Editor’s note: Rhys Lenarduzzi recently
completed a Bachelor of Law (LL.B) and Bachelor of Philosophy (B.Phil.) at the
University of Notre Dame, Sydney, Australia. As a former professional athlete,
then international sports agent and consultant, Rhys is interested in
international sports law, policy and ethics. He is currently undertaking an
internship at the T.M.C. Asser Institute with a focus on Transnational Sports
Law.
As one may have gathered from the series
thus far, the question that comes out of this endeavour for me, is whether
redistribution in football would be better divorced from the transfer system?
In my introductory
blog I point towards historical,
cultural, and of course the legal explanations as to why redistribution was
established, and why it might be held onto despite obvious flaws. In my second
blog, I point out how the training
compensation and solidarity mechanisms work in practice through an African case
study, as well as the hindrance caused and the Eurocentricity of the
regulations. The key take-away from my third
blog on the non-application of training
compensation in women’s football might be that training compensation should
apply to both men’s and women’s football, or neither. The sweeping
generalisation that men’s and women’s football are different as justification for
the non-application to the women’s game is not palatable, given inter alia
the difference between the richest and poorest clubs in men’s football. Nor is
it palatable that the training compensation mechanism is justified in men’s
football to incentivise training, yet not in women’s football.
In the fourth
blog of this series, I raise concerns that
the establishment of the Clearing House prolongs the arrival of a preferable
alternative system. The feature of this final blog is to consider alternatives
to the current systems. This endeavour is manifestly two-fold; firstly, are
there alternatives? Secondly, are they better?
1. Is training compensation
necessary to incentivise training?
It might be the case that this question
does not receive adequate attention. Though we are told there exists a need to
incentivise training and the system as it stands is justified by this notion,
is that truly what the redistributive mechanisms in the current form achieve?
Furthermore, for all the flaws in reasoning and hindrance created by the mechanisms,
is it really worth it?
During my time as an agent, I have
personally never heard from a director or executive of a football club, the
words or sentiment that, time - effort - money placed towards their youth
football programs is done so solely, predominantly, or at all in anticipation
of training compensation or solidarity payments. Nor have I ever come across the sentiment
from within any club, that a club would not care for or abandon its youth
programs without the ‘dangling carrot’ of potential compensation. FIFA now
refer to the redistributive mechanisms as ‘training rewards’, though one may
reasonably struggle to connect these training rewards with a true definition of
incentive. It appears more likely to be the case that any desire or expectation
to be rewarded or compensated is an after the fact conclusion, when a player
progresses professionally and a training club concludes that they are part of
the reason for that players’ success. In a macro sense, given how infrequent it
is for a training club to develop a professional, this seems to add weight to
an argument that compensation does not create the purported incentive, or at
least that clubs do not rely on the prospect. It is because of this that I tend to lean
towards the view that the incentivisation to train youth as a justification for
redistributive measures may not have aged well. In any event, it would be
interesting to test that intuition derived from experience, through a proper
social scientific survey of clubs. Systems with such far-reaching implications
should be grounded in a proper study of the socio-economic drivers of the
training of football players.
On the other hand, the possibility of
attracting large and exciting transfer fees is often spoken about within club
walls. For these ‘selling clubs’ with a
clear intention to invest in youth and capitalise later in the form of transfer
fees, such fees may be seen as compensation of sorts, but more likely as a
remuneration for a deliberate though hardly risk-free investment. Moreover,
these clubs do not simply abandon their first team and focus on youth and
potential transfers exclusively. First team squads are also the beneficiary of
strong youth systems and commonly the main reason a club invests in youth.
Additionally, clubs can have a strong connection to their communities and see a
combined duty and benefit of having strong youth programs. Clubs not only play
a role in sustaining the social fabric of the communities to which they are
situated, but benefit commercially through the many ways in which fans add
value.
If it is true that compensation does not
amount to incentivisation, then it is difficult to conclude that it is
necessary. However, even if training compensation and the solidarity mechanism are
not deemed necessary, a strong case can still be made for redistribution so
long as the gap between wealthy and poor clubs remains or grows, and entire
continents continue to be nurseries and the source of the muscle drain.
2. Imagining Alternative Redistributive
Mechanisms
Proposing an alternative to the existing
FIFA systems of redistribution is a difficult task. I have raised the concern
of the Eurocentricity of the current regulations, and in proposing something
else, one must be mindful that these are global regulations. If one suggests a
form of taxation or tariff to redistribute, awareness of the myriad cultural
differences on taxation and the multiplicity of enforcement contexts might be
important. Also, whilst I have raised the question on whether compensation
ought to be divorced from the transfer system, reasons for redistributing at
all should be axiomatically better than not having a system of redistribution.
Intent and what is to be achieved needs to
be clear. Is the ideal system of redistribution in place to reward ‘something’
or should redistribution be directed more deliberately and where it is needed,
acting as welfare of a kind? I have already suggested that compensation does
not incentivise clubs, though conversely, might clubs be disincentivised to
grow if they only remain the beneficiaries of redistribution insofar as they
stay sufficiently small and poor, whatever that threshold might be? Or could a
system still incentivise growth, with clubs the beneficiaries of an amount that
would not be enough to sustain themselves in full, yet enough to help them to
continue to grow and commercialise? Whether greater commercialisation is a
desirable change is another worthwhile question.
