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Putting Fifa's failure in context


Gerard Clarke has an interesting article in a recent issue of the Journal of Civil Society in which he seeks to put Fifa's governance failure in a broader context.

Put simply, he argues that there has been a tendency to regard global society as a 'good thing' which can empower citizens.  However, transnational civil society organisations (TCSOs) exist in a space which is relatively unregulated.  This enables them to engage in 'rent seeking' behaviour.   'Rent seeking; is the extraction of economic rents (ie., financial gains) from improper manipulation of political processes.

Clake traces back the origins of embedded rent seeking in Fifa to 1974 when Havelange was elected Fifa president, securing the role with support from Horst Daadler, the head of Adidas, the German sportswear company.

Under Sepp Blatter, rent seeking practices developed as commercial links to private firms yielded rapidly growing returns and the probity of internal governance deteriorated.   Senior officials were prepared to buy their way into office and then had to generate rents to provide a return on their ;'investment'.   Many national associations, especially those from low income countries, were coopted through financial inducements.

Clarke argues that it may be only a slight exaggeration to suggest that Fifa functioned as a modern day banana republic.  Both Havelange and Blatter were 'godfathers of greed'.  Fifa was able to use its status as a civil society organisation to avoid the normal rules of financial probity applied to listed private firms, evading effective oversight.

Fifa is incorporated in Switzerland where such organisations have traditionally been poorly regulated and where the federal system charges small cantons with regulating powerful global organisations.

Fifa has forced nation-states to pay rents in the form of extravagant promises to build expensive infrastructure, capturing scare state resources, often outside the parliamentary scrutiny and judicial oversight which exist at national level but which have comparatively little transnational reach.

Clarke departs from convenional rational choice explanations of rent seeking stemming from interference in the operations of markets by politicians and bureaucrats,   He prefers an explanation which emphasises a regulatory vacuum at the interface between nation-states and the institutions of global governance.

He suggests that the best way forward is coordination among national regulators led by the US.  US-led public transnational authortuity, allied to a transnational free press, offers the best defence against abuse of position.