As a Wisconsin business professor, I've been on the front row of two major recent events -- the Packers' super bowl win and Scott Walker's extreme right-wing economic policies. I'm not sure which one the business community feels more passionately about.
In a recent discussion with friends, it struck me that the Packers' victory helps explain why Walker's economic policies are bad for business.
Most of my students assume that republican leadership is better for the economy than democratic leadership, despite evidence to the contrary. Business people generally think that left-wing policies are bad because they are akin to socialism, and right-wing policies are good because they embody free market capitalism.
The problem is that the data suggest the opposite. In the last 100 years, the economy has grown more than twice as fast under democratic presidents. That's a statistically significant difference that holds up under different time windows (last 50 years, last 30 years), and equates to 9.33 percent more income after eight years of of a democratic president than a republican one.
Democrats haven't done a good job explaining how their policies are better than republican ones for the economy. So here's where the Packers come in. You see the incredible economic success of the NFL is very troublesome for republicans to explain. The NFL may have rabid red-state fans, but it's economic policies would make Mao and Marx proud.
We all know that the NFL players are unionized, but that is not unique to the NFL (nearly all professional athletes are union). What is unique to the NFL is that the 32 teams share revenues nearly equally with each other, rather than rewarding the best teams for winning with higher revenues and profits. The worst team in the league gets nearly the same revenues as the best team. Moreover, the NFL rewards the absolute worst teams by giving them the best picks in the draft each year.
This would be like the worst company in the retail industry (e.g. Sears, Big Lots) getting the same revenues as the industry leaders like Wal-Mart and Target. And not only that, it would be like Sears or Big Lots getting the pick of the best business school graduates each year. Can you imagine these retail companies sharing their revenues equally, and giving the weakest competitors the best talent? I can only imagine the corporate revolt that would happen if Obama created NFL-type regulations mandating revenue sharing within industries.
So the worst teams in the NFL get the most money and talent. This is crazy right? Wrong. The NFL is the most popular American sport in terms of total revenues, television viewership and attendance. The NFL has had remarkable economic growth under this 'communist' set of economic policies. Their revenues have grown by double digits (at least 10 percent) every year since 1993, from $1.7 billion in 1993 to $7.8 billion in 2010. Interestingly, the communist NFL has grown just as fast as another communist economy -- China.
And the more right-wing Major League Baseball league (they only share 25% of their revenues), is now copying the NFL and agreeing to share more of their revenues. They are beginning to understand how revenue sharing increases competitiveness of games, which increases ratings and league revenues. The whole baseball economy benefits when the teams share revenues equally. Fans lose interest in the game when their local team always loses and the Yankees win the world series every year.
So if communist economic policies are so good, why did communist Russia's economy collapse? Because they were monopolistic (one state-run company for each industry), which is very similar to many U.S. industries right now. The communist monopolies had no competition, just like most industries in the U.S. are dominated by just a few large companies (e.g. Goldman Sachs, ExxonMobil, Koch Industries).
When one team is all but assured to win each year, markets are anything but free. Just as political systems tend toward tyranny by autocrats, economic systems tend toward tyranny by monopolies. Powerful monopolistic corporations push around and kill weaker ones. When republicans argue for less regulation and 'free markets' they are really advocating on behalf of the few powerful corporations who want to dominate the political and business arena. The markets are only 'free' for the monopolies and nobody else.
My job as a business professor is to teach my students how to destroy their competitors. I teach them to steal customers away from their competitors, squash pesky innovative companies that undermine their businesses, and do whatever it takes to win in the marketplace. Monopoly power is great for the lucky company that survives, but terrible for the economy as a whole. No one would watch the NFL if there were only two teams (e.g. East and West monopolies). Similarly, customers lose interest in monopoly-produced products because monopolies have no incentive to improve their products or care about their customers.
Will lazy monopolies eventually encourage competition from new entrants? Absolutely. New entrants will take over in the long-run, but usually not before the monopoly collapses (think USSR collapse, Detroit collapse, Wall Street collapse, Enron collapse). These collapses are incredibly costly and damaging to the economy as a whole. It is far better for the economy's health to subsidize short-term losers to get them back on track, which keeps all our economic eggs from being in the same basket.
Democratic 'communist' policies tend to spread the wealth across companies and decrease income inequality. This makes monopolistic businesses try harder, and helps the economy as a whole grow and innovate faster. And the rich and powerful scream really loudly against Obama and the democrats because they don't want the rules of the game to encourage entrepreneurs and innovations, which would truly free the markets. These monopolistic tyrants are mortally afraid of innovators and competitors who will ruin their precious monopolies.
The oppressive NFL regulations actually make the NFL industry freer and more competitive than almost any other U.S. industry. That's why it is growing much faster than other professional sports and the economy as a whole (11 percent growth in the NFL versus 2 percent growth in the U.S.). Democratic policies that raise up the worst performers and reign in the cut-throat tactics of the best performers help the economy as a whole. In contrast, republican policies that strengthen the power of corporate heavy weights help the corporate behemoths at the expense of the rest of us.
So what would this NFL revenue-sharing idea look like in a non-sports industry? The highly competitive U.S. hospital industry is actually starting to follow the lead of the democratic NFL and share revenues among competing hospitals. Nearly half of the U.S. states have set up mandatory programs where rich hospitals share their revenues with poor hospitals. The rich hospitals agree to this revenue sharing arrangement because they don't want the poor hospitals to close and send a swarm of uninsured patients through their marbled doors. This revenue sharing arrangement has been a boon to most hospitals, as typically the richest 20 percent of hospitals fund the other 80 percent. The poor hospitals can now pay top dollar for the best doctors and nurses, buy better equipment, and be more competitive.
Democrats tax the rich, educate the poor, empower small businesses, and provide a safety net, which in combination strengthens the weak and the economy as a whole. Republicans tax the poor, cut education, empower big business, and remove the safety net, which strengthens the powerful and weakens the economy.
Donald Trump may know how to become a titan (by entrenching his own power), but Karl Marx knew how to grow an economy (by bringing up the bottom).
Note: Thanks to 'mad mystic hammering' for the amazing photo of Karl Marx in vintage Packers gear!
