baseball settlement = socialism?

A friend of mine who is extremely pro-player and anti-owner in all of the recently-settled baseball labor mess insists that the settlement is akin to socialism. He means the sharing and distribution of wealth. I don’t know quite why, but that analogy seems wrong. However, I don’t want to resort to the argument that “players make too much already.” That, I realize, is not the issue at all. I do believe that people should make as much as they can get, but that seems wrong in the baseball case.

Here is a part of his e-mail to me on the subject (I had his permission, don’t worry):

**Am I the only one who is sick and tired of hearing
what is essentially socialist rhetoric coming from
baseball fans? Do these fans really believe player
salaries should be capped? That sounds like something
that would happen in the Soviet Union. Do they really
believe that wealth should be shared? Hmm, sounds like
Karl Marx to me. **
Is he right? If not, how can I respond to his assertations? It does seem a bit like socialism, doesn’t it?

I’d hate to see what he thought of the nfl contract thats still going

And yes lots of fans do beleive salaries should be capped in fact there was some sentiment that mlb should have a reworded nfl contract

But i’ts wrong becuase the players are pricing themselves out of the business

But you have to remeber the bias hhe has and well sounds like we’re mot gonna convince him of anything

What your friend, the players, and other die-hard proponents of the free market overlook is this:

BASEBALL TEAMS ARE NOT IN COMPETITION WITH EACH OTHER!

Therefore, it makes little sense to compare baseball to other industries.

Some will read that and say, “WHAT? You’re an idiot, Astorian, of COURSE the Red Sox are in competition with the Orioles. Of COURSE the Dodgers are in competition with the Giants. Of COURSE the Rangers are in competition with… well, actually, the Rangers can’t compete with anybody, but that’s another matter.”

And I reply, once again, NO. The teams ofd major league baseball are NOT in competition with each other. Not the way Burger King is in competition with McDonald’s, not the way Ford is in competition with Toyota, not the way Dell is in competition with Compaq. The nature of the business is completely different.

Burger King and McDonald’s are trying to sell the same product to the same potential customers. If I choose to eat lunch at Burger King, Burger King earns my money at the expense of McDonald’s.
Ford and Toyota are both trying to sell me a car. If I buy a Taurus instead of a Camry, Ford earns my money at the expense of Toyota. If I buy a Dell computer instead of a Compaq, Dell gets its money at the expense of Compaq. Moreover, Burger King would benefit greatly if McDonald’s went belly up. Ford would be delighted if Toyota went out of business. And Michael Dell would LOVE to see Compaq fold.

But what about baseball? If a guy in Atlanta takes his kids to a Braves game, does Ted Turner earn that money at Drayton McLane’s expense? Are Tom Hicks and Jerry Colangelo competing for the same customers? If the Royals went out of business, would Jerry Reinsdorf benefit?

NO!

Oh, to SOME extent, the Cubs are in economic competition with the White Sox, and the Yankees with the Mets (though far less competition than you might think), but in reality, every owner is in competition with other LOCAL forms of recreation, NOT with other owners.

The Florida Marlins aren’t in competition with the Minnesota Twins- they’re in competition with all the movie theaters, video arcades, amusement parks and zoos of Florida. If people choose not to go to a Marlins’ game (and MANY people are making that very choice every day!), they don’t give their money to the Twins! They give their money to some OTHER enterprise that offers them a day’s entertainment.

In baseball, “competition” isn’t just a condition of doing business. Competition is the PRODUCT being sold. If every other auto maker went out of business, Ford Motors would be happy. But if every other baseball team went broke, George Steinbrenner and the Yankees wouldn’t be happy, they’d be SCREWED! Ford doesn’t need other auto makers, but the Yankees DO need other baseball teams.

So, while some libertarians may be aghast at sport “socialism,” they’re failing to recognize that baseball economics aren’t EXACTLY the same as the economics in every other business.

