Why Economics is like football & why we need a red card!

ANALYSIS, Global – Very few people actually understand capitalism, or economics. Even those charged with regulating economic free trade.

But most people understand sport, say European football (or soccer in other countries). And economics at a macro, international level is similar conceptually.

So here’s an easy explanation of the main argument between economics and ‘free trade’; and the practice of regulating markets.

You may think who is ‘right’ about economics and free markets is too complex to understand, but this analogy makes it straightforward.

I know a few politicians who could do with this drawn on the back of a beer coaster.

Two teams of people with individual goals. Be the hero, avoid getting kicked in, draw penalties, etc.

Much like free markets, a series of individual self-interests form the greater interest.

Two teams with an agreed interest, ie. winning. Well, mostly.

A shared national sense of priority, which only the strongest teams and nations have, and requires a clearly articulated vision.

A game with rules and regulations.

Trade rules and regulations, various laws, acts and constraints. But now we’re starting to see the end of our analogy.

A referee/ umpire with a good supply of red cards for serious violations, and yellow cards for warnings.

And now this is where our similarities stop in many Western markets. Only a few like France or Germany keep active referees.

The Problem with the Free in Free Trade

Increasingly governments in the USA, UK or Australia view governing as getting out of the way of the game. Yet in trade or football, good umpires step in to ensure fairness.

In football (soccer) rules and umpiring cannot be too heavy handed, the goal of most good umpires is fairness.

But because those same politicians have been swallowing the numerous right-wing partisan think tanks out there they do not get balanced opinions.

Our current situation in global commerce and government is like the umpire only listening to a handful of players.

The right-wing have been unchallenged in their economic views, despite the fact that the last Great Depression of the 1930s resulted from right-wing free markets with no regulations.

A balanced opinion is that free markets are very efficient at most transactions.

As is a fast and free-flowing football game.

But that free markets require rules and regulations to ensure the quality of goods produced, and the interaction of players is fair. Regulators of corporate behavior.

An active series of referees , with clear and fair rules to apply.

The problem is that corporations do not have enough regulation to control that they behave globally in a fair way to the local communities they participate in.

Environmental, Quality of production, pay standards, employee health & safety.

The cases are well known for sweatshop workers and environmental abuse. And the corporations involved need a red card.

Meanwhile in many Western nations all those right wing think tanks have stopped free trade being regulated. They have used the word free as a mantra.

But in football, would you watch the game without rules and regulations, where the biggest toughest players always won, no matter what?

The same teams winning time and time again.

We need strong rules and regulations that don’t interrupt the flow of trade. To prevent corporate misconduct, and to protect the national interest of the countries we live in.

On an interesting note take a list of the world’s poorest countries. Most of those are the ones with no regulations and ‘free trade’.

We need free trade with umpire and red and yellow cards. Maybe that’s fair trade.

After all, you couldn’t have a world cup without referees…

Take care

Christopher

* Of course this is a simplification, but it’s an analogy that is useful and if you think about most important aspects of our life (School, work, college) it is ridiculous to suggest we do not need regulations on trade. Yet that is the current ‘default’ position in the mainstream economic commentary in USA, UK, Australia, some of the EU and as suggested to developing countries.