The Soccer Theory of Globalization

by Daniel Kaplan, NYU graduate student in economics and supporter of Bafana Bafana Last season, when the British soccer team Liverpool FC played Real Madrid, the number of Spanish players in Liverpool’s team outnumbered those playing for Madrid. This is one illustration of an emerging trend: while soccer is already the most globalized of sports, it is also fast becoming one of the most globalized professions.

As labor mobility among soccer players has increased, there has been a decline in team inequality at the country level (documented by Branko Milanovic in this 2001 paper). Although traditionally dominant teams like Brazil, Italy, France and Germany continue to win, international tournaments are becoming far more competitive.

Cases in point: at the recent Confederations Cup in South Africa, Egypt beat Italy. And while Brazil eventually won the tournament, they had to fight back from two goals down against the USA (which had never before been in a major tournament final). What is behind the leveling of the international soccer landscape, and how could these lessons be applied to developing countries struggling to benefit from globalization?

Some “soccer economists” argue that nations that are worse at soccer have benefited from exporting their players to world-class foreign clubs, where they gain valuable skills and experience before returning to play for their home country This is similar to recent literature that questions the traditional Brain Drain fear, with the Brain Circulation alternative – skilled emigrants bring home skills and connections that could be as valuable to their home country as the skills brought back by exported soccer players.

But there is also a homegrown story. As Dani Rodrik points out, the Egyptian team that beat Italy had a majority of players with experience playing in domestic, rather than foreign clubs. The USA team that similarly surpassed expectations has key players from both domestic and foreign clubs. So taking advantage of globalization perhaps requires BOTH strong domestic capabilities and international links.

One nation’s strategy for developing a strong domestic soccer league will be very different from the next. American kids who play under the supervision of soccer moms are different from the street kids in a Brazilian favela. Perhaps the venerable theory of comparative advantage needs to become more complex as each country learns to play to its strengths and use more of whatever are its most abundant resources to compete globally. And just like in soccer, it’s hard to predict who will win the game at any particular time in any particular industry. Except the nice thing about trade, unlike soccer, is that both teams win in the end.