Friday, February 6, 2015
Re-balancing democratic federalism: the example of soccer
This week I discussed with my students (in the course on the economics of soccer that I teach at the Study Abroad program at UAB) the article by Branko Milanovic "Globalization and Goals." The article has three parts. In the first part, the author presents a simple theoretical model where the introduction of free trade of players among clubs increases the concentration of talent (because the richest clubs get the best players), increases average quality (because of the multiplicative nature of the production function among players), and increases equality among national teams. This is so because quality is endogenous, and the best players from even the poorest countries go to play in the best leagues. In the second part, he presents evidence consistent with these trends from the European Champions League, the Italian League and the World Cup. And finally he compares these trends with trends in general in the global economy. He claims that global soccer is an example where free trade increases efficiency, but this efficiency is compatible with redistribution because of the presence of institutions, in this case the rules of global soccer enforced by a true global authority, FIFA. According to these rules, mobility of players at the club level is not matched at the national level, where players can only play for one national team all their life. An obvious example is The Netherlands: before the Bosman ruling Ajax Amsterdam were among the likely winners of the top European competitions, but now they are no longer so because the best players go to richer leagues at a young age. However, the Dutch national team is still very competitive, because these same players reunite in summer to play national team competitions. The argument is that if we had a similar institution in the global economy we could make efficiency compatible with redistribution. I agree, with the caveat that one must make sure that this institution avoids the opacity and apparent corruption of FIFA. Even though soccer is very democratic (one could argue, too democratic and populist) at the local level, it becomes too distant from democratic rules at the global level. FIFA is more a powerful and distant body than a democratic federal body. Perhaps it is time to introduce more constraints to direct democracy at the local level (managers would appreciate it) and create more constraints at the global level, so that FIFA preserves its welfare enhancing powers but eliminating the corruption temptations. The details of all this are obviously to be filled in.