Yahoo Finance Does Manchester City prove you can buy success?
Manchester City’s fourth consecutive Premiership victory is just one example of the concentration of success in football among a handful of clubs, says Paul Ormerod
So Manchester City won the Premiership yet again. Four in a row has been widely trumpeted, and it is also six out of the last seven.
But this is just the most obvious aspect of the increasing concentration of success in football amongst a handful of clubs. In the past seven seasons, the top two spots have been taken by just four clubs: City, United, Arsenal and Liverpool.
At least in England we are spared the tedious predictability of the Scottish Premiership. No club other than Celtic or Rangers has won it since Alex Ferguson’s Aberdeen in 1984/85, almost 40 years ago.
The example of Scotland makes the reason for dominance obvious. Celtic’s turnover is £120m and Rangers made £83m. The next club, Hearts, had an income of only £21m.
The correlation between the amount of money spent on the squad is not perfect but it is strong and positive.
Football fans themselves seem to have an ambivalent attitude towards money in the sport. There appears to be little resentment of the stupendous amounts which are paid to individual players, in much the same way as there are few complaints about the earnings of film stars and rock musicians. Paul McCartney has just become a billionaire, but nobody seems to mind.
In contrast, there has been a groundswell against the fact that wealthy owners can buy success. Wealth in this context really does mean wealth. Even the ex-Beatle does not really have enough.
This is why the Premiership clubs in England are moving towards adopting a salary cap for the season after next, despite fierce opposition from the two Manchester clubs.
The proposed rules are complicated, depending upon whether a club qualifies for a European competition, where further large sums can be made. But the basic idea is that no club would be allowed to spend more than a fixed (and high) percentage of income on the playing squad.
A fixed percentage of a very large amount is still much bigger than the same percentage of a smaller sum. So an additional restriction is being considered. Namely, that the total amount of spend permitted will be a multiple of what the bottom club earns from TV rights.
This is likely to increase the turnover in terms of the number of clubs occupying the top slots. The evidence from American football makes this clear.
Americans are more attracted to the idea of capitalism red in tooth and claw than Europeans. But despite the general devotion to competition, American football has had a salary cap in place for many years. In recent years Kansas City Chiefs have been prominent, but in general there is a far more equitable distribution of playing success than in soccer in the UK.
We might reasonably wonder why this matters. Supporters of all the other clubs in Scottish football do not stop attending because their teams cannot win the Premiership. Their devotion remains strong.
We can again look to America for the main reason.
American regulators and politicians are usually very happy not to interfere with business outcomes. But they broke up the oil barons quite ruthlessly over a century ago. Their attention is now turning to the tech giants.
Success is still admired. But it is when its powers are used to lift up the drawbridge against challenge that it becomes resented.
The dislike of monopoly now rampant in UK and European football neatly captures two key religious themes. The Puritan tradition of the need to justify success and the old Catholic belief in the “just price”, the longstanding attempt to capture fairness in transactions.
The practice of religion may be fading in Europe, but its legacy remains strong.
Paul Ormerod is an economist at Volterra Partners LLP, an Honorary Professor at the Alliance Business School at the University of Manchester and author of Against the Grain: Insights of an Economic Contrarian, published by the IEA in conjunction with City AM
