With the World Cup only weeks away, one of Wall Street’s leading financial houses recently switched its attention from gold, shares and the dollar to which emerging economy has the best chance of lifting the trophy in Berlin on July 9.
The Goldman Sachs World Cup and Economics 2006 survey suggests there is a limit to how much overlap there is between the beautiful game and the murky world of finance.
Judged by best stock market form since the last World Cup in Japan and South Korea four years ago, the favourites this time would be Ukraine, one of the rank outsiders. A better bet may be Argentina, where the stock market was on its back after an economic collapse in 2002 but has since gained 548%, somewhat more impressive than the United Kingdom’s FTSE 100’s 41% rise, the second worst of all 22 nations in the World Cup this time.
What the Goldman’s study does reveal, however, is that six of the countries in the G7 wealthy economies are in the top 20 football nations according to Fifa world rankings.
Surprisingly, the richest of the G7 nations, the United States, is also the highest ranked by Fifa, in fourth place. France is in seventh place, England 10th, Italy 14th, Japan 17th and Germany, this year’s World Cup finals host, languishes in 19th place. Of the G7 countries, only Canada is not in the finals.
Goldman Sachs says that when it comes to footballing success, population size matters. Luxembourg, Switzerland and Norway have three of the highest living standards in the world but feature nowhere in the World Cup. By contrast, the four most populous countries in the European Union — Britain, Germany, France and Italy — are the only European nations to have lifted the trophy.
”This suggests that there may be a common denominator between size and football success,” said Jim O’Neill, the company’s chief economist. ”Perhaps it is simply the size of population that matters for football success in Europe. Other economic measures matter less.”
On Europe in particular, the study suggests there could be a problem ahead for countries where the population is expected to drop as a result of falling birthrates. Italy and Russia are both set to see their populations decline by 20% by 2050, which could mean World Cup success will elude them. By contrast, Turkey’s fast-growing population could mean it will challenge Germany ”as the automatic top European football country”, O’Neill says.
The ”size matters” argument applies in Latin America as well. Brazil — Goldman’s favourite to lift the cup for the sixth time — has the largest population in Latin America.
Using a probability model, combining official rankings and book-makers’ odds and the toughness of each team’s World Cup schedule, Goldman says Brazil has a one-in-eight chance of lifting the trophy. England, using the same yardstick, are second. Should England win for the first time since 1966, there would be a feelgood factor that would help boost an economy already on course for robust growth this year and next, according to the investment bank.
The three big challenges facing the government — productivity, rising taxes and pensions — are hardly likely to worry football fans while they are glued to their TV sets or propping up a bar in Berlin, it adds. ”More importantly,” said UK economist Ben Broadbent, ”history tells us that if England were to bring home the World Cup it would keep its fans happy for decades to come.”
That ought to be good news for British Finance Minister Gordon Brown who, in a foreword to the report, says England have the best chance to win a major tournament since Euro 96. With a bit of luck and some healed metatarsals, he said, David Beckham could lift the trophy this year. — Â