For the first time in years, this season’s January transfer window for European soccer clubs seemed to slip by without any big-name transfers or outrageous fees.
The result of this relatively inactive January period is that the upcoming summer transfer window will likely break spending records. If Paris Saint-Germain’s star forwards Kylian Mbappé and Neymar choose to leave the French, both could command fees around of £200 million. Similarly, Italian hegemon Juventus is rumored to be plotting a bid for Liverpool’s marquee center back Virgil van Dijk — who cost the Reds £75 million a few years ago. It’s a trade that could reach £150 million.
These astronomically high transfer fees are causing many soccer fans to call for increased financial regulation of clubs from groups like the Fédération International de Football Association (FIFA) and the Union of European Football Associations (UEFA). UEFA’s existing system, called Financial Fair Play, was introduced in the 2012-2013 season and set rules on European clubs barring them from spending more money than they took in in a season.
While this briefly curtailed spending and helped many clubs keep balanced budgets, revenue from sponsors and broadcasting companies has skyrocketed, increasing the amount of money going into clubs, and therefore increasing the amount of money they can spend on players. Ironically, the President of UEFA at the time, Michel Platini, has since been arrested on corruption charges and banned from soccer-related activities for life.
According to Forbes, European soccer clubs spent over $6 billion on players last summer, almost a billion dollars more than the previous year’s spending — roughly equal to the annual budget for the entire state of Vermont.
The exorbitant amounts of money spent in European soccer should sound familiar to American sports fans, who have watched as recent US sports contracts have gotten increasingly out of hand.
Just last year, Los Angeles Angels outfielder Mike Trout signed a 12-year contract worth $430 million, which became the richest contract in North American sports history, beating out Philadelphia Phillies outfielder Bryce Harper’s 13-year/$330 million contract signed a few months earlier. Small-market baseball teams face consistent player economics dilemmas; as player-team loyalty decreases in the Moneyball age, they must trade away their star players or risk losing them to richer teams with no returns.
Both baseball and the European soccer leagues lack a salary cap, which has helped the National Football League, the National Hockey League and the National Basketball Association limit spending on individual contracts. Beyond curbing spending, proponents also claim that salary caps create parity, preventing teams with richer owners from outspending their less wealthy counterparts.
But while American sports leagues are contained in the U.S. and Canada, European soccer takes place in so many countries that setting one salary cap across all leagues would be impossible. Creating different tiers of a salary cap based on the country of the league would then make it undesirable to play at top clubs in countries like Portugal, when a player could make more money at a bad club in England or Germany.
Similarly, while a salary cap would certainly help to prevent European clubs from operating at extreme deficits, the money problem in soccer has less to do with wages paid to players by clubs and more with transfer fees between clubs themselves.
To put it in economic terms, the European soccer transfer market is a laissez-faire capitalist system that Milton Freedman could have only dreamed of. No price controls, no spending limits and barely any legitimate regulation.
Although the term “trickle-down” isn’t used, large clubs defend their profligate spending by arguing that it benefits the smaller clubs from whom they buy their players. If Manchester United wants to pay Leicester an unseemly £80 million for center back Harry Maguire, then Leicester can make an enormous profit and use that money to buy itself new players from other clubs.
Yet much like actual trickle-down economics, this system is doomed to fail. With every passing transfer market the inequality between small clubs and big clubs grows, and now the only real way for small teams to make it big is for a Chinese or Russian oligarch to decide to invest billions in them.
With the spectre of the 2022 World Cup in Qatar — whose bid was mired in credible and claims of corruption and bribery — looming over the sport, soccer needs to find a fix to the madness of the transfer market. UEFA and FIFA need to figure out how to cap transfer fees and reduce the inequality between large clubs and small ones, otherwise the oil-money-soaked cracks in the beautiful game might ruin it forever.