USA won the most medals in the London Olympics, as well as the most gold medals. Anything to do with the free market system?

And so, America’s victory over China in this year’s Olympics really represents the enduring strength and validity of the American model: free markets, decentralized control, and a government that supports without suffocating. If we stick to this model not just for sports, but also for commerce, innovation, and all other aspects of our economy, we will do just fine as we compete with China in the coming years.

This is a really interesting analysis, with implications beyond those of sport alone. Worth reading the whole thing.

Cast aside for a moment your doom and gloom about the U.S. losing ground to China, the “rise of the rest,” and the “post-American world.” Americans should take a moment to revel in the outcome of this year’s Olympics: Having briefly ceded the top slot to China in 2008, the U.S. can once again claim resounding victory in both overall medals and gold medals. This development is heartening on its own terms, but even more important, it serves as a much-needed reminder of why the 21st century will still be an American century — and not just in athletics.

China’s population is currently over 1.3 billion. In recent years, China has made the Olympics a top priority, putting immense pressure on its athletes to produce gold medals, noting that any athlete who loses will disappoint an entire nation, offering cash prizes to winners, and instructing athletes to produce gold as “the motherland is above everything.” As a result, China crept from fourth place in 1996 to third in 2000, second in 2004, and first in 2008.

And yet, rather than continuing its seemingly inexorable rise, China fell back to second place this year. How did the United States, a country with less than one-quarter of China’s population, again produce a greater number of medal-winning athletes?

Part of the reason, no doubt, has to do with the disparity in GDP between the two countries, which remains quite high. Total U.S. GDP is double that of China, and on a per capita basis the U.S. is roughly ten times wealthier. This means that U.S. athletes benefit from better training facilities, better equipment, better medical care, and more scientifically tailored nourishment.

But the wealth disparity between the United States and China does not fully account for the superior performance of the U.S. Olympic team. Indeed, China has made significant, targeted investments in its athletic programs, and the Chinese government reportedly spends far more on training its Olympic athletes than does the United States.

The issue, then, is not that U.S. athletics have more resources at their disposal; rather, it is that they spend those resources more effectively.

China applies the same command-and-control mentality to its sports as it does to other areas of its economy. The Chinese government, through an agency called the General Administration of Sport, determines which athletic disciplines should receive government funds. The government chooses those disciplines on the basis of various factors, including its assessment of which disciplines yield the most overall medals and which ones carry the best prospects of Chinese victory. The Chinese government then establishes leagues and sports schools, scouts for prospective talent, and provides money to train athletes in favored disciplines.

The United States, meanwhile applies a thoroughly free-market approach to athletics. The U.S. Olympic Committee is a non-profit organization that receives no funding from the U.S. government. Training of athletes is decentralized, occurring at universities strewn throughout the country and at corporate facilities such as the Nike Oregon Project. Independent leagues, operating without government support or sanction, exist in every state — the kind of leagues that are prohibited in China. Children — or, more realistically, their parents — pay to participate in these leagues. Talent develops bottom-up, as those with better athletic promise progress to more advanced leagues and ultimately find their way onto the Olympic team.

This does not mean the U.S. government provides no funding or support to athletics. Public schools and universities receive grants for their athletic programs, and regulations such as Title IX ensure that access to athletic programs is not restricted on the basis of race or gender. And U.S. officials, at the highest levels of government, make sure to imbue athletes with a sense of patriotism, with White House invitations or presidential phone calls to reward exceptional performances. But by and large, the government’s role has simply been to get out of the way and let the private sector and civil society do what they do best.

And so, America’s victory over China in this year’s Olympics really represents the enduring strength and validity of the American model: free markets, decentralized control, and a government that supports without suffocating. If we stick to this model not just for sports, but also for commerce, innovation, and all other aspects of our economy, we will do just fine as we compete with China in the coming years.

— Alexander Benard is managing director of Gryphon Partners, an advisory and investment firm. He recently published an article in Foreign Affairs on the U.S.-China competition in emerging markets.

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