it looks like Nick has beaten me by publishing his Euro 2004 thoughts first. But in a sense, this post begins where Nick ends his, with a look at the consequences of Europeanization, and Globalization, for the European, particularly the German, football.
As a reaction to the dissatisfactory results of a German team in yet another competition, the search for causes has now been extended from the sports section to the political and economic sections of many newspapers. For a reason: German Politicians of all brands have always believed their electoral fate to be inextricably intertwined with the successes of the Nationalmannschaft. ?The miracle of Bern? has probably been talked up a bit since 1954, but winning the world-championship after 1945 certainly became a, if not the, founding myth of German post war identity. Likewise, one could be tempted to identify similarities between the team?s current weakness and the generally gloomy German mood ? unfortunately, the three games played in Portugal did not become the cure against Weltschmerz, which the Economist is investigating this week.
Germany is not alone, as Nick explains below. All over Europe, it seems, the economics of the football transfer markets are again being discussed alongside – and with the same ardour as – questions about Michael Ballack?s, or David Beckham?s, left foot. The debate is, of course, quite similar to the common discourse regarding the costs and benefits of free trade ? it is essentially protectionist, claiming that free trade leads to players being bought cheaply in poor countries, instead of growing them at home. Sure, the sudden fall of the Iron Curtain probably was a bit of a supply shock for Western European football leagues. Particularly given that playing football is rather culture-free, transferable skill. But does that warrant protectionism? Even if one were to accept the assumption of important cultural externalities of the game?
In yesterday?s edition of the conservative DIE WELT, German economist Norbert Berthold did what an economist had to do : He praised the benefits of free trade and the marvels of the price system while blaming the European Court of Justice?s ?Bosman? verdict of 1995 (which limited the ability of clubs to charge transfer fees for players after their contracts have expired) for the relative demise of many European national teams, particularly the German one. Developing players at home, he argued, has since not been fairly rewarded in comparison to buying players cheaply elsewhere.
I am not sure if his analysis is entirely correct. His argument, I think, supposed that the market for football(ers) works like music industry as we once knew it. There, we have a venture capitalist investing in the brand capital of an artist ? entirely specific investments, sunk costs. So, according to transaction cost economics, the specificity of the investment suggests that pure markets may not be the optimal governance mechanism. And, in fact, initial record contracts usually cover up to seven albums, often covering the act?s entire life-cycle, de facto locking the artist to the company; while the Madonnas (I?m sorry, Esthers) of this world commonly get far more flexible arrangements, as the expected return of their records is far more predictable.
Is this really what we can see in football? I am no expert in player- or club-management, but I just cannot see the huge amounts of specific investments being made for younger, home grown players. They seem to be negligible compared to the sums necessary to turn a musical idea into a real brand like Britney Spears. Players can become brands, of course, but it seems to be far less a consequence of commodification efforts on the part of the clubs than of their own abilities. In addition, differences in quality are, in my opinion, far easier to observe than with respect to music. Counting goals is helpful, counting notes really isn?t. Thus, I would say that developing younger football players does not require the kind of lock-in incentives which extended transfer fees clearly are.
Sure, it will always be more attractive to play in the major European leagues, where the money is because that?s where the markets are. But I suppose it is only a matter of time until Western European markets will adapt, as Nick suggests. I believe the younger players we can see today are already an indication thereof.
But we all know that, in the end, there?s more to football than economics, as Germany proved in 1954, Denmark in 1992, and Greece did yesterday. There are very few certainties in football: The grass is green, the ball is round, the game has 90 minutes. England will always lose at penalties. And, of course, Gary Lineker?s law, to which last week was hopefully only another exception: “Football is a simple game where 22 players play against each other and in the end Germany wins.”