As sports fans gear up to watch the NFL Draft this week, I thought I'd write about a long-held observation of mine which some others have commented on in a more limited fashion (like here, here and here)
All of our meat and potatoes consuming red-blooded fellow Americans who - in chorus with their favorite talk radio windbags or local tea party leaders - rail against taxes and government involvement in anything, label any attempt at government planning, intervention, or oversight of commercial activity as "socialist", and who believe the word "socialism" is a representation of pure evil are missing something.
Read on for more...
It strikes me that a great number of these people are, like me, big fans of American professional sports – especially the NFL. Many of these people pick up newspapers and read nothing but the sports section (something I myself have done many a time). Following sports consumes a large percentage of many of these people’s lives, especially the ones that have Fantasy teams. They watch NFL highlights incessantly – sometimes the same ones over and over, listen to sports talk radio, troll the internet for the latest dirt on their favorite players and teams, have lengthy discussions with their friends and family about the latest happenings on and off the field, spend money on the team merchandise, and spend their entire weekends watching the games. Sports (football more often than not) is a major part of their identities.
Does it occur to these people that the NFL, as a system, is not exactly a bastion of free market capitalism? Does it occur to these people that the NFL system is actually a socialistic system with central planning? Does it occur to them that this system actually works quite well?
Here’s what I’m referring to:
• The NFL is a closed club with exceptionally high barriers to entry – currently it costs about a billion dollars to become an NFL Franchisee, and that’s if the NFL deems you and your city worthy to issue you a new franchise or if another owner decides to sell you his/hers -which sale would have to be approved by the League Commissioner’s office.
It isn’t as if you could just start up a team in a market where there was significant enough demand for one and then negotiate independently with other owners to have your team play games with theirs. No, you’d have to hurdle the barriers set up by the central planning entity of the League and you’d have to deal directly with them, if they deemed you worthy of a conversation.
• Almost every NFL Franchisee is running a business that has been substantially subsidized by taxpayers in the area where it operates. This is a central part of the NFL’s strategy. The League and its Franchisees accept hundreds of millions of dollars of collectivized wealth – taken from people regardless of their interest in supporting the NFL or lack thereof – and use it on giant public works projects: their stadiums. The only thing is, although the public’s money is used to build the arenas, the arenas function in effect as the private property of the NFL Franchisees. They are not accessible to the public like other things that are built with public money – like libraries, museums or National Monuments.
In this way, the financing of these Franchises is socialized, but their beneficial use is not managed with socialistic principles – kind of a worst of both worlds from the standpoint of a free marketeer.
• One of the most popular NFL teams – the Green Bay Packers – is organized as a community-owned (Oh my!), non-profit entity with strict bylaws that prevent anyone from profiting in any way from share ownership or from wresting sole control of the team. This has enabled the team to remain in the small town of Green Bay, Wisconsin, deflecting free market forces that may have carried the team off to a more lucrative metro area.
• The NFL’s central planning entity engages periodically in collective bargaining on behalf of its franchisees with the players' union (the NFLPA). The results of these negotiations are usually agreed systems (Salary Cap systems) wherein bands of minimum salaries are set for players based on seniority, and caps are set on the total staffing expenditures allowed for the franchises. All player contracts are reviewed to make sure franchisees do not exceed these caps, and in the off chance they happen to sneak one by the League Commissioner's office, they face steep penalties.
Thus a player who excels beyond anyone in his peer group will not necessarily be compensated up to the level of his excellence (one of the fundamental principles of a market-based capitalist system...or so we are told). The Franchisees are not truly free to pay every individual player however much they might otherwise think he is worth because they can only pay a maximum amount to their whole playing staff.
Ironically, the NFL fan base in large part doesn't seem to decry the lack of free market principles being employed in player contract negotiations, but more often makes comments such as these:
"That player is so greedy. He's making millions of dollars and he's whining about his contract and trying to renegotiate his value instead of just being loyal to the team. It’s all about money."
