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Mon, May 20, 2002 - Page 19 News List

What's the World Cup got to do with economics?

Quite a lot, according to some economists, as eight of the world's 10 biggest economies -- representing some 84 percent of global GDP -- will be competing

By William Pesek  /  BLOOMBERG , SEOUL

Carlos Magnus Fonseca, 33, paints a portrait of soccer player Roberto Carlos of Real Madrid on a street in Copacabana, a famous neighborhood in Rio de Janeiro, on Saturday. Many streets in Rio de Janeiro are being decorated by their residents in anticipation of the World Cup.


A single thought runs through one's head upon arrival in South Korea: Football! The place is awash in props, promotions and enthusiasm surrounding Asia's first-ever World Cup soccer tournament.

You could easily go a day in co-host Japan without noticing a major sporting event's about to start, but not in this city -- or elsewhere in this nation of 47 million. Giant soccer-ball sculptures, billboards hanging over the skylines, huge banners draped over buildings, human-sized cutouts of players, you name it. Everyone and everything, it seems, has a piece of the event.

It's not surprising, then, that analysts are wondering what the World Cup will mean for Korea's economy -- already one of the globe's most vibrant. It's already pumped additional life into the economy as stadiums and other infrastructure were built. And the 450,000 visitors expected here next month would boost consumption, and then some.

But what about the long run? Is there a connection between countries that host the World Cup and gross domestic product? Increasingly, yes, says Jim O'Neill, head of global economics at Goldman Sachs Group Inc. He argues that the "evidence is reasonably strong that the world economy and football are moving in the same direction." The biggest economies are getting better at the sport.

One of the more fascinating qualities of soccer is that many of the world's wealthiest nations aren't good at it. Within the Group of Seven industrialized nations, for example, neither the US nor Japan teams have much global influence within the sport.

At their last outing at the World Cup in France '98, Japan finished 31st out of 32 teams, scoring only one goal. The US came last. Within Europe, meanwhile, Switzerland is a relatively unsuccessful soccer nation in terms of its GDP.

Of course, some of the most prosperous nations in Europe -- France, Germany, Italy and England -- are also highly successful soccer countries. Yet the World Cup is an event where even the poorest nation in Sub-Saharan Africa can defeat one whose per capita income is 25 times higher. That phenomenon gives the event what O'Neill calls "intriguing aspects."

In his book Fever Pitch, British author Nick Hornby wrote that, thanks to soccer, "Yorkshire men, Lancastrians, Scots, the Irish, blacks, the rich, the poor, even Americans and Australians have something they can sit in pubs and bars and weep about." An elitist sport, it's not.

Yet O'Neill's research suggests it's the wealthier nations that are becoming more competitive. This year's finals, for example, will include six of the G-7 nations -- all but Canada. With India excluded, that means eight of the world's 10 biggest economies -- representing some 84 percent of global GDP -- will be competing.

O'Neill reckons that's a bigger proportion than ever before.

Moreover, analysts at Goldman Sachs expect the coming decade would see rapid growth in Brazil, China, India and Russia relative to G-7 nations. Among them, Goldman Sachs says, Brazil and Russia are "serious footballing countries." If the folks at Goldman Sachs are right, and the global economy evolves as much, then the correlation between football and GDP would increase.

In the short-term, analysts speak of connections between nations that win the World Cup finals and GDP and stock market performance. A coincidence, perhaps, but the French economy grew at its fastest rate of the 1990s in 1998 -- the year its team won. Analysts at HSBC Securities find that the stock markets of developed countries that have won the World Cup since 1966 have outperformed global indexes by 9 percent.

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