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Source link: http://archive.mises.org/19156/interventionism-in-everything-football-edition/

Interventionism in Everything: Football Edition

November 12, 2011 by

(And by football, I mean soccer.  Bare with me.)

I am sure that not everyone will be as excited as me, but it is always nice to see something that relates to economics in news relating to your favorite sport.  And, it does not hurt when the news has to do with central banking and government intervention.

Marca, a Madrid-based sports newspaper, published a story (in Spanish) on Neymar, a Brazilian football player who had been tied to Real Madrid (a Spanish club, and at times the wealthiest football club in the world) for quite some time.  The piece goes into quite a bit of detail concerning why exactly Neymar never trasferred, and why Real Madrid has lost interest in signing this prodigy (considered by some to be the future Pelé).  In Spain, this is a big deal, since it was long expected that Neymar would transfer as soon as January 2012 to the Spanish club — Marca nicknames the entire ordeal the “Neymar soap opera”.

It turns out that the major incentive to move to Real Madrid would have been the much higher wages the Spanish club were offering Neymar.  Because Santos, the relatively poorer football club that Neymar currently plays for, could not afford to match these wages, his transfer was seen as a real possibility.  The threat of his movement to Spain is not just Santos’ problem, apparently.  It is also a Brazialian social issue — or, one would think, given how the Brazilian government has responded.  Neymar is a celebrity and an icon.  He represents the future of Brazil, including the future of Brazil’s national football team at the 2014 World Cup (which will be hosted in Brazil).  Thus, the maintenance of his Brazilian identity has been deemed a priority.

It is such a priority that Dilma Rousseff, current president of Brazil, personally intervened in the transfer by securing Santos a €40 million loan from the Bank of Brazil.  This loan will help the Brazilian football club raise Neymar’s wages to €7.2 million per year.  In terms of gross income, this is still 15% lower than Real Madrid’s offer.  But, considering differences in the tax codes, it allows Santos to offer Neymar a roughly equal wage in terms of net income earned.

To me, this is incredible.  The president of Brazil decided to guarantee a €40 million loan to a football team, rather than allowing a major international football club pay Santos millions of euros (not just Neymar’s wages, but also the millions which would have been paid to Santos directly to buy out Neymar’s contract), just to maintain a single player.  The irony is that this decision will most likely handicap Neymar’s growth as a player, since it will keep him in an inferior and relatively less competitive football team, meaning that when the time comes to represent Brazil at the World Cup he will most likely be less talented than he could have been had he transferred to Real Madrid.  But, this is humorous irony.

The worst of it is that Brazil is a country that suffers from serious poverty.  It is saddening that a government is more interested in wasting its time extending loans to poor football clubs to maintain what is basically a piece of propaganda (because that is what it is using Neymar as) than actually pursuing policies that could raise the standard of living (and by policies I mean, of course, steps towards reducing the burden of government on Brazilian industry).

{ 50 comments }

8 November 12, 2011 at 10:33 am

Maybe the Brazilian people are more interested in soccer than the burden of government on Brazilian industry.

stephen November 12, 2011 at 11:50 am

Then they should prove that by patronizing more soccer games. Then Santos would have the money to be able to pay its star player enough to keep him around. Instead, people are (or will be) taxed in order to keep him. That’s the burden on industry. Anyhow, soccer is a part of industry. This is just another example of crony capitalism – the state picking winners and losers – the state overruling voluntary action and forcing others to conform to its own scale of values.

Daniel Kuehn November 12, 2011 at 10:34 am

You Austrians are always confusing terminology: inflation/monetary expansion – football/soccer.

blabbe November 12, 2011 at 11:11 am

Take it easy Daniel, you don’t have to be a useless troll everyday, you know.

El Tonno November 12, 2011 at 2:11 pm

Hohoho.

No-one who cares about football in Europe calls it “soccer”.

What the US calls “football” is considered “the barbarian show for jocks”, except if done w/o protection by sweaty muscular men ripping up the grass with their stubbly chins.

Monsieur Catalán: It’s “Bear with me”, not “Bare with me”.

stephen November 12, 2011 at 2:32 pm

The term soccer did come from England, though, as a way to differentiate between different forms of football. Rugby football, for example, was one version, while asSOCiation football was another variety. College students at Oxford called the latter “soccer” for short.

