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Saturday, 11 October 2014

Capital in the 21st Century: Using Piketty to Explain Soccer's Rising Inequality

Had a funny experience the other day at a conference I went to for work. During one of the networking breaks, I got to chatting with a Swedish guy about the not-particularly-work-related topic of soccer. I interrogated him about the state of the Swedish league, and was pleased to learn that unlike the bigger leagues in Europe, Sweden's isn't a one-, two- or three-horse race. Apparently (a quick look at Wikipedia has borne this out) seven different teams have won it since 2004.

Contrast this with the English Premier League, which has been won by three teams in that same period (Manchester City, Manchester United and Chelsea). In fact, since the English top-flight became the Premiership (and then the Premier League) in the 1992-93 season, it's been won by only five teams overall (Arsenal and Blackburn being the others). In Scotland, you have to go all the way back to 1985 to find a winner other than Celtic or Rangers.

Naturally, we didn't go that deep into the stats (although I'm sure we would have, if cell reception in the hotel had been better). But we did register the comparison, and the conversation swung into another direction when I noted that this concentration of titles, and the bad run of form Swedish teams have had in the Champions League, was just the same hollowing-out of the middle class that we've been seeing in, well, every single other facet of life.

Naturally this brought in discussions of Thomas Piketty's book, Capital in the 21st Century. Even though neither of us had read it, we marveled at how it's become beach-reading for a goodly number of the Western world's citizens, and at how applicable it is even beyond the normal realm of personal and national finances.

Because it's certainly true of soccer - leagues were generally more equal (er, Scotland aside), and so were the European club championships. But no club outside the top four leagues (England, Spain, Germany and Italy) has won the Champions League since 2004, when Porto won it, but even that was an outlier - the last one before them was Ajax in 1995. Not only did the title go to teams from seven different countries during the 1990s, but in 1991 the winner was Red Star Belgrade, of what was then Yugoslavia.

The fall of Communism may have been expected to reap benefits for Eastern Europe, but it certainly hasn't done so in football.

Contrast this with the Super Bowl: eight teams have won it since 2004, showing that the NFL has been even more equitable recently, as six teams won it in the 1990s. American sportswriters like to harp on this meme of the "socialist" NFL with the "capitalist" European leagues, but it's hard to fault them when you look at numbers like those. US leagues don't feature relegation, for one thing, and the last-placed team typically gets the first choice of the new crop of players coming out of colleges.

The interesting thing, at least in the Premier League, is that while the bottom three teams get relegated, they typically also get a bigger payout than the teams who placed just above them, who don't get any cash at all. This effectively makes relegation from the Premier League more desirable than hovering somewhere in the middle - and as evidence you could point to the fact that, of the promoted teams, one typically stays up, only to go down again a year or two later. This has been the case almost every year since the Premier League started up - of the three teams that get relegated, only two were among the teams that won promotion at the previous season's end.

You might argue that this polarization is good for fans - after all, it means that top talent like Ronaldo, Messi and Rooney (on those now-vanishingly rare occasions when Manchester United gets into the European tournaments) get to play against one another, making for more unforgettable games. Except that, at least when teams from the same country play each other, the result is typically more likely to be a low-scoring game or a dour 0-0 draw.

It's also bad for fans of teams from the smaller leagues. As my colleague pointed out, one of the reasons the Swedish league is so equitable is that each year the winner relies on a couple of standout young players. However, at the end of the season these players get lured away to a bigger, foreign league, where they typically warm the bench and are never heard from again. This means a league winner can't capitalize (there's that word again) on its success, whether at home or abroad.

Soccer, it turns out, is an excellent system for studying these effects - you can see how quickly a massive infusion of wealth turns into success, and how quickly success feeds on itself: look at both Chelsea and Manchester City, neither of whom had won the English league in about 50 years, before their respective sugar daddies showed up.

The trick now is for economists and governments to turn this knowledge into fixes that have real-world benefits. After all, the rise of inequality in soccer wouldn't be so frustrating if it weren't happening in parallel in people's daily lives.