The Sad State Of Baseball Economics

http://zkonedog.mlblogs.com/2009/11/24/the-sad-state-of-baseball-economics/

The Sad State Of Baseball Economics

After watching my beloved Minnesota Twins got stomped by the New York Yankees in the first round of the playoffs this past season, and then seeing Cleveland-bred C.C. Sabathia and Cliff Lee pitch the Yanks and Phillies into the World Series, I believe that now is the time for me to comment on the sad economic state of baseball these days. This has always been a very hot-button topic for me (as I root for the small-market Twins), so I would like to take a few moments to explain why the current system is broken and what can be done to fix it:
Basically, the problem started way back in the 1900s, when both the American and National Leagues were first established.
Instead of free agency, there was something called the reserve clause, which was essentially a legal precedent that baseball used to keep players on one team until their owner decided differently. The players were treated not too much different from a cattle-range steer, to be bought and sold as commodities. It wasn’t, by any means, the greatest system in the world (as the only option a player had to fight against an unfair salary, which were very common in those days when most owners made Carl Pohlad look like the Monopoly Guy, was to quit playing altogether), but it did help the competitive balance of the game, allowing all teams (if managed/owned sensibly) to have a shot at competing for a championship.
That all changed in the 1970s when Curt Flood of the St. Louis Cardinals challenged the reserve clause all the way to the Supreme Court.

Though Flood didn’t actually win his case, he shed so much light on the matter that a free agency sytem was quickly established by MLB. During the 1980s, the system actually worked like it was supposed to…players had better rights, AND the game was still competitive. But, starting in the mid-1990s, salaries began exploding (along with the economy) and suddenly the system was skewered. Teams in huge economic markets like New York, Los Angeles, and Boston were able to throw huge wads of cash in the pockets of all the top free agents, all but assuring there services. Sometimes, in the case of Ted Turner’s Atlanta Braves, all it took was an incredibly rich owner to give a team a distinct advantage.
Those big markets had (and continue to have) such an advantage for a few different reasons: First and foremost is the fact that, just by sheer geography, a team like the Yankees can much more easily fill their ballpark every night than, say, the Twins can out here in Minny. Also, teams on both coasts have established their own TV networks (YES Network for the Yankees and NESN for the Red Sox), which bring in enormous profits compared to what the Twins get from Fox Sports North.
After about ten years of this broken system, when the same teams started making the playoffs year in and year out, MLB Commissioner Bud Selig established the “luxury tax” system into the game. Essentially, this is known as the Robin Hood system, as it robs from the rich to give to the poor.

This has helped a little bit (e.g. the Twins signed Justin Morneau to a long-term deal and have at least a shot at doing the same with Joe Mauer), but it din’t get to the root of the problem, as teams like the Yankees, Red Sox, Angels, and Mets can continue to reach into their deep pockets to get the best players. Essentially, they are saying “luxury tax be damned” and just paying the fine for going over the payroll limit. This is evidenced very toughly for Twins fans by these two photos:

The Twins gave very decent offers to both Torii Hunter and Johan Santana, but couldn’t come close to matching the amount of years the Halos offered Hunter or the sheer dollar amount the Mets dangled in front of Santana. Another obvious example was the beginning of this season, when the Yankees went out and got C.C. Sabathia and A.J. Burnett, while the biggest moves the Twins made was signing Nick Punto, bringing in R.A. Dickey (what a joke) and getting a Joe Crede whose back was so bad that he essentially a non-factor. Those “moves” were all we could afford. Imagine how different the 2009 ALDS might have been if Hunter had been patrolling the outfield instead of Delmon Young, or if Santana had made the Game One start instead of Brian Duensing.
Now, to be fair, there are some criticisms of instituting a salary cap into MLB, but I would like to give my rebuttal to two of them:
1. Why should the Yankees be penalized for running an efficent system? It seems as if Yankee fans could just criticize Carl Pohlad for being a tightwad all those years and not spending money to improve his team, but that really isn’t a fair criticism. First of all, George Steinbrenner isn’t really spending much (if any) of his OWN MONEY on the Yankees, instead relying on seemingly endless revenue streams based on his sheer geography. Without those streams, other owners (like the Pohlad family) would be dipping into their own personal reserves, which would be like you paying for your office supplies/furnishings or me paying for Wal-Mart shelf labels.
Secondly, then, is that if teams know they can’t spend with the Yankees, then why even try? The Twins know that, under the current economic system, they are already beaten in trying to sign free agents, so instead we save our money to try and lock up as many of our good players as possible (which, in this age of inflated salaries, is fewer and fewer each season).
2. The second criticism of the the salary cap is that it really isn’t needed, due to the fact that the 1998-2000 championship run of the Yankees was accomplished primarily with home-grown players like Derek Jeter, Jorge Posade, Andy Pettitte, and Mariano Rivera.

That may be true, but funny how those great players STILL WEAR YANKEE PINSTRIPES! Instead of losing those great players to a higher bidder, the Yanks can just keep them. Plus, whether the free agents work out (Jimmy Key, Paul O’Neill, Johnny Damon, Sabathia, etc.) or flop (Kevin Brown, Chuck Knoblauch, Carl Pavano), the Yanks can just “pay through” and be done with it. If the Twins make a mistake in signing the wrong player to an expensive contract, it would hamper the organization for a decade.
Thus, until MLB institutes a salary cap like the NFL and NBA (to a certain extent) have in place, the economics of the game will remain skewered towards the large markets, and that severely troubles me. I consider baseball to be my favorite sport, the one that captivated me as a child and still does to this day, but right now the NFL is gaining ground and fast due to the fact that in the NFL setup, all teams have a chance to be competitive. It is only through bad ownership (Al Davis, Matt Millen, etc.) that teams completely fail.
I know that this situation isn’t likely to change anytime soon, but that doesn’t mean that it is right or correct. Until Bud Selig can take charge of the National Pastime like he should and not just cater to the owners, the Yankees will continue to unfairly dominate the Twins for years and years to come.