American Sports & Socialist Possibilities
By Francisco Perez
Sports and politics analyst Nate Silver made headlines last year when he called American sports ‘socialist’ and European sports ‘capitalist’. There’s a good discussion to be had there. In most European soccer leagues, the richest teams win every year while the poorest teams fight to stave off relegation, or demotion to a lower level. In contrast, American sports teams have mechanisms which distribute income around and create a (more) level playing field than European soccer. As a rough analogy, European sports structures are to American sports structures as free market capitalism is to Scandinavian social democracy, with attendant inequality greater in the former. In all of these sports, some teams have the advantage of being in larger markets. In setting up a competitive structure, the league has to decide how much, if at all, to level the playing field. American sports leagues— the militaristic, patriotic NFL being the most successful—set up a structure where small market teams are more likely to compete. The publicly owned Green Bay (population 300,000) Packers won the Super Bowl in 2010, while the New York (population 9 million) Jets have not won since 1968.
There’s some interesting things to reflect on, but it’s important to be clear about which mechanisms help which groups. While the owners have always used competition as a canard to lower player salaries and boost profitability, the caps on spending and revenue sharing allow small-market US teams to compete in ways that are simply impossible in European soccer. The NFL, MLB, NHL, and NBA are still capitalist businesses (on a more fundamental level than their ‘non-profit’ status), but they operate essentially as cartels. The editors at the Business Ethics Review argue that spending caps, reverse order drafting, and revenue sharing are not
evidence of ‘socialism’. It is instead evidence that the league itself, rather than any of the teams composing it, is the relevant firm seeking to maximize its returns. NFL, NBA, MLB, and NHL teams are called franchises for a reason: each is a league-granted concession; a local alter ego of the league. (Teams competing in European sports leagues are not league-granted franchises.) Just as a successful franchising business seeks to avoid franchisees cannibalizing one another’s sales, a successful sports league seeks to maintain spectator interest. American sports leagues hypothesize that any-given-Sunday game outcomes are more appealing than predictable dynastic victories and that this greater appeal will be reflected in revenues. By most ‘capitalist’ measures, the NFL is the most financially successful sports league in the world. Its franchises are competitors on the football field but cooperators in a joint business enterprise off the field. So, too, for the other American professional sports leagues.
The American sports league do not operate like a single business and team owners still try to maximize their franchise’s profits. Owners in the EPL also collaborate but there the big market teams have been more successful at exerting their dominance over the smaller ones. To the extent that American sports leagues are akin to social democracies, it is a “socialism for the owners.” Still, we can draw some interesting insights from this form of operation.
How does this Socialism of American Sports Work?
In the North American sports leagues, there is typically more parity in the sense that even small-market teams have a more-or-less equal chance of winning a championship than their wealthier competitors. There are still disparities of talent so that at any given time there are only a handful of good teams (‘elite’ is by definition exclusionary). What makes American sports “socialist” is that the Oklahoma City Thunder could win 59 games in 2013-14 and could afford to pay three of the best players in the league, while the New York Knicks won 37 games. In the La Liga (Spain), however, FC Barcelona or Real Madrid typically win the league, while teams like Atlético Madrid play the perennial foil. In the Premier League (England) there is an elite six (Manchester City, Manchester United, Arsenal, Chelsea, Tottenham, and Liverpool) that have a chance at the four Champions League spots and the Premier League title. This parity in American leagues is achieved through regulations such as salary caps, revenue sharing, and reverse order drafting:
- Salary caps, or ceilings on salaries that can be paid to the players in a team, limit spending so that the wealthiest teams do not simply spend more than the poorest. Salary caps are also a convenient way to control labor costs and ensure profitability, and have helped redistribute income from players to owners. On the other hand, in Europe, there are no spending caps. The new FIFA “Financial Fair Play” requirements only ask that teams do not spend more than they earn, which means that wealthier teams can spend more than the poorer teams.
- North American sports leagues also redistribute revenue from revenue earning teams to non-earning teams. The money generated by billion-dollar TV contracts are shared equally. Even here the Premier League does better than other European Leagues (The Premier league shares TV revenue amongst its teams, La Liga & the Bundesliga do not), which seems to have had helped the lower-tier teams to close the gap with the elite. Still, “clubs without the economic power of the biggest clubs can win occasionally, but most of them fall well short year after year.” The English Premier League remains among the most uncompetitive soccer league in the world, though we’d all be happy if Leicester City could continue to run against this current.
- The practice in North American sports league for inducting new players also ensures a level playing field, by ensuring a reverse order draft. In North American sports leagues, young players entering the league do not choose who to play for, instead teams select them. Usually, the teams with the worst record (or in the case of the NBA lottery, among the worst records) get to draft players first, to help those teams improve. In the NBA this has given rise to “tanking,” where team management decides to lose on purpose in order to improve their draft position. This systematic attempt to help the worst teams improve is markedly social democratic. In Europe, by contrast the worst teams are relegated. Like poorly-performing capitalists they have to exit the market. European soccer teams are free to buy the best young players at whatever price the market will bear. In 2013, FC Barcelona (winners of La Liga crown that year with 32 league wins) paid at least 57 million euros* for Neymar, widely regarded as the top prospect that year. Zaragoza (with 9 wins) was relegated.
- Finally, in complete opposition to the stereotype, North American leagues have strong players unions while the European soccer leagues do not. This is probably the best evidence that North American sports are more genuinely social democratic and do not simply represent “socialism for the owners.” The MLB Players Association might be the strongest union in the United States. Consequently, baseball players have the longest (as long as ten years) contracts, and unlike the NFL, the money is typically guaranteed. The NFL Players Union is the weakest and therefore players there have more “team-friendly” contracts that are more easily shed. In promoting parity, players unions prefer greater revenue sharing to any spending caps, arguing that what matter is that all teams be able to spend equally.
So who says there is no socialism in America? Our sports leagues are an American version of socialism, which could perhaps prefigure economic and political possibilities. With a few caveats, American sports try to ensure a mix of equality of opportunity as well as reasonable chances of success to all teams, and have some valuable lessons to teach us. Of course, the conversation doesn’t end there, and can be pushed further in terms of thinking about socialism: What if sports teams were community and player-owned?
 An American equivalent last year would have been sending the Philadelphia Phillies down to AAA and promoting the Columbus Clippers to the big leagues.