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Austin Cline

Socialism of American Sports

By July 8, 2004

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Americans like to see themselves as great defenders of capitalism and stalwart enemies of socialism. It is curious, then, that American sports are so socialist in how things are done while in Europe, bastion of socialism, sports are run in a far more capitalist manner. Why do you suppose things have worked out this way?

Daniel Gross writes in Slate:

The Austrian-born economist Joseph Schumpeter—a tennis player, not a soccer fan—developed the concept of creative destruction, the touchstone of American-style capitalism. Schumpeter famously likened the elites of a society to a hotel, one in which rooms are always occupied but by an ever-changing roster of guests. The hotel concept almost precisely describes the soccer leagues of Europe. Every year, the worst-performing teams—three in England, four in Italy—check out. Relegated, they must play the following year in the next-lower division. Meanwhile, ambitious upstarts who have succeeded at lower levels check in. They are promoted.
This constant cycling has enormous financial consequences for the teams and their owners. ... (Imagine what would happen to attendance at Shea Stadium if the New York Mets had to play AAA opponents this year.) Relegated teams release or sell off highly paid players and instantly face a renewed fight for survival. ... By contrast, the American professional leagues are like a Marriott Residence Inn—once you're allowed to check in, you never have to leave. There's no great punishment for consistently propping up the standings year after year. Yes, the market value of losing teams often suffers in comparison to those of winning teams. But once you're a member of the cartel, there's a floor under the price.
In America, someone who wishes to start a major-league sports team, or who wants to upgrade a minor-league team into a major-league one, is essentially out of luck. ... In other words, the European system rewards ambition and ruthlessly punishes sloth and incompetence. At the beginning of each year, every owner places every dollar of investment on the line.

More than one American sport sets limits on how much a team can pay its player, sets limits on the minimum amount players can be paid, transfers money from the richest to the poorest teams, etc. If the government tried to do this to any other industry, people would be infuriated — but if the sports industry does it to itself, that’s OK. The anger with the first scenario wouldn’t be due merely to the use of government force; no, it would be in large part due to the perceived limitations on risks and rewards. Why, then, is it tolerated in professional sports?

Maybe Americans aren’t quite the anti-socialists and pro-capitalists that they imagine themselves to be. They seem quite willing to accept socialism in some circumstances, don’t they?

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Comments
Nick(1)

It is a misconception that the salary cap in American sports is socialist. The misconception lies in the idea that each team is against the others. That is not true, financially speaking. They are against each other only on the playing field. Financially, they compete with other leagues, TV, and movies for your entertainment dollar. That is who their competition is against, not the Cowboys vs. the Redskins. It is largely different in Europe where the only team sport to speak of is Soccer (or football) and every country has several leagues. America has 5 major leagues (NFL, MLB, NBA, NHL, NASCAR…6 if you add MLS). Add the NCAA football and basketball games and there is a need to become more entertaining than a competing sport so people will watch you and go to your games. There are only so many hours in the week to watch sports. We still have to work, watch tons of TV, and go to the movies, in addition to any other activities we want to enjoy. Some people even read as a hobby. Imagine that. So, again each league competes against the other leagues. Salary caps and spending requirements bring parity so more teams will be competitive closer to the end of the season. More cities involved increases viewing and ticket sales which makes money. So, I would argue the American sports leagues are just as capitalist as European leagues, if not more, because they operate under collective bargaining so as to become richer in the broader scope and protect the viability of the league against fierce entertainment competition.

May 8, 2006 at 1:53 pm
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