Global Investing

Olympic medal winners — and economies — dissected

August 13, 2012

The Olympic medals have all been handed out and the athletes are on their way home.  Which countries surpassed expectations and which ones did worse than expected? And did this have anything to do with the state of their economies?

An extensive Goldman Sachs report entitled Olympics and Economics  (a regular feature before each Olympic Games) predicted before the Games kicked off that the United States would top the tally with 36 gold medals. It also said the top 10 would include five G7 countries (the United States, Great Britain, France, Germany and Italy), two BRICs (China and Russia), one of the developing countries it dubs Next-11  (South Korea), and one additional developed and emerging market. These would be Australia and Ukraine, it said.

Close enough, except that Hungary took the place of Ukraine as the emerging economy in the Top 10 and the United States actually took 46 gold medals — more than Goldman had predicted.

Goldman Sachs quite rightly pointed out in its report that progress and improvement in economic growth have historically equaled progress in sport  –check out South Korea’s 13 golds in London compared with none in Munich 40 years ago; its per capita income is now $23,000 compared with $2,300  back then.  Clearly wealth is key: hence 9 of the top 20 medal winning nations also have among the highest per capita incomes.

Second, countries with a socialist past (or present) also usually put up a strong showing even if the people are poorer — 8 of the top 20 from London are either communist (China, Cuba and North Korea)  or ex-Soviet bloc (Russia, Hungary, Kazakhstan, Ukraine and the Czech Republic).

Now for the euro zone. There has been some hand-wringing in Germany, France  and Austria about their relative performances. The first two received 11 golds each (compared to the 14-plus that were targeted) while Austria go home with no medals at all, gold or otherwise, for the first time in 50 years. (Lets wait until 2014 to see how the Austrians do at the Winter Olympics).

In the euro zone periphery, Italy fared best, landing 8 gold medals for 8th place, though less than the 10 that Goldman had predicted.  Spain failed to break the top 20, with just 3 golds (it took 5 in Beijing and Goldman  had forecast it would get 6 this time).

Portugal came in a dismal 69th, behind the likes of Taiwan and Malaysia (it was 46th in Beijing with a gold and a silver) and  Greece ranked 75th with just two bronzes. What a comedown from Sydney when it took 17th place.  Ireland, on the other hand, the poster child of the periphery, had its best Olympics in 60 years, winning one gold, one silver and three bronzes to take 41st place (rather than the 50th GS had forecast).

Brazil and India, the two BRICs that have always punched below their weight at the Olympics, took 22nd and 55th spot respectively. Both fared worse than Goldman had expected,  with Brazil taking 3 golds (exactly what it got in  Beijing) instead of the 6 that were forecast. India remains a minnow at the Games despite its vast population and fast-growing economy and failed to win any golds (Goldman had predicted 2 and it had 1 at Beijing). This reflects not only the lack of sport infrastructure and funding but also abysmal per capita incomes and wealth inequality.

Another disappointment was Australia which won only 7 gold medals, half its Beijing haul. Reasons are unclear — Australia’s economy, unlike the euro zone, is doing pretty well.

Finally, the Olympics were a dream event for Britain, which took 29 golds, 10 more than it got at Beijing and the total tally of 65 medals well ahead of the 48 that were targeted. Despite the dire state of the economy, that’s not surprising, if Goldman is to be believed. The bank had actually forecast GB to take 30 golds, citing its analysis of past Olympics that showed a distinct advantage for host nations.  “In some cases, hosting the Olympics has meant increasing the number of medals by more than 50% with respect to what countries would have otherwise attained,” the bank’s report had said.

Brazil takes over now as host for 2016. But with just 3 golds from the London Olympics and 17 in total, it will need a massive host nation advantage if its athletes are to get to the top-10 finish the country’s Olympic committee is targeting.

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