ECONOMICS OF CRICKET & BETTING

SHAMSUL GHANI
(feedback@pgeconomist.com)
Feb 21 - 27, 20
11

The 10th cricket world cup is co-hosted by three cricketing countries of the subcontinent - India, Sri Lanka and Bangladesh. Pakistan has been stripped of the coveted honor in view of its precarious internal security condition. Millions of media dollars are being spent to give the event a look it deserves. Tourism, travel, hotel, and food businesses are getting a tremendous boost in the host countries. Participating teams are bracing to take on one another in fierce contests designed to pick a winner. The economics of the event are huge.

The cricket boards expect to greatly improve their finances with the help of windfall fee money for organizing matches. The winner and other top ranking teams take millions of dollars away. The countries hosting the event are set to improve their current year GDP as a result of incremental economic activities.

Surprisingly, what overshadows all these economic developments is the quantum of money involved in betting through the illegal markets, India being the hub of such markets. According to a report, $200 million to 300 million are staked on a single one-day match between India and Pakistan. Cricket betting is now a huge industry, the size which can only be measured through unreliable guesstimates. The clout of illegal betting markets is comparable to that of the underworld. In fact, the underworld reportedly has a controlling interest in these markets. According to a report, Rs20,000 crores are estimated to be involved in betting in India during the world cup and [coming] IPL events.

The estimate has come from five Indian high-ranking officials from police and enforcement directorate, the agency that investigates illegal foreign exchange transactions.

The demon by-product of betting - legal or illegal is 'match fixing'. The disease of match fixing, having now become pandemic, has created endless episodes of greed and shame. India, Pakistan, and South Africa have been the epicenters of betting storms that have ravaged the world of cricket. The vortex of betting and match fixing has sucked in and destroyed players like Hansie Cronje (from South Africa), Mohammed Azharuddin, Ajey Jadeja (both from India), and Salim Malik (from Pakistan). Many others managed to dodge the scanner and got away with a clean slate while some caught in the gray area were either made to pay fines or were earmarked for keeping a check on. The recent casualties from Pakistan are Salman Butt, Mohammed Aamir and Mohammed Asif who have been banned from all types of cricket for a certain number of years. One might feel that the focus on subcontinent cricketers on match fixing issue is much sharper than that on the players of mother-cricket-nations, Australia and England.

It is difficult to trace the history of match fixing with some degree of accuracy. The Kerry Packer factor and the resultant boost the game of cricket got in Packer era could be the vital links between the yesteryears' limited and legalized betting and the present day mutant virus of match fixing. Betting in cricket has been legal in Australia and England where it forms part of their documented economies. From their point of view, there is a distinct line between authorized and unauthorized betting on cricket. So, it is the tax dollars (and sterling pounds) that they are worried about loosing through illegal betting markets and that's it - no compunctions for making gambling legal.

Match fixing alone, which is an extended and scientific form of gambling, should not be subject to moral coloring. Then why players involved in match fixing are viewed as pariahs? When George Soros shakes England's economy by shorting on pound sterling, he is revered as an investment guru by the Wall Street bankers. In fact, Soros exploited weak spots in the currency market mechanism. There was nothing moral or immoral about his act. Similarly, when the US - and therefore the world - economy collapsed, it was the weakness of world financial system that tempted the Wall Street bankers to indulge in over-smart financial engineering to create such spurious products as mortgage-based collateralized debt securities. So, in the ultimate analysis, it is the existence of markets - currency and stock markets - that gives way to adventurism which, in case of backfiring, creates the destructive waves of economic collapse.

Seen in this perspective, and without coloring the issue with moral streaks, match fixing would simply appear to be a piece of smart financial engineering. To understand this point, we will take a look at the stock market mechanism. For stock brokerage companies, the main source of their income is supposed to be the commission earned through handling of their customers' orders. Do the owners of these companies stick to this basic principle? Certainly not; they hold sway over the market either by maintaining unusually long positions of or by heavily shorting on certain scrip. An off and on collusion between them for mutual gains is common. This is stock match fixing. The cricket bookmakers are supposed to earn nominal profits by balancing the position of bets taken. But, in the world of immense financial possibilities, no one believes in nominal profits, not even the Wall Street bankers. If highly fancy but spurious products like CDS (Collateralized Debt Securities) can be legitimized then why not match fixing? Creation and sale of CDS takes a series of parties - home builders, home buyers, mortgage writers, investment bankers who purchase these mortgages to convert them into CDS, and gullible foreign buyers (including governments) who line up to buy dollar-denominated CDS. Similarly, cricket match fixing takes individual players, teams, management, and of course gullible betters who blindly bets on a highly strong team and gets jolted when the minnow turns out to be the winner.

The root cause of the evil is the very existence of certain markets. We need currency and stock markets to make operative the world financial system we are associated with and from which we cannot expect to delink ourselves in the near future. But, why at all a 'legal' gambling market; can't we do with out one? The recent scam involving three Pakistani players has made waves throughout the cricketing world. The apex body ICC has managed to tighten the noose around them. Its corruption control policies have been found wanting with its anti-corruption unit having hardly succeeded in doing any work of substance. The damage control strategy too does not promise anything. The statements by two of its chairmen, including the existing one, ask India to legalize betting in its part of the world. This is not a very bright idea. Legalizing of betting in the biggest market will give a clout to the market bosses and the operatives. This will shift the power balance further away from the government - to the bosses of the underworld. The moral fiber of the Indian society will be further weakened. The possibility of a legal betting market in Pakistan is out of question as gambling in all its forms is a taboo for Muslims.