The World Cup and the Curse of Oil

I share a house with two small boys so I have been watching and listening to more football these last few weeks than I have done since I was 12, and Chelsea was playing and replaying Leeds or the FA Cup (1970, if you must know).

It has made me wonder a little why the most lucrative, expensive and money-laden nation on earth - when it comes to football - should produce such a less than successful team.

There has been rather too much involvement by very old-fashioned economists in the football debate.  Goldman Sachs calculated that Brazil would win, so - for that reason at least - I enjoyed their 7-1 defeat, as a blow against the idea that everything can be reliably measured.

So why are England not better?  I think it has something to do with the phenomenon known as the Curse of Oil.

The Curse of Oil is the peculiar paradox which means that the nations rich in raw materials, and oil in particular, find that it does them no good. “What makes her poor is her wealth,” said a 16th-century Spanish economist about Spain, awash with gold and struggling with the effects of crippling inflation as a result. A similar disaster overtook Peru during the guano boom (to 1870) and Brazil during the rubber boom (to 1920).

Nothing excites governments more than suddenly discovering, as the British did in the 1960s, that they have oil on their back doorsteps. The rush of black gold from the seabed or deep in the earth is enough to make the owners of the rights believe that their troubles are over once and for all. Actually the opposite is true, which is why Juan Pablo Perez Alfonzo, the former Venezuelan oil minister and OPEC co-founder called oil ‘the devil’s excrement’.

There are exceptions to the rule, like Norway and Malaysia which have used their oil revenues to diversify their economies, but generally speaking the countries that are most dependent on oil wealth do worse over time, and the countries least dependent on it do best. Strange isn’t it.

Oil lulls nations into a false sense of security. They believe the wealth will cushion them against the need for tough decisions and investment. They believe energy will always be cheap, so never have to innovate to save energy. Meanwhile the inventions and efficiency that result from a shortage of energy go to their oil-poor competitors.

The UK’s own version of the Curse of Oil was a ruinously high pound. It means the world can no longer afford your products, and your factories start closing one by one, as they did in the UK during the peak oil production periods in the 1980s.

The Curse of Oil is the proof that you can't just measure the money and assume that is a measure of quality, success or well-being.  Quite the reverse: too much money can be disastrous, as it was for Spain in its Golden Age.

And look what it does in football.  Because the money sloshes around English football, they buy the best players in the world and forget to develop their own talent.  Soon they forget they have talent at all.

Result: we don't make it out of the groups in the World Cup.