Socialism 101

As Hank would tell us if he hadn’t been gagged by Bud Selig, socialism is an economic and political theory advocating public or common ownership and cooperative management of the means of production and allocation of resources. You know this is true because that’s what it says in Wikipedia. From this definition, we can see that baseball is not a socialist enterprise, since we don’t have public ownership of baseball teams. All major league baseball teams are privately owned.

But, here’s a surprise: baseball is a little bit socialistic. One part of socialism is cooperative management of the means of production and allocation of resources. Baseball has that. As written in the Yankee Stadium bond prospectus, the Kommissar (er, I mean Commissioner) of baseball has the power to take actions he deems to be in the best interests of baseball, even if these decisions are not in the best interests of the Yankees. These decisions include the length of the season, the scheduling of games, the teams that the Yankees play against, the league where the Yankees play, and of course the sharing of revenues.

This brand of socialism pretty much goes with the territory. Baseball is a cooperative enterprise. The Yankees are trying to defeat their opponents on the field, but they’re not engaged in a capitalist struggle to drive their opponents out of business. The Yankees’ business success depends on there being other interesting teams to play against. No one is going to show up at Yankee Stadium just to watch the team take batting practice (at least, not at those prices).

Baseball has always had revenue sharing, as Pete Toms noted in a recent post. Revenue sharing used to take the form of splitting a game’s gate receipts with the visiting team.

Now, baseball shares revenue in different ways, and in total the Yankees probably retain a smaller share of certain revenues than it would have received under the old system of splitting gate receipts. This may upset Hank Steinbrenner, but he can console himself with the knowledge that baseball’s socialism ends with that business about cooperative management. When it comes to the issue of private ownership, baseball remains firmly capitalistic. The value of the Yankees, which has grown about 16,000% since Hank’s father purchased the team, remains securely in private hands.

You might say that Hank Steinbrenner is the happiest of socialists: a rich one.  You might also say that rich capitalists can brag about their achievements, but rich socialists should keep their traps shut.  By definition, a rich socialist got rich through cooperative effort, which in Hank’s case means that he didn’t get rich in a vacuum.  The teams that receive the Yankees’ revenue sharing contribute to the Yankees’ success.

Baseball has no more determined an opponent of its revenue sharing system than yours truly.  See here and here and here, as examples.  But my opposition is limited to which teams gets the revenue sharing money, and what these teams are supposed to do with the money.  I have no problem with the Yankees’ being required to pay money out.  That’s just the kind of good, old fashioned socialism that made this game our national pastime.

18 thoughts on “Socialism 101

  1. I don't know whether or not Hank actually knows what socialism is (most people who throw it out there don't), but he used it 'cause it's a buzzword that gets people's attentions and makes them upset (if they're dumb enough to fall for it.)

  2. Meanwhile the proletariat is still denied any rights in the matter, while their labor (money) is used to fund the revenue stream.

    It's a good point, but I think you and McCarthy are both missing something. Baseball is a non-essential revenue stream. It doesn't produce anything except for those who are directly involved in it.

    The idea of socialism is to produce items of need for the common good. While I'm the biggest baseball fan around, if the game disappeared, life would go on. Tractor production, used for mass production of food, would greatly hurt society if disappeared.

    Socialism is designed to benefit the masses, and not the bourgeois. Just as religion is the opiate of the masses, so is baseball for the American proletariat. The more we want, the more it costs. The more it costs, the more we spend. Its a one-way flow of resources, with only perceived value being return.

    And the perception of that value is what causes the wheels to turn. Nothing else.

    • LarryAtIIATMS

      ohhh boy. My biggest fear is that someone might post a comment who actually knew what he was talking about.

      Who is McCarthy?

      I don't have a clue as to which revenue streams are essential. I suppose that we need farms, though we certainly do not need farms to grow tobacco and my wife seems to be doing well without wheat. I can live without a car, I don't need indoor plumbing, and I could live without baseball too. I live in Hollywood and many of my neighbors would be out of work if not for television. Somehow even a sitcom pilot is economically essential.

      I won't even try to go into what portions of the economy benefit me personally.

      • Don't give me too much credit. I just read a lot of Russian literature.

        McCarthy is a reference to Joe McCarthy, but that's not comparing him to you. Its comparing him to Steinbrenner.

        Its a matter of needs vs wants. We need to eat, but we want to go to a restaurant, not grow it ourselves. We want baseball, but we don't need it,

        Baseball is a commodity, and it's packaged as that. Its a business and that's the debate. My complaint is that everyone always looks at it from the side of the producer of the commodity, and not the consumer.

        This is no different than rich factory owners complaining the price of materials for refrigerators cuts into their profit margin too much, so they raise the price of refrigerators, while forgetting the consumer is already having trouble buying them. The producers are complaining about how much money they are making while the consumer is left out of the discussion entirely.

        I'm done now. I have a headache.

        • LarryAtIIATMS

          TBI, thanks for clarifying. I did think you were comparing me to Joe McCarthy, but I thought you meant the Yankees manager in the 1930s and 40s and I took it as a compliment.

  3. carlsonjok

    I'm sure old Hank was more than happy with all the money New York City put out for various projects associated with the new stadium. That ain't socialism. No siree, Bob.

