The moral limits of markets
The free market is an economic system based on supply and demand with limited government control. Few businesses have benefited from the embrace of market principles as much as the Premier League.
The broadcasting rights alone of this world-beating business are worth £5.13bn for the three seasons from 2016/2017. This figure represents a 70% increase from the previous deal. The huge demand combined with the limited places available on the teams helps explains why the average salary for a Premier League footballer has exceeded £3 million during the current season.
The embrace of the laws of supply and demand clearly explain these high wages. Yet, in times of crisis some Premier League clubs have failed to follow the logic of market fundamentalism.
This week, Tottenham Hotspur, Newcastle United, Norwich City and Bournemouth have announced their intention to use the government furlough scheme to meet the pay demands of non-playing staff without first asking their first-team superstars for support.
In response, Julian Knight MP, the chairman of the Digital, Culture, Media and Sport select committee accused the clubs of pursuing “crazy economics” and operating in a “moral vacuum”.
Footballers are not the Stoic gladiators of the Roman republic whose sacrifices served a social purpose. Yet recognising the sheer volume of human suffering across the globe brought by Covid-19 does not require much emotional intelligence.
To paraphrase Dickens, these are perhaps the best of times and the worst of times for the Premier League. With the season currently on pause until further notice, the total losses for the league and the 20 clubs combined could be colossal.
Still, this asymmetric shock can in no way legitimise the shifting of the burden to the taxpayer. Market thinking cannot be reserved for one section of football, while the nanny state steps in for the rest. The issue of moral hazard applies across industries, but for a business which relies on mass audiences its hard to imagine how players cannot show a degree of solidarity.
This is a crucial opportunity to futureproof its reputation with the next generation of viewers for whom fair remuneration is an important issue and who will undoubtedly care whether Premier League footballers take principled actions.
Compare this to Schroders, who has warned UK companies that executives must “share the pain” of the crisis and called for boards to review chief executive pay and the Premier League clubs resemble the types of Victorian capitalists which Dickens ridiculed.
Many clubs may think that their brand is strong enough to withstand this, but players at major European clubs such as Juventus and Barcelona have contributed to calls for solidary from the public.
According to the Deloitte Money Football league, the Premier League features 11 clubs which is one more than the combined number of teams from Spain, Germany and France. The League has been flooded with money from abroad, but this trend should not be taken for granted. For example, Ineos recently acquired French Club Nice in a league in which Qatari money has broken transfer records. Just take a look at the rise of Manchester City in the last 10 years and you will understand how dynamic the industry is.
Covid-19 will rewrite the social contract between business and the state. If the Premier League does not wake up to this reality and is even outshined by financial services firms in the arena of remuneration, this could have a lasting impact. The free market does have moral limits.