What the World Cup Says About World Economies

Serious sport, according to George Orwell, is war minus the shooting. In the words of Bill Shankly, legendary manager of Liverpool FC, football is not a matter of life and death; it is 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 the referee's verdict with good grace. President Barack Obama stated, with unilateralist insouciance, that FIFA had made the wrong choice. For its part, FIFA insisted 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 commissioned from McKinsey, come out at the 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 BRICs (Brazil, Russia, India, and China) contributing 62 percent of global growth over the next two decades, compared with just 13 percent 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 Sepp 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 U.S. diplomats, as relayed by WikiLeaks—mafia and government work hand in glove. Qatar, likewise, is not noted for its muckraking 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 businesspeople, struggling to find opportunity in a frontier market, roared their approval.

WikiLeaks itself is a symbol of the same dilemma. 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 tradeoff between transparency and national security, but no such debate takes place in the emerging world. A Russian equivalent of Julian Assange would end up dining on the kind of sushi that glows in the dark. China thinks nothing of jailing a Nobel laureate and threatening trade sanctions against countries that attend the prize ceremony. Marx has been replaced not by Adam Smith but by Niccolò Machiavelli.

Until recently the assumption was that countries with brutal governments and institutionalized corruption were doomed to irrelevance. Francis Fukuyama 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 now looks like the high noon of Western triumphalism. 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.