Cronyism Corrupted Sochi Olympics

The modern Olympiad is a made-for-TV spectacle. Nobody doubts that from the ice rink to the halfpipe to the ski jump, the Sochi Olympics will look great on the small screen over the next few weeks.

But viewers aren’t seeing the big picture. The untold story of these Olympics is the cronyism that went into building the venues.

The Sochi games will cost Russians $50 billion, four times the original estimate and far and away the most ever spent on an Olympics. By contrast, the 2012 London summer games, despite being longer, larger, and in a more-expensive country, cost about $15 billion.

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The high cost is partially because Sochi is actually a warm climate city hosting a cold weather event, so the organizers had to move plenty of earth and will need to provide lots of artificially chilled air.

But plenty of the cost was caused by cronyism. Observers from the International Olympic Committee and the Russian political opposition suspect that a third or more of the money Russia spent was simply stolen. Government contractors who support President Vladimir Putin have become rich. Opponents have gone out of business, and even out of the country. One former contractor, now in Great Britain with a contract on his head, says Russian authorities told him to add $30 million to his bill, then to return the money as kickbacks.

In the U.S. there’s less cronyism, but we’re not immune.

After the failed launch of the ObamaCare Web site, the Sunlight Foundation found that “some 17 ACA contract winners reported spending more than $128 million on lobbying in 2011 and 2012, while 29 had employees or political action committees or both that contributed $32 million to federal candidates and parties in the same period.” Big government projects, here and in Russia, provide plenty of opportunities for governments to reward supporters.

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“Sochi was planned as a celebration of Russia’s resurgence,” The Economist writes. It’s the largest construction project in Russia’s post-Soviet history. But instead of highlighting how far the country has progressed since it last hosted an Olympics in 1980, the Sochi games will, from a security and an economic viewpoint, feel eerily familiar.

For one thing, that’s because the games will lose money. Olympics run under free-market principles, including the Salt Lake City, Atlanta and Los Angeles (1984) games, actually turned a profit, and left valuable infrastructure (stadiums, housing) behind. In a free market economy you earn money by getting things done. In Russia too many bureaucrats earn money by preventing things from getting done.

Enjoy the Olympics. They’re meant to show Russia at its best. But they really show how little the country has changed, and how far it has to go.