It’s curious that many of the same people who generally get behind "free market capitalism" as the principle by which the world should run, make an exception when it comes to NFL players.
• The NFL has a Draft system wherein the worst teams get to select the best soon-to-be pro players –(the last shall be first). This is based on a socialistic notion of equality across the system, known in sports parlance as ‘league parity’. The idea is to not have perennial losers and perennial winners. By accumulating high draft picks in successive years, a team that is going through a rough stretch can pick itself back up, and a team that is doing quite well takes a subordinate position which makes it harder to maintain dynasties. This runs quite contrary to the social darwinist rhetoric we often hear from those seeking to root out anything from society that could possibly be labeled as "socialist" (which many seem to understand to mean any interference with unlimited rewarding of success and unlimited penalization of failure).
The Draft - employed by all the major American sports leagues - is quite different from what is done in say European Soccer, which would seem to be more the free marketeer's cup of tea (no pun intended)as it harshly punishes the worst teams with relegation - banishment to the minor leagues - instead of rewarding them with preferred draft status.
From the players' point of view, the Draft system flies in the face of one of the key principles of the free-market: choice. The top new players (the ones in the draft) are not free to choose to play wherever they would like to, and they cannot negotiate with multiple teams and choose one to play for after evaluating a number of offers based on their own decision criteria. They must submit to a planned draft process and if they are drafted by a team – even if it is located in a place they don’t want to play – they must enter into exclusive negotiations with that team or forfeit the ability to ply their trade for at least a year.
• The NFL has a comprehensive revenue-sharing system wherein the most financially successful teams do not get to keep all of their profits from television contracts and merchandise sales. These teams contribute a significant portion of their revenues to a pool that is drawn upon by the less profitable teams. Basically they "spread the wealth around".
The pro team sport in America that is still closer than the others to being a free market system is Major League Baseball which has limited revenue sharing, but no strict salary cap for individuals or teams. The luxury tax on high payrolls which does exist, seems to be no more than a minor nuisance for the high profile teams (NY Yankees 2009 payroll: $201 million vs Florida Marlins 2009 payroll: $36 million). The irony of this is that the American public generally views baseball’s system as the most problematic – so much so that Congress has held hearings about the way MLB works multiple times. Fans scream out about the "haves" and "have-nots".
By contrast, the NFL, which operates under perhaps the most socialized and most centrally planned system is frequently cited as the model professional sports league. It is certainly the most successful league, both financially and in terms of its relevance and importance in American society, and even the owners of the large market, high profile teams would agree that although the teams compete ferociously on the field, the elements of cooperation such as redistribution of revenue and the welfare program known as the Draft benefit all in the NFL society by lifting up the less fortunate.
The general acceptance of "capitalism" and "the free market" by many in the meat-and-potatoes American public when it comes to global affairs, and their rejection of these concepts when it comes to one of the most important elements of their lives – sports – is indeed curious.
Now some may point out that the NFL and other sports leagues are in fact cartels competing with other entertainment sources in a marketplace and that their internal policy choices should not be put on par with structural and policy choices made in the wider economy. I agree. Of course the analogy between a pro sports league and a national economy at large is an imperfect and flawed comparison when you get into the nitty gritty, but my point is a more broad and basic one.
The policy choices made by any "society" of any size or form need not adhere in the absolute to any particular ideological model - such as one based on pure competition or one based on pure cooperation - in order to be successful. If we take the time to examine and analyze the various institutions and systems that we find in different aspects of our lives perhaps we will realize that good results are not exclusively characteristic of any particular broad ideology. Neither, for that matter are bad results.
My hope is that we as a people will focus on RESULTS, and be open to implementing any ideas in society that can produce desired results, rather than demonizing suggested approaches without due consideration solely on ideological grounds, and without stopping to realize that an ideology we may have decided to summarily reject might just be successful in a particular application - sometimes even a highly culturally signficant and pervasive application.
Enjoy the Draft everyone.
Updated to include MLB team payroll info.