Also, understand a bit of the owner’s side. The players were (and still are) preventing the owners from giving money to other owners. All that money belongs to the owners, but they are not allowed to transfer that money as they see fit. Owners are not allowed to pay money to other corporations (owners) in an effort to improve the overall health of their industry.

Picture this, you own a company. You feel, as the owner, that if you enter into an agreement with another company where you transfer monies, you can improve the overall health of your company. Should you be allowed to do this? I suppose not, because even after this concession by the players, the owners cannot do this except as defined explicitly in the CBA.

It is not socialism, it is a joint venture that is intended to improve MLB overall. You know, a rising tide floats all boats and so forth.

All societies allocate wealth in one way or the other. The essence of socialism is social ownership, not private ownership, of the means of production; in this case the baseball teams which produce entertainment. Who owns them? Not the public; they are privately owned. Case closed.

MLB is one giant corporation. It makes sense to re-distribute assets and resources within the corporation to keep the whole thing operating at a profit, rather than have one sector of the corporation make buckets of money, while others go down the tank, and damage the value of the corporation as a whole.

IMHO.

QtM

Damn straight I believe player salaries should be capped. It’s the only way to keep money rather than management be the deciding factor in which teams can compete.

This friend seems to have a salary cap confused with collusion (which is illegal and which baseball has been found guilty of before). A salary cap merely keeps teams from drastically outspending others, and is increased according to increased revenue. When the league makes more money, the cap gets raised.

Your friend seems to be objecting to (and rightly) the illegal practice of back-room conspiring to keep salaries low. Owners can’t get together in secret and say, “Let’s not pay anyone over this amount.”

Exhibit A: The Baltimore Orioles. Their history in the 90s is primarily one of overspending for over-the-hill free agents and failing – miserably – to compete on the field.

Exhibit B: The Minnesota Twins. Despite owner Carl Pohlad’s mandate to spend even less on payroll than the team receives in revenue sharing from MLB, they are one of only two teams with a double-digit lead in their division this year – after dodging Bud Selig’s contraction bullet over the winter.

Exhibit C: The New York Mets. They spent like drunken sailors over the winter for guys like Vaughn and Alomar, and are at the back of the pack in the NL East.

Exhibit D: The Oakland As. David Justice and Jermaine Dye between them account for nearly half their payroll, which is among the lowest in the majors. Yet they just won their nineteenth straight game.

Ability to compete on the field is still determined, as it always has been, by acquiring and developing the best players. The As are a perfect example. Yes, they’ll face challenges in trying to retain their best home-grown players, as evidenced by losing Giambi to free-agency. But they have managed to cope with that loss: their winning percentage this year so far is .630, exactly the same as last year’s. Moreover, it’s difficult for any team to remain consistently near the top of the standings, money or no. It’s even tougher with a tight budget, but the best manage to do it. And does anyone really believe that the Yankees of 2002 have any advantage over the Devil Rays that the Yankees of 1952 didn’t have over the St. Louis Browns?

There was a chart in Forbes recently that showed the growth in payroll, revenue, and debt overall in MLB. The growth in payroll over the last half-decade was significantly less than the growth in either revenue or debt – the problem isn’t that the owners aren’t earning enough revenue; the problem is that several owners are just plain stupid about how they spend the money they do make, and about spending money that they haven’t made – and not just for player expenses.
Sure, there are a few teams that are currently losing money – a lot fewer than the owners claim, but a few, and they’d probably manage to lose money even with a salary cap.

I’m glad the players agreed to greater revenue sharing; frankly, I’d prefer to see teams share 50% of gate and broadcast revenues – after all, the Yankees aren’t going make much money if there are no teams for them to play, or if they turn into the Harlem Globetrotters playing an assortment of Washington Generals-level competition. The luxury tax is probably the least onerous form of salary restraint, in that it doesn’t prevent a team from paying its players whatever it wants, it just makes it more costly to do so, and funnels additional money to the other teams. I’d have preferred to see this coupled with a minimum total payroll, so that owners like Pohlad don’t just pocket the revenue sharing funds and still spend nothing on player salaries; for some reason,the players opposed this notion.

