Giving the Game Away: The Economics of Corruption at FIFA

FIFA, the governing body of world football, has been a byword for corruption for decades, stretching back to the presidency of Sepp Blatter’s predecessor, the Brazilian Joao Havelange, when Blatter was number two in the organisation. Under the Havelange presidency millions of dollars went walkabout in murky transactions between FIFA and a company which marketed its TV rights. More recently the World Cup of 2022 was awarded to oil-rich Qatar, to be played in high Summer in temperatures of 40 degrees Centigrade. The Sunday Times has documented wholesale vote-buying on behalf of Qatar. US Attorney General Loretta Lynch has made it clear that the FBI investigations, which have yielded criminal indictments against FIFA officials, cover offences stretching back to 1991.

Sepp Blatter has been a senior FIFA official for forty years and president since 1998. How can his serial re-elections be explained, the most recent two weeks ago after the announcement of FBI action? FIFA is a most unusual organisation and its governance and economic structures make corruption almost inevitable.

Governance: Every national association, in even the tiniest country, has one vote in FIFA elections. Some tiny palm-fringed idyll in the South Pacific, where soccer was unheard of until recently, can form a football association and expect instant recognition from FIFA. It will then have one vote at FIFA congresses, same as Germany and Brazil, the regular world champions. FIFA has 209 members. There are not 209 countries in the world (the United Nations has just 193 members, for example). ‘Countries’ such as Andorra, San Marino, the Faroe Islands and numerous others are FIFA members. The smallest member in population terms is Montserrat, home to 5000 souls. These ‘countries’ are not regarded as eligible for membership in any serious international organisation, since they are not fully-fledged states but remnants of the Dutch, British and French empires. FIFA member Liechtenstein is a remnant of the Holy Roman Empire. It is not difficult, or costly in the overall scheme of things, to re-distribute rents to these minnows to ensure their loyalty. This is the first part of the explanation for Blatter’s repeated majorities.

Economics: The second part is the simple fact that FIFA has had, for the last four decades, quite a lot of rents to dish out. Without economic rent there is no pot of graft. The rent source is a monopoly, the World Cup: it has become, through TV rights and sponsorship, a huge money-spinner. The players, who tend to take the lion’s share of the earnings available in all other major sports, get paid very little for national team appearances. If they wish to play international football at all, they have little bargaining power. Once committed to a national team, usually the country of their birth, they cannot threaten to desert to someone who pays better. If they could, Saudi Arabia would win the World Cup. Most professional football clubs do not make profits: the players, and their industrious agents, make sure that most of the revenues flow through to the performers, which is what happens in every other branch of the entertainment business. In football the World Cup revenues flow to FIFA, an opaque and unaccountable organisation whose leadership is free to perpetuate itself through buying the small national associations around the world. These national bodies in turn have weak, or no, corporate governance. With one brave bound, the money is free.

It is the combination of equal votes for all with billions of unearned revenue dished out behind the curtain which has created the FIFA monster. This is corruption by design.

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17 thoughts on “Giving the Game Away: The Economics of Corruption at FIFA”

  1. Corrupt officials being re-elected over and over would never happen in Irelan…doh!!!

  2. By how much does the Irish taxpayer subvent the Football Association of Ireland?

  3. I think it is simplistic to blame organisational shortcomings for the increase in corruption. I see it as part of the decline in morality that is going hand-in-hand with the decline in religious belief in the West. This is manifesting itself in increased greed, corruption, drug-taking, sexual licence in almost every Western institution – Wall Street, banks, political parties, charitable institutions, sports organisations etc etc. For the moment, morality is out the window. Last week more doping scandals in the world of athletics were exposed. If a man believes he is nothing but a slightly advanced monkey, that there is no God and that he won’t be judged at the end of life, why shouldn’t he steal $10 billion and spend it on a series of dazzling blondes? That seems to be what’s happening at FIFA and elsewhere. Its Darwinism at its purest. Once lost, no organisational restructuring or change in voting system can restore morality.

    No one should be paid a penny to play for their country (other than expenses). They should play for the glory and honour of their country. If they don’t want to, no one is forcing them.

  4. @Colm

    I agree with sentiments expressed.

    One serious issue which has arisen over the past number of years with regards to soccer is its apparent hesitancy in using technology to solve what seems on the face of it obvious cheating, play acting as well as disputes regarding goal mouth incidences on the field. All of which are spoiling the game as a spectacle.

    The argument from FIFA was that because there was no possibility of uniformity across the globe in bringing all countries along due to the enormous differences in funding and games development from country to country it was always felt better to leave well enough alone. I never believed that this argument was in any way credible and yet the situation remains largely unchanged in the professional game today.

