German football 1 – Free market capitalism 0

I hope no one will be offended if I say that watching the faces of anguished Brazilian supporters witnessing the superb German football team sweep through the inadequate Brazilian defence, gave me an insight into what the French must have felt in May and June 1940 when the German army demonstrated what blitzkrieg meant. This was shock and awe on the football field. If the performance against Argentina lacked that same flare, nonetheless, the discipline, team spirit and ability to win was evident throughout the game.

What has this to do with free market capitalism?

In a word, everything. The English team was a collection of less good players, who played badly as a team and frankly lacked the class of the Germans. But that is not surprising because English football is the plaything of the rich. 

There are very few rules on who can own clubs, so they have been sold off to the highest bidders who then buy mercenaries from all over the world. This is the ‘Wimbledon theory’ of capitalism. We do not mind that we rarely have a winner at Wimbledon. It’s just great to put on the world’s greatest tennis event. Equally, does it matter if there are no decent English players if the world can watch great football from the English Premiership?

There are very few rules on who can own clubs, so they have been sold off to the highest bidders who then buy mercenaries from all over the world.

That attitude says everything about the rootlessness of modern capitalism: It shows little interest in communities and societies but huge interest in using money to acquire power.

The interesting story is how the Germans came to build the team they have. The Bundesliga – Germany’s federal football league – has avoided the injections of cash that have turned a middle ranking UK Premier League club such as Manchester City into transfer market giants.

Under the German rules, 50 + 1 of the shares in a club must be owned by the fans. There are a few exceptions such as Wolfsburg, which is a subsidiary of the Volkswagen Group, and Leverkusen, owned by the pharmaceuticals giant Bayer. The 50 + 1 rule means that German soccer avoids the economic instability that comes from tycoons swooping in to purchase a club and then loading it up with debt. This often goes sour – look at Portsmouth FC. 

The Bundesliga CEO emphases that the most important factor is to ensure that competition overall is strong rather than investment in one club, which may be good for individual fans of that club but bad for the overall competition. There are also tough financial limits on spending laid down by the Bundesliga. The clubs’ books have to be open to the league and the rule book gives precise stipulations on liquidity and debt. Some contrast with the English league! 

According to a recent BBC article, English players contributed to 32% of the minutes played in the Premier League’s first three months of the last season, compared to 50% of home grown players in Germany. The Germans have set up new academies and at least 12 players in each intake have to be eligible to play for Germany. Approximately 62% are able to play for the national team in their junior academies – where as in England it is the other way around with an approximately 60/40 split of foreigners and nationals.

Even the Americans have recognised that sport and the free market do not mix… American football has a draft system which allows the worst performing clubs to hire the best young players.

Even the Americans have recognised that sport and the free market do not mix. In the land of Milton Friedman and the Chicago school that is quite remarkable. American football has a draft system which allows the worst performing clubs in the last season to have the right to hire the best young players coming out of the colleges each year – the so called draft. This injection of good new talent into the less well performing clubs means that the overall performance of the league is enhanced because competition – just like in Germany – is maintained. Money cannot buy the title. 

One definition of social democracy is that its mission is to save capitalism from itself. Unrestrained free markets ultimately end in monopoly capitalism. In sport a free market dominated by money results in uncompetitive, boring leagues controlled by a few wealthy clubs. In the World Cup it means that national teams from countries whose leagues are dominated by foreign players perform badly.

There are lessons to be drawn from this. Markets need regulating; new entrants need to be supported; government has a role to play in ensuring fair play. If the UK government really want social enterprise to flourish then they need to take a long, hard look at the Bundesliga and recognise that the policy of concentrating on youth, which is the key to success for Germany, could be replicated in concentrating on charities and social enterprises to provide social and similar services. If they were to do so, maybe in a few years’ time we would be witnessing a renaissance of quality public services – just like Germany has watched the rebirth of its national team. 

Stephen Lloyd is Senior Counsel at City law firm Bates Wells Braithwaite