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Financial Myth Busting Radio Show's Dawn Bennett Interviewed Scholar Stan Veuger of the American Enterprise Institute on Soccer and the World Cup

 

Washington, DC -- (ReleaseWire) -- 06/20/2014 -- Nationally Syndicated Financial Myth Busting Radio Show with Host Dawn Bennett, CEO of Bennett Group Financial Services, LLC, on June 15, 2014, interviewed Scholar Stan Veuger of The American Enterprise Institute for Public Policy, dedicated to research and education on issues of government, politics, economics and social welfare, on soccer and The World Cup.

He talks about why soccer isn't a socialist sport, which many think people, and issues around the World Cup.

Stan's academic research focuses on the political economy, and has been published in "The Quarterly Journal of Economics," "The Hill," "The National Interest," and "U.S. News & World Report." He recently wrote a piece called "Soccer is obviously not a socialist sport. In it he says, “Unlike the major American professional sports, failure is not rewarded and incentivized in soccer. There's barely any revenue-sharing between teams. Teams invest in players often as early as age 10. There are no salary caps for players. You don't get to draft better players if you perform poorly. And you can definitely go out of business."

Here is the interview with Stan Veuger:

Q: There are some people like your AEI colleague, Marc Thiessen, who was a speech writer in the Bush White House, who think soccer is actually a socialist sport. Can you unwind that argument for our listeners and then explain why you honestly think it's not true?

A: The two main reasons why some people believe that soccer is a socialist sport is one, the countries that typically dominate the sport are European and Latin American. The second is that soccer players are not generally allowed to use their hands.

It's very different from baseball, basketball, and football. All sports have their rules, and like some other sports, soccer is a great example of ordered liberty. In football you can use your hands, but then you're allowed to throw the ball forward once. After that, a regulator steps in and says, "Look, you've got to stop doing that."

Soccer as a sport, the way it's played on a day-to-day basis, shows many more signs of competition and rewards for excellence than NFL football does. If you're a club team in a sports league, you perform poorly for a year, you don't get better draft picks. You certainly don't get supplementary payments. You get relegated to a different division, and you're basically out of business.

If you're trying to hire new players, what do you do? You try and scout out the best, like, 14 year olds or 18 year olds, or you pay a massive fee to a different club team to hire that player. In the NFL, there's quarterly review where you go to a centralized draft where a bunch of young players are available who were mostly trained by the state at public universities. That sounds to me much more socialist than anything that happens in soccer.

American football has revenue sharing. Within the NFL, teams get better draft picks if they perform poorly. So, a team is basically bailed out for poor performance.

George Will once wrote, the NFL is basically violence interrupted by committee meetings, much like the Soviet Union. I think it's quite clear that if there's one sport that demonstrates the benefits and some of the disadvantages of capitalism, it's soccer.

Q: As AEI's resident soccer expert, what do you think of America's chances in the World Cup?

A: I think they're very poor. Goldman Sachs put out a long analysis of this particular World Cup a couple weeks ago and they tried to estimate the probability that different teams would win. For the United States, they put their chances at 0.5 percent. That's a very small number, but I think that's entirely realistic.

Q: They ranked Brazil No. 1?

A: Yes, at almost a 50 percent chance. They're playing at home. They're traditionally the strongest team. I think that's maybe a bit on the high side, but I think it's a reasonable estimate.

Q: There's always a financial side to sports. Do you believe the Brazilian economy will actually get a boost from that World Cup?

A: Maybe a little bit. They'll have more tourism these months than they otherwise would have. I'm not sure about the sort of massive investment in stadiums, especially when they're in places like Manaus in the middle of the jungle are particularly productive.

Q: So a short-term boost?

A: Yes.

Q: I’m wondering if there's an impact on a country's chances of World Cup success from the number of overseas players in its domestic leagues?

A: I think that's definitely true. The best leagues in the world are the Spanish, British, German, and I think the players who are not playing in those leagues just don't get the kind of experience, the kind of training that you need to compete internationally at the highest level.

I do think that it's a disadvantage of the U.S. that quite a few of its players play in Major League Soccer, which is just not at the same level as those other leagues. It's a good example of how globalization in soccer has driven the kind of things that you see in other sectors of the economy, where who has the highest performance, who compete directly, who benefit from interacting with each other to make sure that everyone ends up excelling and that the weaker players get rooted out.

Q: Do you think there's an investing or economic lesson to be learned from that?

A: I think one lesson, and it's probably one that many people know, is that there's no reason to restrict your investment to purely domestic activities, and that there's gains to be made from diversifying a portfolio both internationally and in terms of industries.

Q: So, what about hosting the games? Do the massive investments in these countries make for the honor of holding the Cup actually pay dividends to these countries? Is there any long-term benefit?

A: Hard to assess these things, but I would imagine if there's a long-term impact, it's through a much more qualitative path, where, Brazil may harness its nationalistic pride, and that may help the political process a little bit. I think it would have to be something like that. I think those real economic effects are small. If anything, until now in Brazil, I think the discontent over the way in which the massive public expansion programs, investment programs have worked out probably slums.