All that is to say: soccer sucks

old-timer November 13, 2011 at 9:26 pm

“All that is to say: soccer sucks”

No, it doesn’t.

Sione November 15, 2011 at 1:30 pm

When you refer to “Rugby football” you are, of course, referring to Rugby League (as in the game administered by the Rugby Football League). There is also Rugby Union. Then there are the seven-aside versions of both. There is also “Touch Rugby” and “Australian Rules”. While some may occasionally refer to any of these as “footy” around these parts, generally they are not called “football”. They are known as “Rugby”, “League”, “Sevens”, “Aussie Rules” and “Touch.” The kicking game is always called “Soccer” and American “football” is “Grid Iron”. This avoids the imprecision of the term “football”.

Sione

J Cuttance November 12, 2011 at 5:16 pm

“Bear with me”, not “Bare with me”. No, he might just want to get naked with you…

innuendo opportunity taken

scineram November 13, 2011 at 2:01 pm

As opposed to handegg?

Samuel November 12, 2011 at 11:33 am

This is sad for Brazil that it gets to this point and it is pretty disgraceful stuff. Back in the 50′s/60′s
the Portugeese dicator intervened so as to keep the legendary player Eusébio from moving abroad and in some ways this is not much better.

I think you’re right that Neymar’s growth as a player won’t necessarily be helped by staying in Brazil and especially considering his awful attitude. As a Real Madrid fan I’m very happy though because Neymar is not ready to play in Europe for a major club like Real Madrid.

On the flip side you should point out that Brazilian clubs have also been feeling the growth that Brazil has been generating in recent years. Brazilian clubs are buying players from Argentina and are able to keep their talented players for a longer time than they used to. 10 years ago Santos would not have been able to keep a player like Neymar for so long with the interest he has generated globally.

Giovanni P November 12, 2011 at 1:58 pm

I disagree with you, Samuel. Neymar is ready to play for Real Madrid. He is really, really good. I’d say he is better than all the top players from your Real Madrid and would sure help you beat Barcelona — which has not happened (in a serious match) since a long time ago.

I disagree, also, with Jonathan, about the growth of Neymar as a player: the football in Spain is too easy for the top clubs. There is no challenge for the players, they just need to do the basic and they’ll sure win every game, so it is not a good environment for player development.

I also think that this policy move from (I’m brazilian) our stupid president, ignoring its bad economic consequences, is still bad as a populistic move, since all the other clubs fans prefer to play against Santos without Neymar than with him.

Jonathan M.F. Catalán November 12, 2011 at 8:11 pm

Madrid did beat Barcelona in the 2011 Copa del Rey final. Not as important as Champions League or La Liga, but still the third major trophy a team can earn.

Also, playing for Real Madrid doesn’t just subject a player to playing other Spanish clubs (some of which are top clubs — Valencia, Atletico de Madrid, et cetera, all are very good clubs which usually play better in the league than they do internationally), but also to top European clubs during the continental competitions. And, since he would be playing with Real Madrid he is playing in a team with a top system of management and organization, unlike Santos (and any other club, really). But, whatever may be the case, playing in Spain is better experience than playing in Brazil.

Giovanni P November 13, 2011 at 9:32 am

I would like to let this polemic question be decided by the match between Santos and Barcelona at the finals of the so called World Championship. The result there will settle this worthless dispute here, if you take the bet.

(Notice that I’m betting all in a match between the probably best club of the world and a common median brazilian club, which has difficulties in matches at the local championship.)

Samuel November 13, 2011 at 3:00 pm

Giovanni
Nobody in their right mind would dispute that Neymar is an incredible talent. But he is simply not ready for European football. His attitude stinks and he is incredibly weak physically which he will be exposed for in Europe and especially in Champions League.

He is not tough enough for Europe. In my opinion he is like Robinho but +20% more talented but also with a 20% worse attitude and that is the problem. I’m sure he will have big problems when he comes to Europe. Not mention that he has struggled whenever I have seen him against tough defences. Like Robinho he will probably play well in most games outside the top 2/4 teams in Spain.

