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Tuesday, July 18, 2006

Globalization Lessons from the World Cup

Branko Milanovic, an economist at the Carnegie Endowment for International Peace, looks for lessons about globalization from the World Cup. Does globalization lead to a concentration of wealth and power?:

The Lessons of the World Cup, by Branko Milanovic, Project Syndicate: This year’s World Cup has proven ... that football is probably the world’s most globalized profession. It is inconceivable that Brazilian, Cameroonian, or Japanese doctors, computer scientists, blue-collar workers, or bank tellers could move from one country to another as easily as Brazilian, Cameroonian, or Japanese football players do.

Indeed, London’s Arsenal football club is composed entirely of foreigners, including a French coach. Even the captain roles are no longer reserved for domestic players... Football thus provides a glimpse of how true globalization of labor would work. In football, as in other occupations, restrictions on labor mobility came entirely from the demand side. No limits were ever imposed on players’ movements, except by Communist countries. But the demand side was heavily regulated, owing to a rule that clubs could field no more than two foreign players in any single game.

The Bosman ruling, named after a Belgian player who successfully challenged the rule’s application to players from other European Union countries, eroded the limit, which collapsed altogether under the onslaught of the richest European clubs’ demand for a free hand in hiring the best players, wherever they might be found. ...

[W]herever globalization and full commercialization reign supreme, there is an unmistakable concentration of quality and success. Consider the number of clubs that have qualified for the European Champions’ League top eight slots. If we look at five-year periods between 1967 and 1986, the number of different teams that qualified for the quarterfinals varied between 28 and 30. In the next two five-year periods, however, the number fell to 26, and in the most recent period (2000-2004), there were only 21. The bottom line is simple: fewer and fewer clubs are making it into the European elite.

National leagues are similar. Since the English Premier League was started in 1992, only one championship was not won by Manchester United, Arsenal, or Chelsea. In Italy, all but two Serie A championships since 1991 have been won by either Juventus or AC Milan. In Spain, all but three championships since 1985 have been won by either Real Madrid or Barcelona.

The reason for this concentration at the top is obvious: the richest clubs are now able to attract the best players in the world. Yet this has arguably been accompanied by improved quality in the game itself... When the best players play together, the quality of each, and of the team as a whole, increases exponentially. When Ronaldinho and Messi, or Kaka and Shevchenko, play together, their combined “output” (number of goals) is greater than the sum of goals that each would score if he played in a different club with less talented co-players.

Free mobility of labor in other areas would probably produce the same effect. If doctors, computer specialists, or engineers (let alone the proverbial Polish plumbers!) were allowed to move freely, the concentration of talent in the richest countries would most likely increase. Inequality in the distribution of talent across countries would rise, even if total world output of goods and services, and their average quality, improved, as with football today. Poorer or smaller countries can hardly dream of winning a European championship, as Steaua (Romania), Red Star (Serbia), or Nottingham Forest ... once did.

But, while we see inequality and exclusion in club-level football, the opposite is true for competitions between national teams. The average winning margin among the top eight World Cup national teams has steadily decreased, from more than two goals in the 1950’s, to about 1.5 goals in the 1960’s, 1970’s and 1980’s, and only 0.88 goals in the 2002 World Cup.

The same is true of all games played at the final tournament, not only those among the top eight national teams. The decrease in winning margins is all the more impressive because the World Cup has grown from 16 to 32 national teams – many of them new and rather inexperienced. ...[T]he elite eight teams of the last four World Cups have included two “newcomers ” that had never been quarterfinalists, such as Turkey and South Korea in 2002.

There are again two reasons for this. First, free movement has meant that good players from small leagues improve much more than they would had they stayed home. A good Danish or Bulgarian player improves much faster if he joins Manchester United or Barcelona.

Second, that improvement in quality was “captured” by national teams playing in the World Cup thanks to FIFA’s rule requiring players to play only for their national team. Eto’o can play for any ... club, but in the national competitions, he can play only for Cameroon. In other words, FIFA has introduced an institutional rule that allows small countries (in the football sense) to capture some of the benefits of today’s higher-quality game, thereby partly reversing the “leg drain.”

The same rule could be applied to other activities. Free movement of skilled labor could be accompanied by binding international requirements that migrants from poor countries spend, say, one year in five working in their countries of origin. They would bring home skills, technology, and connections that are as valuable as the skills that Eto’o, Essien, or Messi bring back to Cameroon, Ghana, or Argentina. Job placement would remain a problem, but the principle is sound: the world should learn from the World Cup.

Interesting idea, thinking about ways to transfer skills back to the country of origin is worth pursuing, but uprooting people and their families every five years with an international move seems impractical. Financial incentives to move back to their home country might be better than a rule forcing people to do so, especialy if they stayed permanently rather than just returning for one year in five.

    Posted by on Tuesday, July 18, 2006 at 10:15 AM in Economics, International Trade, Policy | Permalink  TrackBack (1)  Comments (14)


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