THE WORLD Cup is a fascinating lesson in economics, as well as football. The best teams and players have fought gladiatorial battles to reach Brazil, and the competition is about to get even more intense. So before they get lost amid the excitement of the tournament, here are six fundamental economic lessons to take home.
1. Competition is critical. Whether it’s Ronaldo, Messi or Rooney, these guys learnt competition at an early age. They thrived on it, and saw it as their friend, not their enemy. Not only that: competition spurred the best to seek even greater competition at higher and higher levels.
If only we had political leaders who said we want to win the economic World Cup – that we respect our rivals, fear some of their players, but our mission is to win and we don’t recognise second place. It’s impossible to conceive of England captain Steven Gerrard saying he’d be happy with a moderate performance. He’d be on a plane home the next morning. But our politicians promise us a poverty of ambition all the time. They’re happy to stay in the middle of the Premier League. Being happy in the middle is the surest way to get relegated. Where’s the vitality that led to an economic empire across the globe?
2. Competition is emotional and this is one of its great benefits. Billions will scream and shout over the coming weeks, not because they hate competition, but because they’re inspired by it. The next morning, most will wake up and return to a more subdued version in the workplace. How can we capture the football spirit at work? Employers, employees and customers can be persuaded with facts, but they’ll only be inspired with emotion.
3. Free trade works. Messi and Ronaldo wouldn’t have shone so bright if they’d stayed in Argentina and Portugal. They weren’t going to be confined to the domestic market if they were competitive enough to be global market leaders. Trading at the global level has expanded the world market. Neither football or the economy is a zero sum game.
4. Government needs to get out the way. Yes, it may have a key role in providing core infrastructure (stadiums in the case of the World Cup), but that’s it. If you don’t think the government has any role managing football teams, you also have to ask whether it has the required knowledge to manage or intervene in any other sector of the economy. Hayek’s knowledge problem is alive and kicking.
5. Watch out for monopolies. There isn’t a lot of competitive pressure on Fifa at the moment and, without market discipline, problems are as certain as night following day. Say no more.
6. If voluntary exchange determines pay levels, that’s fair. Nobody seems to complain when football superstars have pay packages running into the millions, but they do in business. The football lesson goes further, however. Football players who don’t deliver feel the consequences. Maybe we need more football in the boardroom as well.
Graeme Leach is director of economics & prosperity studies at the Legatum Institute in London.