@RichardJMurphy Stick. Wrong End. Again

The talent to get things wholly the wrong way around

An oligopoly - that thing near to the end-stage of what Marx called monopoly capitalism, what we would now call a monopsony - is one of those things capitalists desire. Because of course they do. One of the reasons the bastards desire a monopsony - monopoly capitalism, which an oligopoly is a near-end stage variant of - is so that they can pay lower wages and thus make greater profits.

With that base truth in mind now consider this from Professor Richard J Murphy:

The bottom three clubs in the league will be relegated at the end of the season, which is now just three games away. And it so happens that all three of those clubs now facing the likelihood of relegation were promoted from the second-tier league, the Championship, just one year ago. After a single season in the top flight of English football, they will very likely be returning whence they came.

The economic point that I am making is a very simple one. As is apparent to anyone who follows football, the English Premier League acts like an oligopoly. In other words, the well-established clubs within it make sure that it is organised to their advantage. They do, as a result, collect vastly more revenue than anyone else in the football. Their players are remunerated at extraordinary levels that would be exceptionally difficult to justify without this oligopoly power. In economic parlance, they earn rents on top of any reasonable level of reward they should enjoy. And, as is all too commonly the case when oligopoly exists, there are massive barriers to entry into this market, as the likely relegation of all three clubs that were promoted into it last year makes abundantly clear.

The current UK government has suggested that the UK needs a football regulator. I agree. One of the things that it needs to do is to control the abuse of market principles by the most powerful football clubs in the country. I am not anticipating that any such thing will happen. The idea that fair competition might prevail is, I think, very unlikely to win the support of those who might lose out as a result.

This is a very firm grip on the wrong end of that shit-stained stick. It’s to get the base economics here entirely and wholly the wrong way around - but then this is Professor Richard J Murphy. And yes, this man is paid to teach economics at a British university - aren’t we the lucky ones?

So, Marx, monopoly capitalism. The word monopsony didn’t exist in his time (invented, I think, by Joan Robinson) but that’s what he meant. A single buyer of labour. The capitalists all agree, labour has no power, therefore the capitalists as a class get to grind, dirt, faces etc. They get to determine wages because they have the power to do so as the single - via cartel perhaps - buyer of labour. Vast profits then ensue.

How cool!

The answer to which - as Marx himself was very clear - is the competition between the capitalists to employ that labour which is worth employing. This then means that as productivity rises wages need to rise too. This is - and again, as I insist, even Marx was able to get this right - why wages do rise as productivity rises in a competitive market for labour. It’s also why monopoly capitalism - that monopsony, the single buyer of labour - is such a bad idea. The capitalists get to expropriate ever more of the value added by labour as that labour productivity increases.

This did indeed use to happen in company towns. The motor car and independent mobility put paid to a lot of that - labour could seek employment over a wider geographic area and thus escape such local monopsonies (if multiple monos isn’t a completely ridiculous idea). The only place it happened at national scale was the Soviet Union where Stalin - openly, quite deliberately - kept wages low in order to boost state owned profits to be used for investment in the next state owned factories.

All of this is so well known that one of our little signals for finding an oligopoly - or monopsony - is excessive profits. Excessive here meaning above the general profit level of the surrounding economy. It’s not proof perfect - people might be making such economic, or excessive, profits by innovation or whatever, but it’s a damn good guide to where we need to have a much closer look.

Hmm, OK. So, English soccer clubs. Do we think they’re making excessive, or economic, profits? Well, we could go look through the reported accounts and all that but we’ve a simpler method here. Everton is losing points because they’ve been hiding subsidy. Manchester City is accused of some monstrous list of such behaviour. All of which is in breach of the Fair Play regulations.

The Fair Play regulations are in place because everyone’s seen, with their own eyes, that owners of soccer clubs tend to subsidise said clubs. The urge to win the league ‘n’ all that - the kudos etc - is such that that’s just what they do. That’s why we’ve got laws in place to make sure that owners cannot subsidise clubs in this manner. Because we want that fair play etc.

Hmm, OK, but if all that cash - and there really is that thundering great Amazon of a river of money flowing into the game - is going in and the capitalist bastards aren’t making a profit then where’s it going?

To the players, obviously.

Which is what happens in a tournament market. Having players who are 2%, 5% better than the others is what wins you the league. The players who are 2%, 5%, better are therefore the scarce resource. And as we all know, money, profits, revenue, flow toward the scarce resource in any activity.

An oligopoly, a monopsony purchaser of labour, is the cure for this.

The classic and standard example used here is the comparison between the American professional sports and European soccer. This is the template example. The American leagues are all closed shops. There is no promotion from below, no relegation. Therefore those teams extant are - collusively, of course, and baseball even has specific antitrust exemptions in the law - the monopsonist purchasers of that very rare labour. It’s been observed that pretty much everyone actually capable of playing professional baseball currently does play professional baseball so rare are the skills required.

Yes, sure, American sports salaries are higher than soccer. But vastly larger market among very much richer people explains that. The crucial point here being that American sports teams make profits. Economic profits, excess profits. In a way that English soccer clubs do not.

The reason is that process of relegation and promotion. It also doesn’t matter that teams go up and then down again - even the threat of being relegated means near all the money in the sport goes to the players. Because to avoid that relegation you’ve got to outbid everyone else in the league also trying to hire those players 2 to 5% better than the others.

The very high wages in soccer are precisely and exactly because soccer is not an oligopoly, is not a cartel nor a monopsonistic purchaser of labour. Which is why all the money and more flows through to the players and we have laws against owners subsidising that process even more.

But then this is Professor Richard J Murphy. Who is, to remind again, paid to teach economics in a British university. If he was doing physics he’d run the tape backwards and insist that gravity is what attracts apples to branches.