After 100 years in which the owners basically dictated terms to the players, the players are understandably very much opposed to anything that directly restricts their ability to offer their services to the highest bidder, just as I would be if software development firms had salary caps and exclusive rights to my services for a certain number of years from the time I was hired. The players’ position in the last couple of labor disputes has never been that they wanted more money – they just didn’t want the owners to be able to artificially limit how much they could make. Players are never going to make more than at least one owner thinks they’re worth, and even the richest team can’t stockpile more than 40 players on their major league roster at a time.

The owners have done a good job, however, of convincing the public that the players are greedy, and the press has played along, with story after story about A-Rod’s quarter-billion-dollar contract. The average fan is bound to think that that’s too much money for one player to make. How would they react if the press was just as forthcoming with the personal finances of the owners? Publish what George Steinbrenner, Peter Angelos, Tom Hicks, Peter Magowan, Mike Illitch, Bud Selig, et al. earn each year on the sports pages alongside the salaries of A-Rod, Randy Johnson, Sammy Sosa, Barry Bonds, Mike Piazza, and Roberto Alomar, and we’ll see how long the fans continue to side with the owners. Intuitively,though, people have less of a problem with guys in suits and ties with law degrees making several hundred million a year than they do a guy in formfitting double-knits making twenty million a year – maybe that’s the answer: make the owners wear uniforms and describe their occupation as selling beer and hot dogs.

I understand what you’re saying and I don’t want to hijack the issue, but when you say the public doesn’t own the means of production of baseball entertainment you overlook the fact that the public actually owns most of the what the accountants and economists would call the baseball owners’ “plant.” Speaking as a beer drinking resident of Cuyahoga County, Ohio, my beer tax money purchased and paid for the construction of Jacobs Field and continues to pay for paying off the construction bonds. The residents of Cuyahoga County own Jacobs Field; Larry Dolan, the Cleveland Indians owner, is merely the beneficiary tenant of a sweetheart lease deal, he doesn’t actually own the means of production.

Personally, I gain a level of sympathy for the owners because I know they paid hundreds of millions of their own money to get into the business. On the other hand, the players are really good at hitting a ball with a stick.

I think that the union is very important for the players, since the owners did have way too much control in the past. I also think the pendulum swung too far recently and this new deal is much closer to reasonable. The owners need to be able to exercise a little control over the business as a whole, this was unavailable to them in prior CBAs.

Sports teams aren’t publically funded?

You’ve never been to Pittsburgh…have you?

If hitting a ball with a stick has no value, why do supposedly smart businessmen pay millions of dollars for collections of 40 guys who’re really good at it and another 150 or so who’re learning how to? And only a few of the guys holding the purse strings in todays game paid even one hundred million, much less hundreds of millions, to get in the game. Franchise values continue to escalate so that even the worst franchises are worth at least $150 million (based on what MLB was offering Loria and Pohlad to contract the Expos and Twins) – why is that, if it’s just guys who can hit balls with sticks? – but most of the existing teams last changed hands before the escalation in values. Why would other smart businessmen be willing to pay a half-billion dollars for the Yankees, or Dodgers, or (probably) the Cubs, if they were on the market? Because they see the huge amounts of money to be made in this business.

The owners exercise, and always have exercised, control over the business as a whole. Who negotiates with the networks for national broadcast rights? MLB, as an agent of the owners. Who negotiates local broadcast rights? The owners. Who sets local ticket prices, concession prices, luxury box prices, parking fees, etc.? The owners, or their assigns. Who determines where the teams will play their games? The owners, though all too often they cajole municipalities or other public entities to pay for building them, and then lease them through sweetheart deals. Who moves their team if the local politicians won’t build the new stadium with 40,000 luxury boxes and 12 general admission seats? The owners, albeit with the permission of . . . the other owners. Who licenses all of the trademarked logos and team names to apparel and souvenir manufacturers? MLB, again as an agent of the owners. Who decides what players to draft, how much of a bonus to offer them, which minor league team they’ll start out playing for, who to hire as minor league coaches and instructors, how much to spend on scouting and other player development expenses, and which players to retain and promote and which to release or trade? The owners, through their employees in the front office. Finally, who decides how much to offer a player who’s a free agent? The owners. The only aspect of the business I can think of that the owners don’t control is the arbitration process – though you could make a case that they control their fate there as well, since in theory they could release or trade arbitration-eligible players before the arbitration filing date.

