Bat and Ball

Friday, April 29th, 2005

From Bat and Ball:

One industry is competitive, globalised and financially self-sufficient. The other is monopolistic, inward-looking and accustomed to handouts from the taxpayer. Now, here’s a puzzle. One of these industries is based in America, while the other was founded in northern Britain in the late 19th century. Which is which?

Oddly, the more energetic of these two industries is British. Football, or soccer, is one of the world’s most competitive businesses. As Stefan Szymanski and Andrew Zimbalist, two economists of sport, explain, that is because most football teams are organised into hierarchical national leagues linked by promotion and relegation. Anyone who can assemble a squad of good players can start competing. If the team keeps winning it will rise to the top of the domestic leagues, at which point it can compete against foreign clubs. A squad that keeps losing will move just as rapidly in the opposite direction, shedding supporters and revenue as it goes.

Not so baseball teams. America’s favourite summer sport is played by a 30-team cartel that is specifically exempt from antitrust laws. No club is in danger of being demoted from the major leagues except through a kind of administrative fatwa, which is not exercised very often. As in football, winning games means more money for a team?but so does losing, thanks to a system in which the richest baseball clubs pay millions of dollars to the poorest. Most outrageous is the fact that local taxpayers often end up subsidising the construction of new stadiums. Since the supply of teams is deliberately held below the level of demand, owners can hold cities to ransom, threatening to move if the public coffers are not opened.

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