Giovanni P November 13, 2011 at 8:06 pm

You’re probably right to think that way. But believe me, he’s much better than Robinho. And has a much better attitude. He’s not a playboy or a drunk or whatever you may think (although his visual may give you this impression). I do not know him, but I can see from his interviews and news on the press that he is much more intelligent and responsible than Robinho was. Robinho is a bad player who had two or three good seasons, playing for a well structured team. Neymar is the team.

Also Neymar has a well structured family and his father is always with him, unlike Robinho.

Nile BP November 12, 2011 at 3:37 pm

Brazilian growth, eh? You really think that a government that does such things will allow the poor sods under its heel to “grow” much? Well, I suppose you could give them the benefit of the doubt. But living in Brazil, I can tell you that this ludicrous attitude is just the tip of the iceberg.

Franklin November 12, 2011 at 1:23 pm

Amazing story. But sadly, perhaps not so amazing.
Government’s are generally chartered with “promoting the general welfare,” embedded into constitutions or implied by way of other introductory phraseology. Not only in the U.S. consitution either.
There are left/right arguments about what “general” means, and the busy-body politicians enact laws or mandate expenditures according to their opinion on how best to serve the people. Of course, what they are thinking is how best to serve themselves, but they can rationalize it and, in turn, garner support because of the root justification — most people believe in a constitutional framework of law which allows intervention in everyday life and trade.

Hack November 12, 2011 at 3:00 pm

It’s *bear* with me.

Andres Rivero November 12, 2011 at 4:34 pm

You can be sure that Neymar won’t remain in Brazil much longer. By doing this you are depriving a young star from honing his skills in (arguably) the greatest league in the world. By staying in Brazil you are not only wasting valuable resources but they are holding back his development into a premier footballer.

Thanks for that great piece Jonathan, I enjoy reading your writings very much. (I am a Mexican currently studying in Madrid, so I find this particularly interesting)

Bill November 12, 2011 at 5:03 pm

” Bare with me.”

I try not to harp on grammar, but you’ve crossed the line this time.

Matt November 12, 2011 at 5:11 pm

“I am sure that not everyone will be as excited as me, but it is always nice to see something that relates to economics in news relating to your favorite sport.”

Obviously has never heard of S.M. Oliva.

Keith November 12, 2011 at 5:21 pm

This story is one of the most absurd I’ve heard in a long time.

Fernando Chiocca November 12, 2011 at 5:21 pm

Hi Jonathan

Nice post. But this is just the top of the iceberg here in Brazil.

I used to like football a lot, but now I just don’t care an iota anymore.
But I have to pay for this kind of thing that you mentioned through government intervetinon and much more.
With this World Fucking Cup the Brazilian governement are investing tax payers money in stadiums and a lot of other stuffs related solely with this event. (and besides that, the Olympics Fucking Games!)

And just going back to the time I care with football, I have to disagree with the “relatively less competitive football team”… Brazilian league is the best of the world. European leagues sucks. ;)

Jonathan M.F. Catalán November 12, 2011 at 8:12 pm

Not just the World Cup, but Olympics, and Confederations Cup (and maybe Copa America?). How they could award Brazil so many competitions in such a short period of time, I have no idea.

Joe Green November 12, 2011 at 8:31 pm

probably had to do with leaving bags of money in front of certain people’s doorsteps. JMFC,are you a Madridista?

Jonathan M.F. Catalán November 12, 2011 at 8:34 pm

I’m an Atletico de Madrid fan; but, I prefer Real Madrid to Barcelona.

Kevin K. November 17, 2011 at 7:38 am

On a completely non-economic note, would you say, as a supporter of Atletico, that Thibaut Courtois has been as good as he seems to have been to Chelsea supporters like myself? From what I’ve seen and heard, he’s been mostly spectacular.

Jonathan M.F. Catalán November 17, 2011 at 10:39 am

Courtois has been doing really well; a really good replacement to DeGea. He’s just unfortunate to be playing in a team with top players, but that for some reason cannot organize themselves in any meaningful way.

Bardhyl N. Salihu November 12, 2011 at 7:50 pm

Great insight Jonathan. I love it as well when football is discussed in the context of economics.