In contrast, the players control whether they sign with the team that drafted them or forgo a year of organized ball (either by continuing in college, or by playing with one of the independent teams, as J.D. Drew did). Once they make it to the majors and have a couple of years’ experience, they control how much of a salary increase they file for in arbitration; they pretty much control what happens in arbitration, since the owners’ numbers are almost always less reasonable than the players’, so the players usually win. On any given day, a player can control whether he wishes to continue his professional career, but if the answer is yes, he has little or no control over where, for whom, for how much, or at what position he does so, until he’s been in the majors for a couple of years at least (or until he’s been in the minors for five or six years). That’s generally four to six years during which a player can be promoted, demoted, transferred, traded, or released entirely at the team’s discretion, with no recourse on the part of the player. Once a player becomes eligible for free agency, they have control over which of the offers they receive from owners they decide to accept. If no one offers them what they think they’re worth, they can take the best offer or quit.

There are a couple of other minor areas in which players have some control (veto power over trades for five-and-ten players, etc.), but not that many. Generally speaking, the amount of control players have over the business of the game doesn’t even begin to budge the scales when weighed against the control the owners have. That’s why I find it so incredible that the owners have the audacity to portray the players as the greedy, evil ones who’re ruining the game.

rackensack: You can be good without money, as the A’s and Twins prove. However, to stay good, you need a salary cap.

Look at the all-star team you could make of former Montreal Expos. The Expos are a farm team for the big markets because they cannot compete financially. When a guy on the Expos gets good, the big markets will just snatch him away.

It’s the same thing with Oakland. They developed Jason Giambi. He came up through their system, developed into a star, and as soon as a big market team offered him money the A’s couldn’t touch, he was gone. The same thing will happen to Mulder, Zito, and Hudson. These guys make next to nothing for their talent level. A big market team could do the same thing they did with Giambi, and that’s wrong.

Until there is a meaningful salary cap and revenue sharing, teams like Oakland and Montreal and Minnesota are nothing more than de facto farm teams for big markets, and that’s just wrong.

What I don’t like is that this deal makes the Milwaukee Brewers the most profitable team in baseball by basically robbing the Yankees.

Where is it written that any team gets to stay good, regardless of how much money they have? If money were the only factor, the Yankees would never have stunk up the joint for ten years from the mid 60s to mid 70s, or for five years in the late 80s and early 90s. Success in baseball, as in anything, is fleeting – to stay good, you have to be extremely smart in your player development efforts. It helps to have money, but money without smarts gets you the Baltimore Orioles. You also need a healthy dose of luck.

**

Thought experiment: give Montreal an extra, say, $50 million/year in payroll over the last fifteen years, but change nothing else about the franchise – still in Canada, with the hassles that entails for players in taxes, customs, etc., still in the worst ballpark in the majors, still with lousy attendance and general fan indifference. How many of the players the Expos have lost would have stayed anyway, even if the Expos could have paid them?

Kansas City As fans were saying the same things in the 50s and 60s. Philadelphia As fans watched Connie Mack sell off a couple of World Series teams. Only then it was other operating expenses that were eating up the teams, since player salaries were artifically depressed by the reserve clause. There are reasons why certain franchises consistently struggle to compete financially with others, but those reasons have very little to do with player salaries and a lot more to do with the viability of the market and competence of the management.

