Major League Baseball's 'Communism' Problem: Not Enough Communism

The owner of the New York Yankees, Hank Steinbrenner, recently blasted Major League Baseball's revenue sharing agreement, which requires high-spending teams like the Yankees to subsidize less fortunate teams. He compared the arrangement to communism:

"At some point, if you don't want to worry about teams in minor markets, don't put teams in minor markets, or don't leave teams in minor markets if they're truly minor," Steinbrenner said. "Socialism, communism, whatever you want to call it, is never the answer."

I have limited sympathy for this argument. Limited, because taking money from the rich and redistributing to the poor is much more like a progressive tax system than communism. Sympathy, because Steinbrenner is right to question baseball's revenue sharing agreement. 


Teams like the Yankees fork over hundreds of millions of dollars for spending "too much" to win while teams like the Pittsburgh Pirates, who have cut spending to the bone to qualify for money under the revenue sharing agreement, have illegally used the funds to pay down debt on their stadium rather than spend on fielding a halfway decent team.

The Pirates aren't unique. The lowest spending teams in baseball -- the Florida Marlins, Kansas City Royals, and Pirates -- are all taking in more in revenue-sharing than they're spending on players, and they all showed a profit last year, according to Bleacher Report. There is a clear incentive for baseball's worst teams: They less money they spend, the less money they make in revenue, and the more money they make under the revenue sharing agreement.

Aiming for profits rather than wins might be a trend in what Steinbrenner calls "minor markets." As Professor David Berri, president of the North American Association of Sports Economists, told me: "If you go back to the Tampa Bay Buccaneers of the 1980s, I think they were doing the same thing. They were profitable losers every year. Then in NFL set a payroll minimum. And all of a sudden, they started winning."

In other words, you could argue that what baseball needs isn't fewer top-down mandates but more rules that require poorer teams to spend more on their players.
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Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.

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