Ho Pin November 13, 2011 at 10:16 am

Nothing new in the profitable relationship between politicians and soccer. Politicians help football clubs, voters vote those politicians. Good point Jonathan

I live in a small Spanish city. We are really proud of our football team and its long history, but it has been a shame election after election politicians using it as an electoral weapon. The city council -population 150.000- is the owner of the team and the accumulated debt is about 20 million euros. The total cost for the city could be in a range between 8 and 15 millions depending on how opportunity costs are counted. In return, our mayor has secured every single election in part based on team success in saving the team from bankrupcy and later success on the league.

Anyway, I think that happens everywhere, unfortunately

Samuel November 13, 2011 at 3:01 pm

Jonathan M.F. Catalán

Have you read Soccernomics?

Merlin96 November 13, 2011 at 10:58 pm

Anarchro-Capitalism:
With zero statism, Barca and Real Madrid creamed off 50% of the TV rights with rest of the La Liga teams (16 teams?) sharing the remaining 50%.

Socialism:
In England’s Barclay Premiership League (BPL), all 20 teams shared equally – I think 72-mil quids each – the foreign TV rights paid by SkySport.

But in this case, “Socialism” certainly worked as BPL is competitive and unpredictable and is globally, the most watched (best in terms of viewship and excitement generated) in the world.

For the sheer fun of it, anybody want to analyse it in terms of Austrian Economics”?

Especially if in 2013/14 season, with UEFA FInancial Fair Play Regulations (Statism?) kicks in such that teams cannot incurred more than 45-mil euro in losses or risk being kicked out of all lucrative European competitions.
This is of course to level the playing field to prevent Sugar Daddy like Abu Dhabi spending billions to buy up titles and trophies for their toy boys at Manchester City…or Roman Abramovich for his Chelsea Rent-Boys.

Look at NBA on the case of Michael Jordan and Lebron James.
What if there is no draft system and like European Football that these talented players are allowed to join clubs of their choices?
What is going to happen?…like NBA and NFL ended up with dynasties and turned the fans off.
So, “Drafting” = Socialism and Statism
…..Free Agent = Anarcho-Capitalism?

Jonathan M.F. Catalán November 13, 2011 at 11:29 pm

There is currently a movement in Spain, though, led by the bigger of the “minor” clubs (Sevilla, Atletico de Madrid, Valencia, et cetera) to redistribute television rights in Spain. So, it’s not as lopsided as you make it seem. And, Spain’s La Liga is not government-free.

Kevin K. November 17, 2011 at 8:14 am

Obviously, you know that Austrians would have no problem endorsing equal sharing of revenue among clubs in a private league. Much like they would have no problem with a group of people voluntarily deciding to live in a commune by themselves.

As for FFP, I think the Austrian would be, were it a policy question, rather than the rule of a pseudo-private institution, opposed to it. FFP is a clear barrier to competition. It’s largely going to cement the current top teams at the expense of those trying to rise to the top. Sure, it will reduce the number of clubs taking on crazy loans to finance pushes for European football, but the current top clubs will now have much less competition for players, monetarily. As for nouveau-riche clubs like Machester City or Chelsea[, who I might remind you were actually a fairly good club(, unlike, say, City), just in need of a more sane owner than Ken Bates, before Roman bought the club], the Austrian perspective would see them as upstarts challenging the established order. [It's also not as if the "old guard" got to where they were without a decently wealthy owner at some point, anyway.] It’s also not as if they keep spending and spending either, most “sugar daddies” tend to offer a short-term burst of cash, spent on players and infrastructure, then spend less and less until the club is self-sufficient. Right now, for instance, Chelsea is surprisingly close to being self-reliant, and it’s mainly the much lower stadium revenues compared to other top clubs which is keeping them from being able to live without Roman, and they’re working on getting a new stadium.

My point may have been a little lost there in my defence of my club, but basically, I think the Austrian position would be that FFP is largely curtailing competition by preventing clubs from acquiring the capital necessary to compete successfully.

Merlin96 November 13, 2011 at 11:15 pm

Football fans, please correct moi if I am wrong.

