Economic Research Forum (ERF)

Lessons in economics from Algeria’s victory in the Africa Cup of Nations

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Algeria’s recent victory in the Africa Cup of Nations has united a country whose development model has frustrated its young and educated workforce. This column offers four lessons for economic development from the national football team’s success: on the role of competition and market forces; mobilising talent; the role of managers; and the importance of referees (that is, regulation).

In a nutshell

Algeria’s development model has frustrated an educated young and increasingly female labour force aspiring to economic empowerment beyond subsidies and public jobs.

Algeria has a unique window of opportunity to undertake bold reforms and transform its economy.

The country has the pool of individual talent, the natural resources – what it needs now is the political will to attract and empower talented managers by reinforcing its corporate governance and regulatory apparatus for a creative and fair game, just as in football.

On 19 July, Algeria won the 2019 edition of the Africa Cup of Nations. The victory was the culmination of a strongly contested international football tournament with 24 teams, where we saw the best of competition, talent and refereeing on the continent.

Algeria’s consecration comes amid sweeping political transformation triggered by massive demonstrations in the past few months, in turn driven by young people asking for radical change. This has united Algerians and emboldened the national team. This can-do spirit and renewed momentum are likely to be key ingredients for delivering big reforms.

On the economic front, Algeria’s development model has frustrated an educated young and increasingly female labour force aspiring to economic empowerment beyond subsidies and public jobs. The model is essentially stuck in the transition from an administrated economy to a market economy.

Moreover, decades of state domination with episodes of liberalisation have yielded crony capitalism, further distancing the population from appreciating the power of harnessing markets for development.

In Algeria, as in many countries, football has triggered passions capturing dreams of greatness and unifying nations. Football can offer four lessons for economic development in Algeria, which is looking to revamp its economic model (see also Kuper and Szymanski, 2009; and Palacios-Huerta, 2014).

The first lesson is on the role of competition and the power of market forces. In too many sectors in Algeria, prices are controlled, and state or private monopolies are the rule, stifling the space for talented Algerians to transform their economy and deterring foreign investment. This is unsustainable considering the shrinking rents coming from oil and gas ever since oil prices collapsed in 2014.

Football illustrates how market mechanisms are an important filter for detecting and rewarding talent based on performance and for moving away from favouritism. Without free entry and failure, as in football, economic dynamism and momentum rapidly come to a halt.

The second lesson is on mobilising talent. Ever since its independence from France in 1962, Algeria has invested significantly in education, with women topping men in terms of educational achievements. The national football team under Coach Belmadi, who, during his career as a player, played in the best clubs in Europe, mobilised within less than a year the best Algerian talent playing around the world.

Algeria, like other developing countries, has been plagued with a massive brain drain due to the lack of reliable domestic markets to provide opportunities that meet the level of talent and competences of its fast-growing population.

Beyond football, bringing talent from Algeria and abroad will, combined with increased open markets, contribute to higher productivity and economic growth, which has fallen below 2% per year – a level that is a third of what is needed to create the kind of jobs to absorb newcomers. Mobilising its diaspora will also make it possible to integrate the country using the networks and capital of a diaspora who have very a strong affinity with their home country.

The third lesson is related to the central role of managers. Coach Belmadi exemplifies the kind, courageous and demanding leadership with the required technical and strategic skills that has turned a collection of individual talents into a symbiotic team. In many developing countries, as in Algeria, managers are either not selected appropriately or not empowered to lead.

To transform its economy, Algeria, as it did with its football team, needs to select and entrust managers in the public and private sectors by relying on the implementation of modern corporate governance. This corporate governance should give these managers the latitude and independence to make decisions, to select and reward talents to instil new momentum, and to rebalance the historical top-down approach towards more of a bottom-up approach at the firm level.

The last lesson is on the role of the referee. A competent and independent referee is the pillar of a sound and fair game. In the sphere of economics, arm’s-length regulators, whether sectoral or transversal, such as telecom regulators or competition authorities, are complementary to market liberalisation and to avoid the monopolisation of the economy.

Avoiding a popular backlash against markets can be achieved by instilling trust in a regulatory apparatus with appropriate enforcement capacity, which should become the guarantor of vivid and fair competition. Technology can help, as it has in football with the advent of the ‘video assistant referee’, allowing referees to review events and assess whether their initial decisions were appropriate.

Algeria has a unique window of opportunity to undertake bold reforms and transform its economy. It has the pool of individual talent, the natural resources. What it needs now is the political will to attract and empower talented managers by reinforcing its corporate governance and regulatory apparatus for a creative and fair game, just as in football.

Further reading

Kuper, S, and S Szymanski (2009) Soccernomics: Why England loses, why Germany and Brazil win, and why the U.S., Japan, Australia, Turkey – and even Iraq – are destined to become the kings of the world’s most popular sport, Nation Books.

Palacios-Huerta, I (2014) Beautiful Game Theory: How Soccer Can Help Economics, Princeton University Press.

This column was first published at Vox.

 

 

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