Against modern football? Blame liberal economics.

This is the third in a series of posts attempting to explain football through international relations theory; or international relations theory through football; or drawing tenuous links between both.

Antonio Gramsci once wrote that football is the model of individualistic society.  Within a game or a team there is a place for individual expression or entrepreneurial spirit, but this must occur within a system or a framework.  There is the game plan or the tactics, and the rules of the game, plus the unwritten law of fair play that provide the setting for the individual to express himself.  There is also the differentiation of tasks based on particular skills or attributes, some players are defenders, specialists at tackling or heading, some are small and quick, others are tall and strong.

The system of liberal economics which establishes the conditions for the capitalist, individualistic society is based on a few simple rules.  There should be a limited role for government, the role of the state should be to provide the conditions for stable markets, it should create markets where there are none and guarantee the integrity of money and the market.  This is based on the belief that the best way to secure human well-being, and the ‘good life’, is to provide an institutional framework that allows entrepreneurial freedoms to flourish and prosper.

A key component is the theory of comparative advantage, devised by David Ricardo, tells us that each nation should focus on the task at which it is the most efficient and leave other tasks to those who are more efficient at it, likewise within most conceptions of a football team.  The Dutch ‘Total Football’ is seemingly a departure from this, where each player would interchange positions and roles and utilise space in new ways.  But it fits with the theory behind liberal economics in a different way, it was effective because it was entrepreneurial and no-one else was doing it at the time.

In the modern game the roles of players have changed again.  As Jonathan Wilson writes, a particular tactical formation creates space somewhere on the pitch for the team to exploit, other teams eventually adapt to block this space, but then space is created elsewhere for a different tactical system to exploit.  Within the entrepreneurial capitalist society there are equivalents, if one can identify inefficiencies within the market system this can then be exploited for money-making purposes until others eventually catch on and the gap in the market is closed.

There are two basic maxims underpinning this, ‘a rising tide lifts all boats’ and ‘trickle-down’ economics, both of these ideas believe that if the rich are allowed to earn money, and keep their money, they will create opportunities for the rest of the population less fortunate than they are.  Under this system competition, private enterprise and entrepreneurial initiative are the best ways to ensure continued innovation and wealth creation for all.

There are a few parallels with the top levels of European football.  For example, since the inception of the Premier League, a small number of English teams have dominated the English game and collected enormous financial rewards from the television contracts brokered by the Premier League.  These teams are now so powerful that they attempt to block any changes to this structure that rewards them so well.  The Financial Fair Play ruling will not prevent any team making money, it only requires that it be spent more prudently.

Within all the top European leagues failure means relegation, and most commonly the least-wealthy teams are the ones relegated.  The wealthiest teams are the ones that challenge for titles every season.  Being poor in football, as in life, means your options are limited and you are fighting for survival.  The best players are collected by the wealthiest teams.  The small clubs have to work harder on training and scouting to find value somewhere unnoticed in the market.

The principle of free trade is paramount within liberal economic theory.  Whereby the barriers, tariffs or regulations, to the free movement of goods and capital across national borders are eliminated.  Again there are a number of similarities with European football.  Much is often made of the damage done to prospects of young domestic players when there is an influx of foreign players.  The chances are limited for young players and their development is inhibited, with particular consequences for the national teams.  This debate is raised in England every time the English national side fail in a major tournament.  The authors of Soccernomics have pointed out that England in fact may be doing about as well they could expect to do given their resources.  Nevertheless the failure of the national side is often linked to the number of foreign players in the Premier League.  Likewise with liberal economics, particularly that focused on developing countries.  The complaint is that liberalising a developing economy too soon and too quickly hinders growth and opportunities for domestic business and entrepreneurs.  Instead the market becomes controlled by a few foreign multi-national companies.  This situation creates winners and losers, depending on where you are positioned on the economic food chain.  Workers in more advanced countries, and even young footballers, see their options diminishing, and struggle to find work.  Workers from overseas may find employment in the more, advanced nations but this means having to leave their country.  The domestic firms see their best employees leave to work for the foreign firms.

The other grandfather of economic liberalism is Scottish economist Adam Smith, in particular his idea of the ‘invisible hand’.  This theory states that, if left free and encumbered with unnecessary regulation, markets will regulate themselves and fair prices and distribution of rewards will result.  In his writing Smith made it clear that his idea was the imagination of an ideal type of market, something he believed unlikely to occur in the real world.  There were too many opportunities for markets to be exploited by those with the power to do so for his ‘invisible hand’ to ensure a fair distribution of rewards from the economic process.  And in truth Smith’s fears are played out in the economy and the football world.  The rules, financial and otherwise, are exploited by the larger teams.  And there is little outside of insignificant fines that the governing bodies of football can do about it.  In 2009 Chelsea were found to have acted illegally over the transfer of Gael Kakuta from Lens, and FIFA instituted a ban on Chelsea making any transfers until 2011.  Following an appeal to the court of arbitration of sport, the ban was overturned. The ban was first instituted as an attempt to show that FIFA were serious about stopping the abuse of contracts by players and clubs.  FIFA believed that on too many occasions smaller teams were not being sufficiently rewarded for developing young players.  The cherry-picking of young talent by the wealthy teams was a way of finding value in the transfer market.  Teams could identify young, rising stars and buy them for very little in comparison with what they would be worth when they have fully matured as players.

Smith’s idea of an ideal economic system was based on the idea of everyone having equal access to information.  However as elsewhere in life, football’s elite have recognised that having sole access to some information can be very profitable.  This makes a potentially fair system unfair.  Thus much effort is put into scouting. When John W. Henry’s Fenway Sports Group took over at Liverpool, they were well-known for attempting to find value in the market where others hadn’t seen it.  Identifying young players and buying them before anyone else is a technique only available to teams who can afford the necessary scouting system.  So far at Liverpool FSG’s signings have been characterised by being young, talented and expensive.  Paying for potential rather than proven ability is still cheaper than the Real Madrid galacticos method, whereby the best players from around the world are bought for astronomical sums.  Teams without the financial capacity like Real, or the extensive scouting network, have to rely on training and developing players.  Who then normally leave for a bigger club after a good season.

If any of the game’s governing bodies seriously want to level the playing field they won’t find much help from economic history.  Whenever the financial system goes into a crisis many people call for greater regulation from governments and international institutions.  Minor changes may be made but generally the system reverts to the liberal standard and continues as before.  Likewise with football, the powerful teams and owners resist any attempts to curb their financial autonomy.

What economic history tells us is that the richer teams will continue getting richer and manipulating the system to ensure they continue to gain.  Smaller teams will continue to provide talent for the top sides and can do little to ensure they will be fairly rewarded for their efforts.  The rule of economics extends into all aspects of modern life, football is just one example.

See the other posts in this series here: Football & IR Theory

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