Real Madrid?
Associated with General Franco; heavily in debt with connected Spanish banks underwriting their massive deficits.
Like Real MAdrid = Fascism

Barcelona?
Catalan, rebellious, club is owned by fans but still a heavily in-debt club.
Like Barcelona = Anarchism

Without loans from banks, you think Real Madrid and Barcelona will survive in a Laisezz Faire Capitalist World, living within their means?

Or Real madrid and Barcelona survive with massive “stae-injected funds” like a Corporatist State via all those Spanish banks giving them generous borrowing facilities?

Jonathan M.F. Catalán November 13, 2011 at 11:30 pm

Are you sure about those club’s financial positions? I don’t know for sure, but I think Barcelona is actually in worse financial shape than Real Madrid.

F'ing F-face November 14, 2011 at 12:17 pm

Dilma is a fucking ignorant bitch who doesn’t even know how to speak english.

Brazil sucks so bad that, this post, where I especifically refer to her being a huge cunt is actually a crime in Brazil*

* it’s a form of lèse majesté which applies to all public employees

Edit: Dilma is a cunt

Bernardo Gollo November 14, 2011 at 4:21 pm

I’m sorry but you got it a bit wrong, try studying a bit more of Brazil’s economy and Brazilian football. Brazil is the 7th biggest economy in the world, if that means a poor country what is a rich one? And not rich like China or India that has a billion plus population, only 190 million. Because of that football clubs in Brazil got better conditions now to pay bigger salaries, not like Europe yet but well paid enough. Santos got a loan from the bank, not a subsidy. And last but not least, the Brazilian league is as strong as European ones, you can check that on the weighting Fifa gives to each league to point world clubs rankings, and if you watched it.

Jonathan M.F. Catalán November 14, 2011 at 7:21 pm

The loan is basically a subsidy, given that without the approval of Brazil’s president the loan would have never been given. And, Brazil might have a large economy on paper, but this doesn’t necessarily translate to its football league or to other sectors of the economy (e.g. Brazil has a relatively large pool of people that live in poverty, compared to first world nations).

And, I don’t know what weight FIFA gives to the Brazilian league — I didn’t know that FIFA issued coefficients (I can’t find them, either). I know that some Brazilian teams are ranked highly by other ranking systems, but if you look at the top 25 in most rankings the teams are overwhelmingly European, with the rest being South American (Argentine or Brazilian)… but with this “rest” being in the majority.

Daniel November 14, 2011 at 7:08 pm

I don’t think Marca is a trusted source…

Felipe Sacemramento November 14, 2011 at 7:34 pm

If dont know dont talk about it !!!
The goverment from Brazil has nothing to do
with neymar and Santos the spanish are pist off
couse the kid decided to stay in Brazil and we
very capeble of to pay his salary in the sane level
of the europeans .
You dont need rankings to say that our league
is stronger tham most of all europeans league
they have a couple of teams fighting since the start
when we have at least 12 , thats a league.
We are 5 times world champions and we export
over 1000 players a year to all over the world
and we still make teams to win anything on the world
this europeans sidex NEED to buy the best of the best
to be something when sell our best and still
make a completly new team as good as .
Take the the top 2 , 4 teams from the so callef
best leagues in the world and the rest is as bad as our
4 division .
The problem is that the eutopeans think the are the centre
of the universe , but not in football .

Felipe Sacemramento November 14, 2011 at 7:46 pm

We do have a lot of poverty in the country
but like bernardo said we are the 7th economy
in the world and our teams dont need the president
to help us .
This is the past , there is way less corruption now
and we have very rich clubs at the moment ,
most of our clubs have over 10,20 MI fans and now
the clubs are learning how to make money out of
it and the so called richest clubs in the world own
a LOT of money to the banks . None of this clubs
in europe have this kind of money to buy players at
this level but they do anyway and everybody thinks
they are veryyyy rich but in fact they with more debts.

Sorry abouy my spelling im texting from my mobile
and made a phew mistakes.

