The Strategist

Why is success at Olympics tied to success in economics?

08/24/2016 - 14:34

British athletes won 27 gold Olympic medals and became a sensation of Rio 2016. This success looks particularly impressive on a background of the United Kingdom’s extremely unfortunate results at the Olympics in 1990 and in the early 2000's.

In recent years, according to experts, government agency UK Sport has been working much better to select potential winners and provide them with the most favorable conditions, The Economist magazine says.

What is the secret of success at the Olympics? First off, it would be nive to be a rich country.

Size of population is another advantage since it’s much easier to find people with outstanding athletic ability among large number of people. Yet, all of that means little if a state does not care about its human capital.

For example, India, the second most populous country in the world, has won only two medals (silver and bronze) in Rio de Janeiro. In turn, small New Zealand won 18 medals, including four gold awards.

In 2008, an independent analysis confirmed that, despite the huge population, India's Olympic potential is very small. Local people are struggling with poverty, disease and malnutrition, they do not think about the career of the athlete champion. Rich countries traditionally have a healthy population, and more funds for development of sport. In 2000, when China's GDP per capita (adjusted for purchasing power) was less than $ 4 thousand, Chinese athletes won 58 medals in total.

By 2012, the country’s GDP per capita has increased four times, and number of medals won by Chinese athletes at the London Olympics Games medals soared almost twice.

Andrew Bernard of Dartmouth College and Meghan Busse of Northwestern University published a study in 2004. They concluded that size of population and GDP per capita have a similar effect on number of medals. Aggregate GDP is a good predictor of number of a country's future rewards at a sporting event.

Allocation of substantial funds to solve the problem brings results. From 2000 to 2012, funding for athletes in the United Kingdom (most of which comes from revenues of the national lottery) has increased fivefold from 50 million pounds to 250 million pounds. Number of Olympic medals jumped accordingly.

British medal success in Rio is partly obliged to funding cuts on not very promising sports and specific athletes. In 2012, good results of cyclists led to additional funds, and failure of volleyball players - to an automatic reduction in their budget. 

However, governments should not rush to use Olympic strategy anywhere else. The competition cannot be comparable to most aspects of economic life. Fourth place in the global steel industry is no reason for alarm (unless, of course, the government wastes money on inefficient plants).

Governments should pay more attention to investment in public interest (such as universities and railways) since this has a positive impact on all sectors of the economy. Those who do it never lose, even if they do not appear on top lines in studies. Caring about people ultimately leads to success in the economy and at the Olympic Games.