Column : Of football and economic strategy

Written by Michael Walton | Michael Walton | Updated: Jul 4 2010, 03:32am hrs
The World Cup (of football, for those who have been missing it) is not only a huge global sporting event, a source of elation and despair, of triumph and humiliation, but also both model and metaphor for national economic performance. It vividly exemplifies how the success of nations in todays world flows from both globalisation and institutionally grounded national strategies.

The biggest profile is given to individual football stars, especially attackers such as the little magician Lionel Messi of Argentina, or the egotistical Cristiano Ronaldo of Portugal (thankfully out of the competition now). But the real stories lie in the blend of inspiration with collective organisation. And this is where national history and strategy come in.

This was the first World Cup on African soil. At one level, African teams disappointed: only Ghana made it to the knock-out phase of the competition and (at the time of writing) to the quarter finals. Yet relative to their size and national prosperity, African teams actually performed above what would have been predicted. Ghana, indeed, knocked out the US, for the second World Cup running, when the US has 13 times more people and is 36 times richer in per capita terms.

Many European teams have also been struggling. England, economic leader in the Industrial Revolution, inventor of football, and never short of illusions of footballing grandeur, went out early in a classic humiliation from rivals Germany. France and Italy, the two finalists from the 2006 World Cup, did even worse, not even making it to the knock-out phase. France went out with a stunning blend of drama, dissension and dismal play, even managing French-style industrial action on the way, when players refused to practice before the last key match. Italy was just depressed. At times it seemed as if the collective trauma of the global financial crisis and Europes relative decline was infecting team performance. By contrast, South American teams, somewhat shielded from the financial crisis by the prudent legacy of their many past crises, have done particularly well. But the parallel breaks down: Spain looks very good despite its sovereign debt premium!

The structural story is actually not one of a shifting centre of global economic power in football. European club football remains the epicentre. The English, Italian and Spanish leagues are extraordinarily wealthy, with corporate clubs built on consumer passion, lucrative broadcasting money and brand income. Many clubsManchester United, for exampleare publicly listed capitalist firms. Others are more like personal fiefdoms, reminiscent of crony capitalism: Italian PM Silvio Berlusconi owns AC Milan, and billionaires from Russia, Thailand (briefly) and the Gulf have been buying up trophy clubs.

Whatever the form of ownership, money has been pouring into the elite clubs. And top European club competition has come to define the global technological frontier of football, in terms of both talent and techniques. The global elite of players is now truly international. Internazionale, Milans other team, won this years UEFA Champions League and the major Italian competitions with an Argentine captain, a Colombian vice-captain and not one Italian in their first choice team. Africa provides some of the best players in Europe. In a wonderful vignette of global linkage, two brothers of Ghanaian heritage played in the Germany versus Ghana gameone on each side.

Globalisation also applies to technique and organisation. Football is highly technical and European club competition defines the techniques. Brazil, historically proud of its joga bonito (play beautiful), now plays a highly technical European game, but does so very well, and with the flashes of brilliance needed to break down other defences.

So, globalisation of talent and technique is part of the story. The other part of national success concerns what economists have slowly been waking up to in interpreting economic performancethe role of institutions. In football, both historically shaped cultural traditions and contemporary organisation matters. Europe, South America and Africa all have long footballing traditions. Asias is more recent. Germanys recent success has flowed from organisation and their capacity to nurture young domestic talent. While England has less than 3,000 top football coaches, Germany has almost 35,000, by the European governing boards standards. By contrast, while many African teams increasingly have the talent poolthanks to globalisationthey have so far lacked the depth in national leagues and business organisation to build effective national teams, and have relied on imports of foreign coaches.

In football, as in economic strategy, the achievement of success depends on deep integration into global markets and techniques. But global integration is not enough. Of equal importance is the development of national institutional processes, to nurture the talent and capabilities, to solve the organisational challenges of building a collective enterprise, and to do this on the basis of local cultural traditions.

The author is at the Harvard Kennedy School and the Centre for Policy Research