Saturday, July 17, 2010

What Can We Learn About Free Markets from the World Cup?

from http://www.caseyresearch.com/displayCdd.php?id=482

As Spain’s Andres Iniesta scored the deciding goal against the Netherlands, another World Cup has come to an end. The World Cup is always a magical time – especially for impoverished countries. Entirely backward nations such as Ghana can actually face and defeat teams like the United States. Some other surprise victories this year included Serbia over Germany, Mexico over France, and Uruguay triumphing over many all the way to fourth place. Anytime a second- or third-world country competes against a bigger opponent, I’m always rooting for the small guy. Victory means so much more for them.

Strangely, these outcomes aren’t extremely uncommon in soccer. But why do they happen? The first world dominates these countries in nearly everything. At first, one could explain the difference by the nature of the game. This is a physical sport, and hence no special requirements are necessary, such as infrastructure, education, etc. Sure, that’s a partial explanation. But there’s much more to it.

For one, soccer may be the most privatized industry in the world (outside some stadium subsidies). Even in the most regulated kleptocracies, no one can stop people from playing soccer. The rules and regulations are the same globally. Governments don’t get involved – in many cases, for their own good. Regulate any industry, but touch soccer and you’re asking for trouble. After all, dictators want circuses and bread – regulating circuses does them no good.

With government out of the way and a high demand for the sport internationally, countries around the world have developed very successful clubs and teams. Even the most backward nations will have amazing stadiums and organizations. The sport is a sacred right of the poorest nations.

Soccer doesn’t face the same restrictions as most industries in the third world. So, naturally the sport will prosper. But the game is also much freer internationally. Professional players essentially have a run of the world – no pun intended. They are perhaps the only class of people with truly open borders. Because soccer is such an important game worldwide, citizenships are often immediately granted to talented foreign players. If not a direct grant, the route to citizenship is always smoother. Would you like to be the immigration officer to deny Manchester United their next top goal scorer? I don’t think so.

Players from African countries and Eastern Europe are commonly recruited into the best teams of Germany, Italy, England, and Spain. Your birthplace is unimportant; only talent matters. This is a free market principle in a very pure form. After training with and playing against the best teams in the world, these players return to their home countries for the World Cup. It should be no surprise that they can compete with German, French, and Italian players. They play alongside them regularly.

The story for the average citizen in these countries is the exact opposite. The local industries have been regulated into oblivion. The government has its hands in every business and every pocket. To accumulate skills becomes almost pointless as the only reward will be government theft. And suppose that you wanted to take your talents somewhere else. International immigration laws will impede every step, regardless of talent and skill.

Even if one gets into a prosperous country, he will not be treated like an arriving champion. Instead, the locals will despise him for working harder, better, and cheaper – the complete opposite of the soccer star. With a kleptocracy at home and worldwide immigration obstacles, it’s no surprise that much of the world remains perpetually poor.

With freedom Ghana, Serbia, Kenya, or any country could compete with super-powers beyond soccer. Natural resources and the rest are only footnotes. Just look at Luxembourg and Switzerland as examples. The World Cup teaches us an important lesson: Give individuals the freedom to pursue their dreams, and they can rise to the top. No matter where they come from.

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