Q: Let's talk about future World Cups. FIFA has been excoriated for giving the 2022 World Cup to Qatar.

There's ongoing allegations of corruption and bribery in the awarding of the game to them. This is a desert nation of the Middle East where they're going to be playing, it could be 104 degrees. It doesn't seem to makes sense, so I'm wondering what you think of that?

A: You’re entirely right that it makes very little sense. Typically a World Cup is played during the summer. The original plan FIFA came up with after they realized this was a little bit ridiculous was to move it to the winter, which would disrupt a lot of domestic league play. It's now become clear that this all the result of corruption and bribery. They will reconsider and maybe go through the allocation procedure again. I think that would be an entirely reasonable thing to do.

Q: So, is this a solution to put the 2022 games in the United States? I think that we finished second when they were counting the votes.

A: Yes, I think that's right, so, the U.S. or England, a country like that. Those are the kind of countries that have the kind of infrastructure, a country that we won't see hundreds and hundreds of workers die in terrible labor circumstances as they construct the stadiums. I think it would be much better in the US. We did a great job in '94 and I think we'd be able to do a great job again.

Q: Do you think this issue with Qatar is actually going to force FIFA to focus on putting these World Cups in a place where human rights are actually important? Everything seems to be very severely restricted. Do you think that FIFA learned their lesson?

A: There’s little protection for immigrant workers, which do most of the actual construction work. I do think it is great that it's a bit more on FIFA's radar. Much more so, I think what they have come to realize that a small country without any kind of soccer tradition is probably the worst kind of choice. If you cobble it with human rights concerns, that may be too much.
Q: Russia in 2018 is supposed to host the World Cup. Do they have a big soccer culture there?

A: They certainly do. They have always been a reasonably competitive nation. Russia has won the European Championship in the past. Some of Russia's club teams have historically performed reasonably well at a continental level. So I think the concerns there would be very different. I think it would have much more to do with the nature of Russia's current regime than it would be with all of the other things that people worry about in Qatar.

Q: I understand there's about 11 pounds of gold in the World Cup trophy. Do you expect it actually to be worth more or less, and I'm actually talking to the economist in you, when the 2018 World Cup games come along for Russia?

A: I have no real idea. I'm not an expert on the price of gold. I don't see inflation escalating in the West over the next couple of years. If anything, you've seen Europe tending toward deflationary pressure, so I don't think if I had bet, I would say it probably be slightly less valuable.

Q: I think I'll probably have to disagree with you. I think there's a lot of demand and since our fiat currency is becoming less and less valuable because of the printing of money and mismanagement of our economy, I think gold's going to be very valuable.

Who's going to win the World Cup 2014, and which country is the dark horse?

A: Well, in my bracket, Argentina wins. In my heart, I want Holland to win. I was born in the Netherlands, it was where I grew up, where my roots where. The moment they get eliminated I stop watching.

Q: But they had a great game against Spain, right?

A: Five to one, exactly, against the reigning World Champion. I was very excited.

Q: I guess because Spain's actually really good. Why do you think that Spain lost and the Netherlands won?

A: I think the Spanish team has grown a bit older over time. I think they're now beyond the point where their key players are in their prime. I think Holland did a great job tactically. They have basically had three really good players. They're all playing forward positions. I think just making sure you defend with the rest of the team and just hope those three guys will score a couple of goals is a great strategic concept. I think it worked out real well.

Q: Why do you think that soccer isn't as obsessed about here in the United States as it is with the rest of the world?

A: It's a combination of factors. The U.S. has many other sports that have traditionally been more popular. That's true for other countries too, but the U.S. is one example. It's true for Canada, Australia, India, Pakistan, and even China.

There are traditional sports that people care about, and it's hard to get into a different sport once you're an adult. But if you don't grow up with these things when you're 8 years old, you're 12 years old, I don't think making the switch is so easy. So, I think if it's going to happen, it'll just take some time.

I think China is really becoming obsessed and crazy about soccer. Aren't they? It's the fastest growing sport in Asia. They are still incapable of fielding a reasonably good team, even though they are very competitive.

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About Dawn Bennett
Dawn Bennett is CEO and Founder of Bennett Group Financial Services. She hosts a national radio program on http://www.WMAL.com called Financial Myth Busting http://www.financialmythbusting.com.

The show airs live on www.WMAL.com each Sunday at 11 am EDT. It now has over a year’s worth of achieved interviews for listeners free on-demand at http://www.financialmythbusting.com.

Dawn discusses educational topics and events in the financial news, along with her thoughts on the economy, financial markets, investments, and more with her live guests, who have included Rock Legend Ted Nugent, as well as Steve Forbes and Grover Norquist. Listeners can call 855-884-DAWN as well as take podcasts on the road and forums for interaction. The show is a great complement to Dawn’s monthly investing seminars that take place at Tysons Corner in McLean, VA, where she discusses investing.

She can be reached on Twitter @DawnBennettFMB or on Facebook Financial Myth Busting with Dawn Bennett or dbennett@bennettgroupfinancial.com