Bill Gates’s possibilities aren’t real. You know that. They would take tremendous organisation and even then, they may fail.

    Far better defeat the Identity Card Crap. There are already several structures in place to do this, including one that’s imminent on this respected and well-regarded blog, one assumes. This is do-able.

    The resistance is in place, and it is employing England’s greatest gift (after bravery and foresight) irony. Tony doesn’t do irony. Neither, to no one’s amazed gasps, does Jack Straw. No, honestly! Or wossname, that bint, oh yer, (Tessa Jowell, Patricia Hodges, Margaret Beckitt – boy! has she been quiet these last two years!), and all those other prim, faceless women with an abnormal interest in getting inside other people’s families and ruling them. Oh, and Ian Blair. We should never forget the inept, overweening ego of Ian Blair, ruler of London’s police.

    As long as we don’t get deflected by the press releases apparently conceding defeat – a typical tonyesque tactic while switching plans – the Identity Card will be defeated. And that will be the beginning of the end for Tone.

    My own view about the future? My country and its past were stolen from me. Tony’s toxic. It will take the country too long to slash the political correctness and the destruction of education that has been embedded with such devotion to the Gramscian cause. I pray to God British children will rediscover their history and their place in the world – not because London won the Olympics, like some little upstart city that needs the press.

    Although I will engage in the battle with all my heart, I will not return.