Games theory says the Olympics are more about national prestige, international PR and one heck of a party than building a lasting, sustainable and ultimately profitable economic legacy. Many Olympics have been duds on the legacy front. Montreal in 1976 and Athens in 2004 come to mind.
As for London 2012, every economist, politician and urban planner in the country has an different opinion about the short– and long-term impacts of Games on the city and the country as a whole (since London, population 8.2 million, dominates the British economy).
The verdict: The Games themselves are probably a wash or, at best, a slight positive for London. The long term is where the real payoff could come, if it comes. That's because the Games were always as much about the development of a huge, derelict and unhealthy swath of East London – so unhealthy that life expectancies in the area are seven years less than those in the rich west end – than about Olympic glory.
"This is a major opportunity to link the east end to the more affluent areas of the city," Tony Travers, director of LSE London, the political and urban affairs think-tank at the London School of Economics, said at a recent conference on the economic impact of the Games.
By his estimation, the Olympics crammed 70 years of development into a mere seven by imposing the 2012 deadline. The Games were awarded to London in 2003. Since then, the Olympic Park adjacent to Stratford City has been a non-stop flurry of construction and reclamation projects. Some, such as the erection of the sports facilities, were designed specifically for the Games.
But most of the projects – from cleansing the chemical-sodden land to connecting the area to the rest of London with a network of roads, bridges (38 in total), and subway and train links – were designed to rescue the site from oblivion. "It was a dead site, an area of unspeakable dereliction," Mr. Travers said.
The trouble with any Olympics is that they are one-shot wonders, that is, they come with no annuity in the form of repeat customers. The millions of sports enthusiasts who come to the Games – about 8.8-million tickets have been sold – won't be back next year. That's why London, as Barcelona did to great effect after the 1992 Olympics, is trying extra hard to ensure the Olympics site is reinvented as vibrant and productive residential and commercial area after the Games end.
The pressure is on London officials, such as mayor Boris Johnson and his predecessor, Ken Livingston, who won the Games for the city, to prove that the soaring expense is worth the effort. Indeed, London 2012 could qualify as the mother of all cost overruns.
The original estimate was £2.3-billion ($3.64-billion). The bill now is £9.3-billion, and that excludes the £6-billion sunk into transportation links, and the estimated £2-billion operating cost of the Games themselves, which officially began Friday with the Danny Boyle-directed opening ceremonies.
All up, this is a £17-billion-plus effort.
The Games on their own seem to have provided a minor uplift to London and Britain itself, which remains mired in a double-dip recession. Writing in The Times, Kevin Daly, the United Kingdom economist for Goldman Sachs, estimated that the Games' overall short-term boost at 0.3 per cent to 0.4 per cent of gross domestic product this year.
But many Londoners are leaving town during the Games, while others are staying at home for fear of the madding Olympic crowds. Their spending pullback could easily offset the visitors' spending.
Employment figures for both London and Britain are more encouraging. London's unemployment rate has fallen to 8.2 per cent from 10.1 per cent quarter-over-quarter, with some, but perhaps not all, of the improvement coming from the Games.
Overall employment in Britain rose by 182,000 in the three months to May, despite gross domestic product shrinking by 0.7 per cent in the second quarter. It's hard to tell how many of those new jobs are related to the Games.
For London, the Games' legacy is the far more important issue.
In effect, the goal was to build a new city within a city in East London, a grand project in a country that, unlike, say, France, doesn't like grand projects. Of all the Olympic sites, only four – the velodrome, the main arena, the handball court and the aquatics centre – will remain after the Games pack up on Aug. 13.
The rest will be dismantled to make way for housing, recreational land and commercial developments, all connected to the city with modern transportation infrastructure, such as the fast Javelin trains that whisk passengers from Stratford City to London's St. Pancras station in seven minutes.
The enormous Westfield shopping mall at Stratford City is the anchor commercial development so far. The decision to build it was actually made two years before London was awarded the games. The athletes' village will become housing shortly after the Games.
Goldman Sachs thinks the British government's estimate that the £9.3-billion investment in the site will yield £13-billion in benefits is an "underestimate."
On Thursday, Prime Minister David Cameron used an international investment conference in London to promote foreign investment. He hopes the soon-to-be-former Olympic site, with comparatively cheap rents and modern infrastructure, will emerge as an investment magnet.
"Britain is back open for business," he said.
Will London's Olympic redevelopment dream come true? It's impossible to tell because the site will take years to fill with people and businesses. "This is a 20- to 30-year project," said Ricky Burdett, a professor of urban studies at the LSE.