    I have always been at a loss to know why the biggest sport in the world was happy to allow available technologies pass it by – when such tech has been shown to enhance virtually all professional sports where it has been introduced such as tennis and rugby for instance.

    The fortunes of the Irish soccer team could have travelled a very different path had FIFA allowed technology be introduced when for instance it was allowed in rugby i.e. about a decade ago.

    A certain night in Paris may not have ended the way it did and subsequent events regarding the FAI and FIFA would almost definitely have been avoided.

    The question however still remains – where’s the tech?

  5. YoB:

    The GAA introduced an effective goal-line technology (two men in white coats with flags) over 100 years ago. There is no understanding FIFA!

  6. Colm has identified two problems fundamental to the FIFA mess: (i) one country one vote so lots of very small and poor places have easily-bought votes; (ii) the rents generated by TV and other rights to the World Cup finals. Any solutions? I am not optimistic.

    Even if you could engineer a weighted voting system, there are several large countries who would have more voting power than at present: among them Argentina, Russia, Brazil, Nigeria, and maybe one or two in Southern Europe whom delicacy forbids me to mention. Are these likely to be paragons of virtue?

    A multinational enterprise with a more or less guaranteed monopoly of TV rights is very difficult to bring under the rule of largely national or regional competition laws. One might hope that in liberal democracies, there is a greater realisation that staging the World Cup can be an economic disaster for taxpayers in the host country. In that case the hosts might bargain for a hefty slice of the TV rights to help pay for the competition: did this happen when Los Angeles got the Olympics in 1984? But how can one enforce such rights against such a powerful incumbent? In any case there will always be plenty of venal, corrupt and undemocratic places more than willing to go along with FIFA for their own honour and glory (as they see it).

    Once again, I am not optimistic. Any bright ideas anyone?

  7. Technology has never been popular within FIFA because it would threaten the equivalence of a Premier League gme and one in Jack Warner’s backyard – leading to questions about why then the equivalence of votes?!

    Football has been so popular over many decades – and subtle cheating (diving, shirt-pulling before free kicks, elbows the referee won’t have a view of…etc) has been so prevalent, and often decisive in matches, that it has probably influenced standards of acceptable behaviour in society generally (including LIBOR, FX and structured finance desks). Cheating works and is part of the skill of playing the game! What lessons should the bright and ambitious draw from their engagement with the fortunes of football teams?

    Technology would have threatened all that.

    Say what you like about the FCA and the SEC, but Thierry was never going to get banned from the industry by FIFA.

  8. What surprises me is how soccer ever became the ‘World Game’. There are plenty of field sports that are much more exciting (rugby, Gaelic football, hurling, American football, Aussie Rules etc etc). Those unfortunates who paid to watch 26 Counties v England on Sunday, when they could have gone to watch Cork v Waterford, should write to Sepp Blatter asking for compensation. They’ll almost certainly get it. I think it has something to do with soccer being the sport of the proletarian masses. Those countries where soccer is not the number one sport (U. States, Ireland, Australia, Canada etc) seem to have more dynamic economies than those where it is (Italy, Spain, Portugal, Argentina). I guess, if someone thinks 0-0 is an exciting scoreline, they’ll think 0% is a good growth rate.

  9. @JtO

    Describing American Football as in any way exciting is stretching credulity. I’m a self prescribed sports watching fanatic but American football is always ranked extremely low in hours watched from year to year – even the Super Bowl is a slog.

    Soccer is the only true World Game simply because there perhaps wasn’t a child born on Gods earth in the last 50 years who at some stage in their development didn’t kick a round ball across a pitch, a road a school yard ete etc. Not so sure one could say that about rugby for instance – qed.

    BTW being a fully qualified FIFA and IAAF Athletics Coach aswell as having played county football and hurling for many years has led me (and virtually all other coaches that I speak to) to be belief that a child who develops his/herself at the skills of soccer to a reasonably high level will be adept at pretty much any sport – the same is not true for children who play Gaelic football, rugby or hurling for instances.

    I have no doubt this is why we as a country fail to make an impact in lots of other sports where the skills transfer from our ‘home’ games looks obvious but doesn’t translate. In simple terms to become an accomplished soccer played is a much higher hurdle to cross than the other team games, and that’s coming from a die hard GAA fan, player and coach. So whilst the hurling on Sunday was indeed exciting the skills on view in Berlin on Saturday evening last are light years ahead in player development.

    Irrespective of the internals of FIFA the top soccer players today are indeed supremely talented which is why its such a shame the game is being run by such a small elite group of sleaze bags.

