There seems to be no limit to the efforts of Lord Coe and his friends at the International Olympic Committee to bring this summer's London Games into ridicule and contempt. A week-long "military exercise" is currently under way in the capital. RAF Typhoon jets are to scream back and forth over the Thames. Starstreak surface-to-air missile batteries are being set up in East End parks and on flats in Bow, with 10 soldiers manning each one. Army and navy helicopters will clatter back and forth, with snipers hanging from their doors "to shoot down pilots of terrorist planes".

Machine-guns will for the first time be toted by guards on the London tube. Police special forces, "trained to kill", will wear balaclavas to avoid identification. There are to be naval landing craft roaming the coast off Weymouth and submarines at the ready. The Olympics have become a festival of the global security industry, with a running and jumping contest as a sideshow. No one in government dares call a halt. Nero in his prime could not have squandered so much money on circuses.

The Olympics have become an Orwellian parody of what happens when a world agency blackmails a government aching for prestige into spending without limit. Not one defence spokesman has come up with a plausible scenario for the jets and missiles. The latter have a range of just three miles and are said to be usable "only at the express instruction of the prime minister". What will they shoot down, and on whose head will it crash?

These boys-with-toys are costing taxpayers £1bn yet they cannot add an iota to national security. They have nothing to do with deterring terrorism, even supposing there to be any such threat. The modern terrorist uses suicide tactics, by definition immune to deterrence. All the government has done is raise the politico-military profile of the Games and tempted some crackpot to have a go. Even at the street level, Occupy London and the cycling militants must regard Lord Coe's VIP lanes as a golden opportunity. The Olympic organisers are planning to close the Mall, Horse Guards Parade and most of St James's Park from June onwards, for fear someone might plant a bomb near the volleyball contest, crazily located behind Downing Street as a sop to Tony Blair. This is despite the prime minister and the mayor's office specifically countermanding the decision. Computer firms eager for contracts place regular stories about the "threat to the games from cyber-attack". One firm has been hired to deploy 450 "IT wizards" to guard the Games from hackers.

This means that, for the rest of the summer, London will effectively be "ruled" by the IOC. Enthusiasts for world government should take note. An unaccountable, self-validating body expects five-star hotels, chauffeur-driven BMWs, Soviet-style Zil lanes and all-green light phases for its thousands of "officials" and corporate hangers-on. It not only expects them, it gets them. It demanded and got its own legislative powers, under the 2006 London Olympic Games and Paralympic Games Act. Lord Coe does what the IOC tells him and passes the bill to George Osborne, who pays it. When the opening ceremony alone was £30m short (on a staggering budget of £60m), the cheque was promptly sent round.

The IOC is ever vigilant for its sponsors. Inspectors are to fan out across the capital, arresting anyone who uses the words "2012 Olympics" or any other associative phrase, for not paying Coe and the IOC a fortune in sponsorship fees. Jamie Oliver cannot hold an Olympics party in Victoria Park as he is a non-sponsor. Blogs, pictures or videos on YouTube or Facebook are banned. Anyone who so much as carries an unapproved bag, hat or shoe in a venue is banned. The Chinese politburo is Liberty Hall compared with this authoritarianism.

Transport for London has been reduced to a gibbering wreck. It has warned Londoners to get out of the city for the duration – at what cost to the economy? Citizens have been warned that central London roads will be closed, tube drivers may go on strike, and hospital casualty departments will be short of blood. How this will make money for London, as promised by Coe and others, is a mystery. As a tourist destination the place is being put on a par with Baghdad or Kabul.

There is no civic dividend from this sum and never has been. August in London is always a light month and, as the empty rows at Athens and Beijing showed, Olympic sports are not people draws. The irony is that the chief success of the London Olympics organisers has been the chief source of criticism. They have undoubtedly generated domestic enthusiasm. By making ticket sales a national lottery they achieved what appears to be the first sold-out Olympics of modern times.

However, roughly 85% of these buyers are Britons, few of whom will stay in London hotels. The crowds will be concentrated at the venues. It is the government, through its hospitality for the IOC "family", that will sustain the luxury hotel market this August. For the non-games districts of the capital, I would be surprised if shops, buses and tubes are not half deserted, taxis unused, theatres, cinemas and concert halls empty and any royal park not fenced off for a commercial sponsor pleasantly uncrowded.

The London Games began in a spirit of economy and popular enthusiasm. At the considerable cost of £2.4bn, they were to answer the state gigantism of the Beijing Games and fuse modern sport into the urban fabric. London would prove that cities did not have to be rich to host the games. It would be "the people's games".

The IOC put a stop to that. It drove a pliant British government to the present paranoia, budgetary incontinence and corporate greed. If the image of the London Games is to be rescued this summer, it must rely on diverting attention to the sincerity of young athletes and spectators, on somehow restoring the dignity of the sporting spirit. For now, a noble movement has been hijacked by a monster that is plainly out of control.