Why is it that professional soccer in socialistic Europe is capitalistic, while in the U.S. all major league sports are monopolistic and socialistic?

In America, there are salary caps, parity for losing teams and revenue sharing. In Europe, there are few salary cap rules. Sports teams are punished for losing by being sent down to the minors – the entire team – where revenues are drastically cut. Great teams in the lower leagues can move up to the majors with higher revenues.

Why do we Americans, who bridle at the “evils of socialism,” permit our major league sports to protect the weak and the failures? It does not seem to make any sense.

Derek Thompson, in the June 16, 2016, “Atlantic Monthly” article entitled, “Why American Sports Are Socialist,” answers these intriguing questions.

The answer comes down to supply and demand.

The answer can be traced to Europe’s soccer history. English soccer began to grow rapidly in the 19th century. Hundreds of English and Welsh soccer clubs came into existence. Owners, players, and fans all came to realize the helter-skelter scheduling had to be improved upon. In 1888 a dozen teams were formed into England’s first football league. In its original rules the worst teams had to “reapply” to retain their position since there were literally hundreds of teams eager to take their place.

As the league grew, divisions were created to accommodate more teams. The custom continued and became standard operating procedure; losing teams were relegated to lower leagues and the winning, lower-level clubs could advance to the Premier League. If there was no “churn” the lower-level clubs would ossify and fans would either lose interest or revolt.

In the U.S. we have a variety of sports with a limited number of talented players: baseball, football, soccer, basketball and hockey. This created a different problem than what beset the British. There are only 32 teams in the National Football League and 30 in Major League Baseball. In America, if a team is bad for an extended period of time, the team might move to another city – a form of relegation. The Seattle Mariners would not be demoted to the minors, for instance.

In American sports history, there have been several competing leagues. In football, there used to be the National Football League and the American Football League. These two competing organizations combined in 1970 into the NFL to avoid having the leagues outbid each other for prime players, thus raising costs. The same thing happened in basketball when the Basketball Association of America merged with the National Basketball League in the late 1940s. creating the NBA.

The challenge these monopolistic leagues face poses a different dilemma than their British counterparts. The American league owners solved their problem through parity drafts, salary caps and revenue sharing. If a team does poorly one year, they get first chances to improve by picking the top athletes in the yearly drafts. This socialistic approach tends to keep all the teams competitive and maintain fan interest.

Both the European and American leagues have a common concern: what to do with losing teams? In the U.S., individual players can be relegated to the minors in baseball, or can advance to the majors, but not entire teams. In football, players can end up on the practice squads, which play the same role as the minor league teams in baseball.

What insights can we gain about American and European cultures from studying their sports leagues? First, supply and demand shaped how each sport solved its economic dilemma. The Europeans chose raw, competitive capitalism because there were thousands of competing soccer teams while the Americans, with a plethora of competing sports, chose to create monopolies to cut competition and raise profits for owners.

In Europe, governments chose to set up welfare states to protect those who could not compete in order to avoid revolutions, but could afford to allow for competition in soccer because the stakes were lower and there was only one major sport.

In America, we chose a different solution because there was less chance of revolution due to our history and governmental system. In this country, conservatives resist socialism for the masses, but provide it to benefit a smaller number of owners and players in major league sports. The elites in this country are the ones who decide which systems we will use, whether it is our form of government or our major leagues. If it benefits them, then that system will be used.

Consider this paradox the next time you hear conservatives berating socialism as a great evil.