Sports Paradox: America's Regulated Economy vs. Europe's Free Market

In the States, fairness rules allow underdog teams to lure superstars like LeBron James. Across the Atlantic, powerful franchises are only getting more powerful.
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Last week in America, LeBron James went back to the Cleveland Cavaliers. A lot of people saw it as a victory for American values, a victory for the little guy and for old-fashioned fairness. LeBron is going back to play for his hometown! No more of this teaming-up-with-other-stars-to-make-a-superteam nonsense! Finally, finally, small-market Cleveland might win a title!

This week in Europe, Premier League soccer giants Manchester United signed a jersey deal with Adidas worth around 75 million pounds ($128 million) per year. That money—which is separate, by the way, from the 53 million pounds per year Chevrolet has agreed to pay to plaster its logo across the jersey’s chest—is more than double the size of the next nearest “kit deal,” Arsenal’s with Puma. And it’s more than the total revenue of nine of the Premier League’s 20 clubs in the year 2011-2012. In short, some soccer teams in Europe are relatively poor, and some are very, very rich.

While the Germans were celebrating their nation’s World Cup triumph, some of those very rich clubs were busy figuring out which poorer ones were unfortunate enough to have a player perform well at the tournament. Can little Real Sociedad afford to keep the promising French winger Antoine Griezmann? Has Russian billionaire owner Dmitry Rybolovlev gotten bored with his new plaything Monaco FC yet? Real Madrid would be happy to take Colombia wonderkid James Rodriguez off his hands. Premier League overachievers Southampton had three English stars snapped up by Liverpool and Manchester United before a ball was even kicked in Brazil.

The Lebron signing and the Adidas deal took place days apart by coincidence, but I could have picked nearly any week and found clear illustrations of the counterintuitive gap between the sporting rules and cultures in Europe and America. In wild, wild, Western Europe, anything goes. Unregulated capitalism is matched by unfettered competition. In the U.S., the major team sports are highly redistributive, or even socialistic.

For example:

  • American teams share a great deal of their revenue in the name of competitive balance. Unprofitable teams are propped up by the big guys. European soccer’s nascent Financial Fair Play regulatory system is largely toothless, and clubs can spend what they please on their players—pushing many a small club that tries to keep up into bankruptcy.
  • Most European soccer leagues operate on a promotion/relegation system, meaning at the end of the season the three last-placed teams are sent to a lower division and replaced by the three top teams from the division below. Contrarily, American teams are rewarded for a poor season by getting the best chance to select college’s top player. The NBA is even contemplating a new draft system to discourage teams from intentionally losing games.
  • The NFL, NHL, and NBA all use a salary cap in the name of competitive balance; MLB has implemented a luxury tax with the same goal in mind. European clubs largely eschew trades in favor or buying and selling stars for up to nine-figure fees. Wealthy clubs, like oligarch Roman Abramovich’s Chelsea FC, buy and stash dozens of young players in the lower leagues, recalling them if the players prove themselves talented or salable.
  • Every American league has more parity than the big soccer leagues of Spain, Italy, and England. Small-time clubs have no chance of winning the league title. They don’t even pay lip-service to the impossible dream; fans can hope only for an upset or two and the right to do it all again next year—that is, if they can avoid relegation. The top finishers from each country play in a money-spinning competition called the Champions League.

Of course, calling an entire sporting culture socialist or capitalist oversimplifies things. There’s a case to be made that salary caps exist merely to hold down player salaries to the benefit of team owners. They certainly don’t seem to have a significant effect on competitive balance. Moreover, the European Union’s requirement that sports leagues follow the same labor laws as other industries actually increases sporting inequality. In Europe, as Aaron Gordon writes for Sports on Earth, “You can't own the rights to a worker before he signs a contract, you can't collude to determine how much money you will spend on employee salaries in order to artificially lower their value, and you can't penalize each other for spending too much money on employees.” So the causal lines from national political identity to sports organizational structure aren’t very clear.

Still, the configuration seems incongruous, considering that socialism is a dirty word for many Americans, and how much more robust Europe’s welfare state is. And sports inequality has virtues that would seem to appeal to Americans. The continued dominance of the few ensures the best rivalries rage on for years, much like the UNC vs. Duke and Michigan vs. Ohio State battles that liven up college sports. Relegation scraps mean every team can celebrate something, and the combination of the hierarchical system and free-spending owners allows improbable rises up the division ladder—the aforementioned overachievers at Southampton were languishing in English football’s third tier just a few years ago. Imagine the AA Wichita Wingnuts making a deep MLB playoff run! And Americans love watching the improbable. European tournaments like England’s FA Cup throw hundreds of teams of all sizes into one knockout tournament. It’s March Madness, Texas-sized.

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Noah Gordon is an editorial fellow with The Atlantic​.

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