  10. John Sheehan: if we had a weighted voting system, how would the weights be determined? Population? GDP? If the former, then a voting bloc consisting of China, India and the US would be very powerful even though, paraphrasing Micheal O Muircheartaigh, none of them could be regarded as a football stronghold. If GDP, then would we have a G7 in FIFA? There’s something about that I don’t find very appealing either.

    It may just be that one country one vote might be the least worst system (and I mean one country, rather than one association) – maybe with some form of UN type central council with some permanent and floating members. Permanent membership could be determined by having actually won a World Cup. Just thinking off the top of my head here.

    Colm’s comments about the GAA version of goal-line technology reminds me of a time when I was doing umpire for a critically important Dublin Division 1 under-16 Ladies League match. There was a disputed goal-line incident but as umpire I found it very difficult to make a definitive call as the goal-post was in the way! Its being able to see vertically above the goal-line which is critical.

    John the Optimist: I have enjoyed your posts over the years, but your one of 7.21 this morning was a real cracker!

  11. Following pressure from the US, Swiss banking secrecy for external transactions will soon end and of course that secrecy in the past helped to hide FIFA’s bribe transactions.

    Bribery is difficult to control and most political bribery in the US has been legalized. In recent years the Supreme Court overturned a 1907 ban on corporate funding of campaigns.

    FIFA may seem a big deal but consider how long it has taken to reduce opportunities for bribery in Ireland – two tribunals sitting for years while lawyers became multimillionaires – maybe they would have anyway as the closed shop they inhabit remains impervious to reform despite a huge Coalition governing majority.

    The land rezoning system that creates an artificial scarcity of development land in a country with the lowest population density in the EU continues to deliver rents and Minister Noonan gave a big tax cut to speculators who had already boosted County Dublin land prices by 50% in 2014. Irish agricultural land prices are already amongst the highest in the world.

    Football has been a grubby business for some time and how different is the money racket to the dubious schemes that are used by big name companies to avoid/ evade tax?

    The FIFA bribery in context is small potatoes compared with the official economic incentive that is given to drug gangs by the continuing US War on Drugs launched by an alcoholic, President Nixon, in 1971. The more seizures made, the bigger the incentive that is given to the sophisticated drug gangs. Read what Milton Friedman wrote on the crazy policy in 1972:

    http://www.finfacts.ie/irishfinancenews/article_1028793.shtml

    The previous Mexican president launched a military campaign against drug warlords in 2006. By the time left office in 2012, following about 60,000 deaths, he said that the only solution is a market one.

    As with legalizing the world’s second oldest profession, the alliance of Puritans and moral do-gooders makes a deadly cocktail.

  12. John Sheehan:

    There are two issues as you say, get rid of the rents, and/or change the equal-weight voting system. Making players transferable so they get the rents is the only way I can think of to take the rents off FIFA, but that would mean the end of international football. Turkeys will not vote for Xmas so the existing FIFA constitution will not be changed. The way out is for the top ten or twenty countries to quit – FIFA could then supervise matches between St. Helena and the Vatican.

  13. @Colm McCarthy – Turkey only has one vote, AND it’s a majority Islamic country.

    Sports administrators, whether GAA county board, those of Dublin’s junior soccer leagues, or all the way up to the IOC or UCI or, god forbid, the numerous global boxing authorities, all seem to exhibit the same behaviours. Some do it in microcosm, some can do it in macrocosm. There are a lot more zeroes in the soccer accounts at international and national level due to the game’s popularity, and hence televisual and sponsor value.

    Ireland has managed to produce a few players on the world stage, who have never ridden a Tour de France, played even a League of Ireland game, nor run a race more competitive than an egg-and-spoon one. Is it part of our national genius?

    Outside of the action by the FBI, Swiss authorities or other coordinated government bodies, the only impetus for change that I can see coming in soccer is from sponsors, not one of whom has a moral imperative beyond their individual bottom lines. I won’t be holding my breath.

  14. Vigorous application of the free-to-air requirement enabled by the European Audiovisual Media Services Directive could do quite a lot towards reducing the rents of international football, particularly if its scope was broadened, and it was replicated elsewhere in the world.

  15. Moments in time:

    http://www.irishexaminer.com/examviral/real-life/video-relive-the-greatest-moments-in-irish-soccer-history-336664.html

    Mad Oul Jozie down-the-road was in Dalymount to witness Don Givens hat-trick …. and had a great night out for a pound!

    Methinks that Corporate Governance wrt FIFA has to go in the bin with pals such as ‘moral hazard’, ‘efficient market hypothesis’, ‘SGP’, ‘banking deal’, ‘accountability’, ‘responsibility’, etc etc etc

    @John Giles

    Blind Biddy says: Hi! I’m free tmro! U?

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