McWilliams in the Businness Post
Lessons from a football windfall
Sunday, August 28, 2011 By David McWilliams
The efficient management structure at Shamrock Rovers suggests that the club will spend its Europa League money wisely, something the country could replicate if oil and gas reserves are struck off the west coast
As a boy, my dad and my uncle Frank used to take me every other Sunday to Glenmalure Park in Milltown to see Shamrock Rovers play. We’d park in Donnybrook and walk up Eglinton Road with hundreds of others, through the turnstiles and into, what seemed to me at the time, an impressive stadium.
For a star-struck boy, Milltown was a Mecca where you might snatch the autographs of legends such as Ray Treacy, Johnny Giles or Eamon Dunphy. If not these big names, you might get the autograph of up-and-coming Pierce O’Leary or the man with the best hairstyle in football, former Arsenal full-back John Devine.
At Milltown, there was a gap between the stand and the terrace, just in front of the dressing room where, if you stood and waited, you’d have a great chance of getting your programme signed by one of the greats. The players came out of the dressing-room and walked diagonally across gravel to a little gate just by the bottom left-hand corner flag.
This little iron gate was a perfect bottleneck because the players had to line up to get through, and that was your opportunity to stick your programme and pen under their noses.
Fast forward to 2011 and I am in a bar in Croatia, watching Rovers play Partizan Belgrade in the Europa League. Here, the hatred of all things Serbian endures after the years of bitter conflict, and the locals display a particular dislike of Partizan. Much of the ethnic hatred in the crumbling Yugoslavia was fanned from the football terraces of Belgrade.
As a result, and based on the age-old logic that ‘‘my enemy’s enemy is my friend’’, an Irishman in Croatia watching an Irish team beat Partizan Belgrade is a king, and is treated as one! It was a long night. Enough said.
Rovers’ historic victory, and entry to the group stages of the Europa League, means a massive windfall for the club and, by extension, for Irish football. The way Rovers spend the money will be crucial. Economics is full of examples where countries or companies get windfalls and blow them.
The most obvious cases are countries that strike oil and blow the cash. The windfall makes the country worse off in the long term: a few at the very top get all the cash and blow it, and the vast majority get nothing, bar higher prices and dented expectations.
The reason Rovers are interesting now is that they could well be a microcosm for Ireland if we do indeed exploit the oil and gas resources off our west coast.
It is worth considering the general proposition of how football clubs and countries spend money. I have a hunch that Ireland could learn from the management of Rovers. But before we explore that, lets see what economics tell us about windfalls.
Interestingly, blowing an economic windfall is called the ‘Dutch disease’. After the Dutch found huge gas resources in the North Sea, their manufacturing industry declined. Why was this? When you strike oil or gas, huge resources move into the new sector and the old manufacturing sectors can decline.
In addition, the price of everything in the country rises because of the huge new revenues the oil/gas strike generate; this pushes up government spending and all prices, making the old industries less competitive internationally. We see this in many countries, including Britain but, interestingly, not Norway.
Now, armed with these observations, let’s go back to football to see what economies can learn from the game.
Consider a club like Rovers, who are going to get a huge, one-off gain from last Thursday’s victory. If they follow the present English Premier League approach - let’s call it the Manchester City model - they will blow the cash looking for instant success. But if Rovers are more thoughtful, they will succeed where other clubs have failed.
The omens in Tallaght are good. The rebuilding of Rovers has been impressive. After 20 years in the wilderness following the sale of Milltown, hard work and commitment by a core group of supporters has seen the club rebuilt.
The decision to work with the local council at Tallaght was also inspired. No one produced a huge chequebook and tried to ‘buy’ the league, as happened with other clubs.
There is a sense that Rovers are a grounded club, run by grounded people who are now forging deep new roots in Tallaght. This all gives grounds for optimism that the club will avoid the Manchester City approach.
In the same way that a country can follow the Norwegian example when it finds oil or gas, a club can follow a different model to the one set down by the Premier League. In fact, the way football is managed can tell us a lot about how the general economy is managed and performs.
For example, unlike the debt-financed English clubs, German football clubs are not allowed to run a deficit. This financial brace ensures that they don’t splash out on foreign superstars. They have to find local talent. This means they invest at every level - and, as anyone who has ever had a kick-around in Germany will attest to, the facilities are impressive.
Even huge clubs like Bayern Munich take much of their talent from their junior team. As has been noted by Irish economist Aidan O’Regan (http://aregan.wordpress.com), this local focus and fiscal disciple in Germany doesn’t detract from competition - the argument put forward by the big spenders in the Premier League. They argue that the freer the market, the better the competition. The opposite is the case.
Look at the variety of German teams who have recently thrived in the Europa League and Champions League. Unlike the English Premier League, which is dominated by the teams with the most money, any one of ten clubs can reasonably expect to win the Bundesliga. This implies more competition, not less.
If you compare the number of German teams who have done well in Europe in the past few years, and then consider the recurring dominance of two or three English clubs, you can see that debt-financed football doesn’t produce more success.
We see similar patterns in the Netherlands, where local focus means that small clubs have a chance. For example, Ajax - the biggest club in the country - won the Eredivisie last year, but this was their first league title in seven years. Trends in Nordic countries, where small clubs regularly feature in the big European competitions, also attest to the success of local, gradual spending, rather than the massive, ‘‘all or nothing’’ approach.
It would be great if Rovers spent the windfall like a German team and not an English one. The omens are good for the first time in years. Looking forward to our possible national oil and gas windfall, wouldn’t it be wonderful if we followed the Norwegian example, rather than the British one?
And speaking as someone who was lifted over the turnstiles at Milltown all those years ago, it would be particularly satisfying if, for once, rather than representing greed and short-termism, a local football club could become the example for the nation to follow.
