Newsweek Dec 12 2010
http://www.thedailybeast.com/newsweek/2010/12/12/what-the-world-cup-says-about-world-economies.html
Serious sport, according to George Orwell, is war minus the shooting. In the words of Bill Shankly, legendary manager of Liverpool F.C., football is not a matter of life and death; it’s much more important than that.
So it’s worth pondering the deeper implications of the recent contest to stage the 2018 and 2022 world cups. The final score in that encounter was a thrashing for the United States, England and Japan at the hands of Russia and Qatar. It was a result that symbolized the new post-credit crisis geopolitical realities; the cash-rich powers of the emerging world easily outgunned the fiscally-challenged members of the old G7.
The losers didn’t accept referee’s verdict with good grace. President Obama stated, with unilateralist insouciance, that FIFA (the Federation of International Football Associations) had made the wrong choice. England’s Football Association had despatched a dream team of lobbyists to Switzerland, including Prince William, Prime Minister David Cameron, and David Beckham. Its angry reaction to defeat would have done any hooligan proud.
For its part, FIFA insisted that the decision was based on a strategy of opening up promising new markets for the game. Other less charitable explanations were possible. British commentators were quick to call foul play. How else could the English bid, which won top marks in the assessment by McKinsey, come out bottom in votes cast?
Both explanations are valid. It makes perfect sense for football, like any other business, to focus its attentions on high-growth emerging markets. Projections by the World Bank have the four BRIC countries (Brazil, Russia India, and China) contributing 62% of global growth over the next two decades, compared with just 13% from the G7 countries. That means huge demand for broadcasting rights, sportswear, electronic games and other high-margin products spawned by the modern sports industry.
Still, there may be other reasons why football, with its notoriously murky finances, feels more comfortable in the emerging economies. It was revealing that among the conditions FIFA demanded from the English bid was exemption from money laundering penalties for FIFA-designated individuals. FIFA boss Sett Blatter, known as the pope of football, made a last-minute speech to his committee members, reminding them of the dangers of British investigative journalism, which had already laid low two of their number.
No such problems are likely in Russia, a country where – according to US diplomats, as relayed by Wikileaks – mafia and government work hand in glove. Qatar , likewise, is not noted for its muck-raking press or vigorous political opposition.
Football is not the only industry where the emerging markets are exerting a magnetic attraction. In the coming decades there will be trillions of dollars of infrastructure deals done in these countries, and for the first time major Western companies may find themselves competing directly with emerging economy champions. Will they suffer the same fate in bidding contests as the United States and England did in Switzerland?
Thanks to Wikileaks again, we know what one member of the British establishment thinks. At a lunch meeting in Kyrgyzstan, Prince Andrew denounced the anti-corruption investigation into a British aerospace deal with Saudi Arabia as “idiocy” His audience of business people, who face the challenge of finding profitable opportunities in the Kyrgyzstan economy, roared their approval.
Wikileaks itself is a symbol of the same dilemna. Needless to say, it does not disclose the internal communications of the Chinese or Russian governments. The United States and its allies may wrestle with the trade-off between transparency and national security, but no such debate takes place in the emerging world. A Russian equivalent of Julian Assange would have dined on the kind of sushi that glows in the dark long ago. China thinks nothing of jailing a Nobel Laureate and threatening trade sanctions against countries that attend the prize-giving ceremony. Marx has been replaced not by Adam Smith and John Stuart Mill, but by Sun Tzu and Niccolo Machiavelli.
Until recently the assumption was that countries with brutal governments and institutionalized corruption were doomed to backwardness and irrelevance. Francis Fukuyama’s influential book The End of History, made the case that convergence with the Western model of capitalism and liberal democracy was the only way forward for the rest of the world.
But Fukuyama was writing shortly after the end of the Cold War, in what retrospectively looks like the high noon of Western triumphalism. The combination of the credit crisis and the rise of the BRICs has dealt a heavy blow to such confidence. The question is no longer whether the emerging world will converge with the West, but whether the West , in order to stay competitive, might have to converge with the emerging world. That really would be a whole new ball-game.