With four months to go till the Winter Olympics in Sochi Russia the characteristics of a planned economy are still prevalent. In the old Russia of the communist-era concerns about corruption, the cost of a project, the effect on the environment and the working conditions of the labour force were brushed aside. However it seems that nothing much has changed, according to The Economist.
Cost
When the bid was placed Russia proposed to spend $12 billion. The estimated cost now is $50 billion – most expensive games in history. According to The Economist Olympics tend to have overruns of about 180% – Sochi is now at 500%
Corruption
The closeness of the Government with the construction companies involved has led to corruption. Olympstroy, which oversees the construction, are run under the informal influence of a rent-seeking group of people for whom extraction of government funds is the main purpose. Furthermore one of Putin’s friends and judo partner has been awarded$7.4billion – more than the budget on the 2010 games in Vancouver. A road contract worth $9 billion went to the Russian Railways which is headed by a former KGB general and friend of Putin.
Environment
There has been little concern for the environment with construction waste polluting the Black Sea and protected forests being cut down to make way for facilities.
Labour conditions
Low-skilled migrants get paid $500 a month and work 12 hour shifts. There is no protection for them in the form contracts, minimum wage, health and safety, and insurance. Wages are not always paid in full and sometimes not paid at all according to Human Rights Watch.
Former prime minister Yegor Gaidar once wrote about how the Soviet Union had wasted its money on construction projects whose main purpose was to utilise government funds. One wonders has much changed?
What is also quite strange is the fact that Sochi has a sub-tropical climate and is one of the few places in Russia where snow is scarce. This has led organisers to store snow.
ECONFIX 