By the way, the owners’ (read “Bud Selig’s”) original bargaining position on the maximum debt load teams can carry would have made it even harder for small-market teams to retain homegrown talent, since the cost of future contract obligations would have counted as “debt”; this would have ensured that no small market team could sign a quality homegrown player to a four- or five-year contract, even at below-market rates, since the entire value of the contract would have counted against the 40% maximum debt-to-value ratio. In other words, the As wouldn’t have been able to sign Mulder or Zito to a contract through 2005, as they’ve done with Hudson, even if by doing so they could keep their payroll costs manageable for years to come. Fortunately, player salaries are excluded from debt calculations in the recent CBA.

I hardly call two teams leading their divisions “nothing more than de facto farm teams”. Both the As and the Twins have had up and down periods over the last couple of decades, but the point is that they continue to have up periods. The As have been more successful than the Orioles over the last two decades, and you could argue that the Twins have also, with a 2-1 lead in World Series appearances in that time.

Neither do I consider Oakland a small market (the whole Bay Area? Come on). “Small market” always seems to have a lot more to do with recent lack of success than with actual viability of a market area – Philadelphia’s got a huge market compared with many other clubs, yet they’re often lumped with “small market” teams who just can’t compete because they don’t have money. Cleveland was a “small market” team (and candidate for relocation) until they put a decent front office in place and built a new stadium, and suddenly they’re a pennant contender for several years running. Atlanta was considered a “small-market” team for years, and based solely on the population, remains so. Any owner that can’t make money and put a quality team on the field can always put the team on the market and give someone else a shot. When franchises start trading hands for less than $100 million again, perhaps I’ll believe that it’s become impossible for some clubs to make money. Until then, I maintain that management has much more to do with success than market size.

rackensack Let me express myself a bit differently. This is a fight between millionaire players and billionaire owners. Without baseball, the players would be schmoes just like the rest of us, the owners would still be billionaires. I feel as though the players basically won a lottery of sorts, and complain about the size of the prize. Yes, they never actually complained about salaries and such, but I’m talking about the general tone.

With respect to how much control the owners have over the game, I should hope they have control, they own the damn thing! You pay a few hundred million for a team, you should be able to control the business.

The players gave up an awful lot in this CBA, and I think it’s pretty close to “right”, if there is such a thing. The owners can exercise a cohesive business strategy, rather than having a mish-mosh of individual decisions, but a lot of free market options still remain.

rackensack: by “stay good”, I mean sink or swim based on skill. Not “be looted by teams with money”. If Oakland’s players go in the shiatter, that’s one thing. If big market vultures steal all their players, that’s another.

The As had their shot. They had reached terms with Giambi last year, and when they wanted a hometown discount he asked for a no-trade clause. IIRC the GM wanted to give it, but the owner refused. No contract.

Rackensack,
You mention the contracts as “long-term debt”, you forget the other phoniness: TV contract were not considered an asset. If you have a TV contract for $50 million next year, and $40 million in guaranteed contracts, you have $40M in debt, no assets.

Cheesesteak,

As Rackensack said, very few actually paid that much money for their teams. IIRC Steinbrenner paid $10M, and the Mets owners $23M when they first bought in. Also, each team has been sold at a profit since Steinbrenner bought the Yanks from CBS.

The As had their shot. They had reached terms with Giambi last year, and when they wanted a hometown discount he asked for a no-trade clause. IIRC the GM wanted to give it, but the owner refused. No contract.

Rackensack,
You mention the contracts as “long-term debt”, you forget the other phoniness: TV contract were not considered an asset. If you have a TV contract for $50 million next year, and $40 million in guaranteed contracts, you have $40M in debt, no assets.

Cheesesteak,

As Rackensack said, very few actually paid that much money for their teams. IIRC Steinbrenner paid $10M, and the Mets owners $23M when they first bought in. Also, each team has been sold at a profit since Steinbrenner bought the Yanks from CBS.

The players didn’t win a lottery. They had to prove their ability over a course of several years. By the time they are in the major leagues, they are a valuable commodity. They are finished products (or should be darn close) who provide a unique entertainment ability that others cannot. Their skills are not easily replaceable. If they were, they wouldn’t make much and I would be playing baseball and about 50 people would be stupid enough to pay.