The time has returned for a long & rambling piece on the bigwigs at FIFA. The topic? Debt. DEBT. And, more importantly, deficit spending by successful teams. But let’s start where we start: FIFA’s reaction to the day the bubble burst in the world financial market. And first a revisionist and absurdly short take on US history as an example.
As an American, I will merely note that the concept of “deficit spending” started with FDR’s New Deal and, in the 80s, reached fever pitch with the Reaganomics solution to dismantling the Soviet Union: outspend it. The result was a crushing blow for democracy or the free market, perhaps both, which left the world a sole “superpower” and lots of happiness. However, the US was not content to reign in contract plus military spending and settle into a new age of economic soft power – too many military towns, pawnshops, and payday loans depended on trashing the American Treasury’s credit score!
Now onto soccer.
Unfortunately, soccer clubs cannot print money. They can jack up ticket prices, they can covet corporate sponsors, they can pull favors from banker friends, but they cannot print money. For now.
In the meantime, the credit car wreck has hit the middle and upper echelon teams hard. American owners did not do their due diligence – they saw total gross, but overlooked player’s wages. Perhaps they thought that a salary cap was feasible; if so, they overestimated the power of labor in Europe and also the disjointed and intra-country competition. Regardless, neither the Glazers nor the Gilletes have the billions of a sheik. They are business man, not aristocracy. And like the American middle class, they tried to get ahead by playing the credit game.
Yet FIFA’s stuttering response, the “Champions League” license, has practical problems. At the best, it set a ticking time bomb for Manchester United and Real Madrid – both clubs must be solvent to participate in a few years time to get a “license.” Of course, this is preposterous – a Champions League without Real Madrid, the most successful team in the history of the tournament? FIFA overestimates its own power – discerning fans will merely switch channels.
Let’s assume the best, err, the worst. United and Madrid cannot get licenses – all of a sudden Perez has free reign to start his own European showcase, and what team wouldn’t want to play in a four team round robin or knockout with those teams? Also, if AC Milan’s finances are really in such dire straights, they would be a quite strong addition.
The quality of play would trump most Champions League matches, especially the tedious group stages, and the number of matches played would decrease considerably. Of course, there is one other distinct possibility.
The FIFA push for economic justice, whatever that means, will merely squeeze out the middle class owners. The rules on credit will force United and Madrid to obtain billionaire sheik owners with the attention span of a four year old and the soccer knowledge of, well, a billionaire sheik. And this is what gets my goat…
For these billionaires, the soccer club is a loss. When dealing with the tax man every April, too high a return or taxation sets off red flags. Thus, to avoid suspicions and an audit, billionaires comb the planet for moderately amusing losses. And what is more entertaining than a global brand with passionate supporters and TV coverage galore?
But is that what we want? If so, then Abramovitch is the ideal owner at Chelsea – he has kept interest, wants to win, and puts his money where his mouth is.
My fundamental question: why are we so opposed to a degree of deficit spending? Credit markets freeze and thaw, tightening middle class belts, but will stamping out the strategic use of debt really shackle the top clubs? I doubt it – I think they will poach sheiks. But the middle class clubs, trying to make a push up the ladder, the teams who may need a short-term loan to make a splash signing or reinforce the squad for two fronts – adios mi amor.
I know that such exorbitant wage spending at the top trickles down – increasing the price of players for smaller and mid-sized clubs. But the eliminate debt approach has three possible outcomes – pervasive sheik ownership, a new league rival, or, most likely, FIFA will back down.
This post is not an apology from an American blogger for what American owners have done to your beloved clubs. The lack of due diligence, the quickgrab for credit, the optimist over wage reform, we can attribute these to individuals with a neat rhetorical twist – but a crackdown on such middle class naivete will put clubs at the whims of billionaire playboys, not businessman. One will sweat over payroll and bonuses…the other will only break your heart.
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