Fred November 15, 2011 at 12:48 pm

It’s quite funny to read this, when a european club is rejected, it’s news around the world. To read that Neymar is not ready for europe, so O’shea and Bendtner are ? I’ll give you a list of players playing in TOP european clubs – not to mention the others – that wouldn’t even get picked in the local league that I play in Brazil. There are a lot of shit players around, that is why you need to buy (at any costs, which are not even in the clubs bank – therefore it’s also a loan) abroad. The decision Neymar did is his, it’s not up to you to decide if it was right or not, he is happy there, so there is where he will stay. Money can’t buy everything, reason why Tevez is not playing for the oil-dollars Man City. He is more than ready, better than anyone there (except Messi), but european will have to learn to accept the fact that Brazil is different now. We don’t have the same power, but Real Madrid don’t know how to negotiate. Neymar will leave at some point, but not when RM wants, it’s when it’s the right time, you’ll see he’ll end up in Barcelona.

Sione November 15, 2011 at 1:52 pm

Wow! Some guys sure are focussed on their favourite entertainment game. No wonder them govt fellers feel a need to get involved and bugger everything up. The whole show is a corrupt distraction really. While it can be fun to attend a game occasionally or even set aside the time to watch one on TV, they are not important at all in the scheme of life. The fact that there has been so much political involvement and popular obcessing regarding the various professional codes all goes to demonstrate a widespread degeneracy and an inactive sloth. Yuck!


An aside:
Are you routinely involved in sports personally? Do you play? Or is it the fan mags and the TV and pub gossip for you?

Interesting to hear more.

Sione

Michael A. Clem November 15, 2011 at 2:50 pm

Bread and circuses. Keeping the masses entertained with a popular sport helps detract from the governmental problems.

Gustavo Basso November 15, 2011 at 10:48 pm

Even tough i agree with almost everything that is said, specially about the relationship of the President in the ‘soap opera’, one thing is completely wrong (i have any prejudice i could say that only a person without real football knowledge could say: “it will keep him in an inferior and relatively less competitive football team.”

Santos is nowadays one of the 5 best football teams in the world, and anyone would be surprise if they beat Barcelona at the World Championship. And even tough european sport – and football – is better organizated than brazilian’s, the level is not superior. In Spain, for example, any team would be easily beaten by Santos (or Vasco da Gama, or Peñarol) except for Madrid and Barça. The same in Italy, but with Milan and Inter. And yet the same in England, except for Manchester City and United and Chelsea. And these are the best one’s… french, portuguese, dutch and ever german leagues/teams can’t face the brazilian league. It may not be the richest, neither the most beatiful, but is, for sure, the most competitive in the world. 4 rounds to the end, the 8 first ones has 4 poins amongs them… where else can this happen?

So, i just think Europe should pay more attention to South America’s football – not just the players you want to buy, but also the teams and the leagues.

jmorris84 November 16, 2011 at 4:57 pm

Santos is “one of the 5 best football teams in the world?” How is this so; especially since they are currently 8th in the Campeonato Brasileiro Série A?

Gustavo Basso November 15, 2011 at 10:54 pm

PS: Bernardo e Filipe:
Não adianta nada ser a 7ª economia do mundo e ser o 84º IDH. Então temos uma economia grande que dá muito a poucos e pouco a muitos. E um estado onde nada, absolutamente nada, funciona de acordo com essa potencia econômica. Eu duvido muito que vcs tenham aprendido inglês na escola pública, utilizem regularmente saúde pública, transporte público ou mesmo acreditem na nosssa polícia (é possivel que vivam em condominios/edificios com porteiros, segurança privada, etc)

Estamos melhorando? Estamos… mas porque nossos políticos seguem se involvendo com assuntos que não deveriam ser seus? (A Italia não serve de modelo para nada nem ninguém). O Itaquera será o estádio da Copa porque o Lula é corinthiano e o R. Teixeira, brigado com o SPFC. O Neymar fica porque a Dilma facilitou um empréstimo. Confesso que fiquei muito, muito feliz com a permanencia dele, mas não deveria ter sido desse modo.

Gustavo Basso November 15, 2011 at 10:58 pm

PPS: Just remembered now – Marca is definetely a non-reliable newspaper. Just as all spanish sport journalism. Just like Madrid and Barça, there’s the Marca and Sport rivality. And i don’t really trust a word Marca says about the contract signed and the president’s involvment into all of this.

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