Avoid the short-termist trap

In: Uncategorized

10 May 2013

This year’s Champions League final provides an uncanny example of football imitating life.

The arguments about the success of the German model, with two Bundesliga teams reaching the final, bear a striking resemblance to the economic debate. That is even leaving aside clichés about German “efficiency” in both arenas.

Success for Bayern Munich and Borussia Dortmund is strengthening the hand of those who contend that other countries should emulate German football. Among their arguments are the controlling ownership interest held by fans, relatively low ticket prices and strict financial controls.

From this perspective Bundesliga clubs are compared favourably with the Premier League. The German teams are presented as representing their fans while many British clubs are viewed as the playthings of foreign oligarchs.

This should be eerily familiar to anyone who follows the discussion of economics. Germany is arguably the best performing large economy in Europe at present – although there are several small ones doing better – so it is increasingly viewed as an attractive model. As a result pundits are arguing that key features of its economy should be emulated. These include high quality vocational training, workers’ representation on corporate boards and industrial strength.

Not surprisingly similar views on both football and economics can be heard inside Germany. After it became clear that the Champions League final would be fought between two Bundesliga teams the German equivalent of the Sun, Bild, ran an article with the English language headline “We are the Champions!”. It went on to describe Germany as “top of the class” in the economy and an overachiever in savings and reform.

The common feature of the arguments about German success at football and the economy is their short-termism. Both sets of claims give too much weight to recent results while paying relatively little attention to the longer run.

It certainly reflects well on the Bundesliga that two of its teams are competing in this year’s final. But the last time a German team won was in 2001 when Bayern was victorious. In the intervening years teams from England, Italy, Portugal and Spain have taken the title. If anything it is notable how geographically dispersed the winners have been.

As for Germany’s national team it last won the European Championship in 1996 while it last triumphed in the World Cup in 1990 as West Germany. This is not to deny that Germany has often done well in these competitions but to view its footballing prowess as towering above everyone else’s is a fallacy.

A similar pattern is apparent in relation to the German economy. It is true that from 2006-2011 it grew faster than the average for the large developed economies in every year but one. But from 1981-2005 it generally lagged behind.

If compared with emerging economies, most notably China, Germany’s growth is substantially slower. Indeed one reason the German economy has outperformed many other advanced economies in recent years is its link to developing countries. While many other European countries are more domestically oriented the German economy exports huge amounts to emerging Asia and elsewhere.

There are other ways in which the benefits of the German model are open to question. For example, according to the German Institute for Economic Research net real wages have hardly risen since the start of the beginning of the 1990s. Austerity started in Germany long before it hit Britain.

Germany does have considerable strengths in football and economics. But the temptation to draw sweeping conclusions on the basis of short-term success should be resisted in both cases.

This blog post first appeared today on Fundweb.