The NFL and the Economy

In a thought provoking Op-Ed piece in the New York Times[1] about the ending of the recent NFL referee lockout, Roger Martin from the School of Management at the University of Toronto made the argument that the NFL lockout situation is a metaphor for our modern economic system.

Martin argues that argues that the referee lockout demonstrates that the modern economy is no longer a war between capital and labor as Karl Marx supposed a century ago. 

Marx bifurcated the economic system into capital and labor. Capital provides the means of production. Labor turns invested capital into profits.

Karl Marx

According to Martin, capital has now finally demolished labor, and that battle is over.  When unions became important enough to threaten capital, capital fought back fiercely.  First, capital moved factories to areas where unions could not get a foothold (the sunbelt) and then offshore to Mexico and China.  Labor is almost irrelevant now except in some service industries that cannot easily use foreign labor and in government (i.e. the service unions and public employees unions like schools, police, firemen, etc.)  Even there, its back is gradually being broken. The air traffic controllers strike was an early example. The battles earlier this year in Wisconsin and Chicago, as well as the public employee layoffs and contract re-negotiations in cities and towns across the nation, demonstrate the current desperate situation labor now finds itself in.  Even Democratic mayors are attacking teacher’s unions.

Now, says Martin, having largely defeated labor, the real economic battle now for capital is a struggle against talent, and that is why income in equality is increasing so dramatically. Labor has almost no slice of the pie.

Talent first began to threaten capital in Hollywood. Actors realized they could demand bigger and bigger slices of the pie. Then the same thing happened in professional sports. 

Talent is not fungible in the way that the janitors at the NFL stadiums are.  A talented movie actor is not fungible. The key NFL players are not fungible.  A talented quarterback cannot be locked out and replaced with any old football player standing around in the unemployment lines.  The contest between capital and talent is usually now won by talent.

Wall Street traders, ever watchful of where the money goes,  took note of the huge wins by talent in entertainment and professional sports and argued that they too were just like big sports stars.  People who rose to the top (or got lucky with a big bet) in financial services demanded whatever they could get.  Outrageous pay packages were the result.

In the case of businesses other than sports, executives needed to convince the owners (capital) that they are irreplaceable talent as opposed to replaceable cogs in the machine.  Frequently, the owners are suckered into believing them, or in the case of corporate boards, they are often in on the scam.  Hence, the obscene CEO pay packages in large corporations.

All too frequently the so-called executive talent is a lot like roger Clemens and Lance Armstrong, fakes and cheaters. Bernie Madoff was considered one of the most talented investors on Wall Street.  He pulled the wool over the eyes of thousands of savvy money managers for years. Lance Armstrong was the same kind of talent.

Modern corporate pay packages take capital (the shareholders and investors) to the cleaners.  Ever wonder why the stocks and mutual funds in your IRA account are not paying off much these days? Ask the CEOs of the corporations your IRA is invested in. These guys consider themselves irreplaceable talent like Drew Brees, entitled to pocket the lion’s share of corporate profits, starving capital.  If there are no profits, they still take home a huge chunk of money by taking out ever larger corporate debt to cover their ballooning salaries, further impoverishing investors (capital).

Martin argues that the NFL referees, like the players, are skilled talent that cannot be replaced by any old person with a striped shirt. Thus, the refs won the battle against capital. The capitalist owners mistook them for labor, easily defeated, and did not realize that they were actually talent, not so easy to crush.

The referee lockout does explain some things about our system, but not the way Martin thinks. There is another way to look at the NFL lookout that explains something even more important about our modern economic system than the struggle for money between talent and capital.

NFL referees are not talent.  They are not like play-making quarterbacks.  They are not like box office film actors that can make or break a film. With enough training and experience, all the refs could be replaced, even with foreign labor.  The refs are no more talented than the skilled and experienced air traffic controllers replaced by Ronald Reagan.

The referees are basically policemen, regulators, and judges.  In other words: government.

Without talented referees in a football game who know what they are doing, everyone starts cheating and the entire game goes to Hell. This is what happened to the NFL, culminating in the game between Green Bay and Seattle in which unskilled referees awarded the victory to the losing team.

The same thing happens in the American economic system as a whole.  When government is impoverished and disrespected, even hated, it begins to attract a class of people who don’t know what they are doing and don’t much care. They don’t get paid the big bucks and they don’t get no respect-- so why bother? When that happens, everyone in the economic game starts lying, cheating, and stealing. Sometimes on a huge scale. Think Enron, AIG, Lehman Brothers, Countrywide Finance. This list is a long one.

We now think it is a good idea to elect people to run the government who have no experience in government , who don’t believe in government, who don’t believe in rules, and who think the game should be played without referees.

The free market works better without rules and regulations, they say.

Try that in the NFL.

The new Tea Party congressmen hate government and want business to have free rein, unconstrained by burdensome rules and regulations that keep people from ripping off other people and making a complete pig sty out of the entire playing field.  A recent Presidential candidate (Rick Perry) admitted that he does not even know the name of some of the government regulatory agencies he wants to eliminate.

Next time you decide to put someone in government who hates government and wants to get rid of all the rules, so we can have a free market, think about the gigantic mess the NFL got itself in without good referees.

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[1] The article was published in the Times on 9/29/2012.