  4. jay_robertson

    It benefits me – I get to see a team I care about on MLB.com almost every night of the year – except for those days when the wanna be monopolist Murdoch has the Yankees on Fox, but my local affiliate decides to show the Royals instead.

    Larry – you just explained some things without meaning too – all of a sudden, I LIKE the fact that revenue sharing money is going to teams that don't use it or don't know how to use it. Look what happened when the Rays got money – the Yankees stayed home. Dang – the last thing I want is a level playing field. I wanna see the Bronx Globetrotters (I mean, Yankees) playing the Generals 100+ games a year. If a flawed sharing system guarantees that, hey – I might have to quit whining for teams to use their welfare money wisely.

    • Pleasure and need are not the same thing.

    • LarryAtIIATMS

      Jay, from the standpoint of my poor grasp of economics, I want to see revenue sharing utilized efficiently. Revenue sharing is supposed to buy us some competitive balance, and it has probably done so, but it's not doing so efficiently. As baseball fans, we're supposed to crave competition, and supposedly the higher the level of competition, the more we'll pay to watch the games.

      Actually, what I just said is not strictly speaking true. We want the home team to win, and we also want the outcome of the game to be in doubt (that way, we get the drama AND the happy ending). That means that we want the chances of a home team win to be greater than 50% and less than 100%. I've read studies that try to fix the percentage.

      Anyway … the Washington Generals thing is instructive. The Globetrotters pay 100% of the cost to keep the Generals in operation. The Yankees cannot afford to pay 100% of the cost of keeping the other 29 teams playing, so we need those teams to be sufficiently competitive to earn the vast majority of the revenue they need to stay in operation. If these teams are sufficiently competitive, and if a host of other factors all come together, then these teams will survive to provide the Yankees with competition. It's a cooperative enterprise.

      It also means that some of these teams will be competitive like the Rays, and ruin more than a few of our summer evenings. When they do this, remind yourself that it's all for the good. It may comfort you. It rarely comforts me.

      • In the short run, I'm a lot less worried about how revenue sharing funds are spent by recipients than I am about how the funds are transferred.

        • LarryAtIIATMS

          ??

          Check, money order, wire transfer? Halliburton suitcase?

  5. Frank S.

    The taxpayers of the city and state of New York built Hank and Hal a shiny new stadium. Is that socialism? (And don't say "the Yankees paid for it themselves"; that falacious argument was disproven long ago).

    • LarryAtIIATMS

      Frank, the taxpayers of the city and state of New York built Hank and Hal a good deal of infrastructure to serve the new Stadium — parks (to replace the parks that used to be where the new Stadium is located), garages and transportation improvements — at a substantial cost, around $450 million.

      But the taxpayers are not PAYING for the Stadium, they are subsidizing the cost of the Stadium, since the Stadium is being financed with tax-exempt bonds. The bondholders don't have to pay tax on the interest they received on these bonds, so the bond issuer was able to issue these bonds at a lower interest rate, and the Yankees (who DO pay the amounts owed to the bondholders) get to pay less than they'd otherwise have to pay. That's a big subsidy, but it IS a subsidy. Also, this particular subsidy is being extended by the taxpayers of the United States as well as those of the city and state (since interest on these bonds is exempt from federal taxes as well as State and City taxes).

      In exchange for these tax benefits, the City owns the new Stadium, sort of. The nature of the City's ownership of the Stadium could be the topic of a post of its own. The City would probably be better off if the Yankees owned Yankee Stadium and paid property taxes on the value of the Stadium to the City. Instead, the Yankees make PILOT payments (payments in lieu of taxes) in an amount that pays the debt service on the bonds.

      Enough. This was not intended to be a post on the modern economics of Stadium construction. Pretty much every ballpark built in the last 30 years was financed with a combination of private and taxpayer money. Is this socialism? Capitalism? I suppose it is a product of the exercise of political power, or greed, two qualities that seem to be present in most socio-political systems.

  6. LarryAtIIATMS

    Yep. Agreed. I'm working on a secret plan to reform revenue sharing, which I'll try to post here before Selig slaps a gag order on me. But hint: it's designed (at least in part) to reward success, not failure.

    • Ideally I'd like a relatively flat transfer based on market potential, market capture, and local revenues.

      • LarryAtIIATMS

        Well … I'm looking at something different, but you might like it anyway. You've actually had a pretty healthy influence on my plan, particularly the argument you've made about differences in market sizes. I think that a portion of revenue sharing should simply move from big markets to small markets, without looking at anything else. So under my plan, the Pirates are going to get a revenue sharing check every year, just because they're in Pittsburgh and we're in NY. I don't care what they do with this check.

        The other part of my plan is to use the remainder of revenue sharing to reward high-performing small market teams. So if you're a small market team like the Rays and you're a top performer on the field, you're going to get more money. The idea here is that this is the portion of revenue sharing that's about competitive balance. Rather than tell small market teams how to spend their money to become more competitive, let's instead reward the small market teams that ARE more competitive.

        There are still a few bugs in my system, but it's getting pretty close to ready for prime time.

        • Yeah, that sounds about right. You'd probably have to be pretty careful about how you structured the performance incentives though, or you might wind up with teams doing what the Marlins do and trying to keep the team perennially around .500, and might scare them away from the approach the Royals have taken. I'd probably try to add some sort of escalator for small market, mid-revenue teams who have pretty much maxed out their market potential too.

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