Despite the difficulties in suggesting an
alternative, one can hope that a system of redistribution can be
non-discriminative, does not create the hindrance effect to the current extent
or encourage risky circumvention of the regulations (see
blog 2 for detail), and is able to attain
its legitimate aims. I would submit that the current systems do not tick these
boxes. In this section, I provide some food for thought regarding potential
alternatives, though I must caveat that I am not an economist and have not yet
settled on an alternative myself.
a) Coubertobin
Tax
I will begin this section by introducing Andreff’s
Coubertobin tax, in the interest of
highlighting that others have thought about alternative systems of
redistribution and have perhaps proposed alternatives that are arguably better
than the current systems. Whilst I hope to present the Coubertobin tax
adequately, one will need to read Andreff for the full picture. Though valuable food for thought, I do not
endorse the Coubertobin tax per se, as it has its flaws and remains connected
to the transfer system, albeit to a lesser extent.
Inspired by a mix of the economic thought
of James Tobin and Pierre de Coubertin, the idea of a Coubertobin tax “is to
levy a tax at a 1 % rate on all transfer fees and initial wages agreed on in
each labour contract signed by athletes and players from developing countries
with foreign partners.”[1]
The objectives are as follows:
- slightly covering the
education and training cost, for his/her home developing country, of any
athlete or player transferred abroad;
- providing a stronger
disincentive to transfer an athlete or a player from a developing country, the
younger he/she is when the transfer takes place;
- thus, slowing down the
muscle drain from developing countries and toward professional player markets
in developed countries; and
- accruing revenues to a
fund for sports development in the home developing country from the tax levied
on every athlete or player transfer abroad.[2]
There is little wonder why Andreff desires
to redistribute to developing countries. He has done extensive work on the
correlation between economic prosperity and sporting success. This list is by
no means exhaustive, but for instance, he writes
extensively on the muscle drain, where athletes from developing nations move
for financial and developmental reasons, which creates a myriad of follow-on
issues to the home-country. He identifies
the toll poverty takes on a developing country’s domestic leagues and
competitions due to the muscle drain and the inability to train professionals
to a world class standard. He notes
that some athletes defect to other nations early and qualify for the adopted
country’s national team. Per Andreff and in summary “the overall context of
sport underdevelopment does not provide a strong incentive for talented players
to stay in their home country even if a professional championship does exist
there.”[3]
Andreff’s proposal is not set in stone and
an admirable element to his work on the matter is the consistent offering of
caveats that suggest, with more study and/or work, a certain piece of the
Coubertobin system may benefit from amendment. Andreff describes his system as
“a solution (not a panacea) which is likely to alleviate, along with some of
the financial problems of developing countries, the aforementioned problem of
the muscle drain.”[4]
Most relevant is perhaps the idea that, the younger the player is in question
regarding a transfer, the higher the tax (see
suggested formulae).[5]
This he submits, may put a brake on the muscle drain at such early ages, or
result in greater amounts of money moved to developing nations if a club wishes
to recruit a player at a significantly young age.
Andreff acknowledges hindrances, though
takes a macro view that encompasses protecting minors, as well as strengthening
local leagues in developing countries given the talent will remain for longer
periods. One can envisage an additional positive result, in having young
athletes finish non-football education having stayed at home until a later
date.
Though this is my interpretation, I
suspect Andreff finds it an easy task to identify the beneficiaries or winners
of these transactions and therefore those parties should be the ones who pay
the Coubertobin tax, on “the bill for the transfer fee and the first year
wage”.[6]
Andreff raises the concern of “bargaining
and corruption surrounding the tax collection in developing countries”,[7]
though offers a plausible solution. “[T]he collection of the Coubertobin tax
should be monitored and supervised by an international organization, either an
existing one (UNDP or the World Bank) or an ad hoc one to be created.”[8] This
is plausible as it is not so different to the way FIFA intends to outsource the
operation of the Clearing House to a suitable and reputable organisation that
would be subject to audit (see
blog 4).
Andreff admits the tax “would meet with both
hindrance and resistance”,[9] it
would “not be easy to implement and enforce insofar as it has to be accepted on
a worldwide basis”,[10]
the system would contain administrative costs that would need sorting and
ironing out, and there would need to be a method for disputes and perhaps fines
for non-compliance. Even so, the
Coubertobin tax provides much food for thought as it is proposed for all
professional sport and not just football. It attempts to address the muscle
drain and the taxes proposed may prove less a hindrance than the current FIFA
systems.
b) Abolishment
and Free Market Economics
If this was day one of football, there
might be a strong argument for a free market approach, with emphasis on club
management to make sure intelligent decisions are made to sustain clubs, with
wealth the responsibility of the clubs themselves. However, we are not at the
beginning of football. Certain clubs in
certain regions are the victims of much more than mismanagement, adding weight
to an argument for a need to redistribute equitably.
As it stands, an equitable system or one
where redistribution is directed to where it is most needed, is not in place
and has not been proposed. Could it be the case, at least in the interim, that
the free market is the best and fairest? The current systems appear at least
somewhat a case of over-regulation with side effects that were not, or could
not have been anticipated, like the hindrance effect and the pressures on
vulnerable clubs to waive compensation to name just a couple. It then seems defensible to abolish systems
that do not work in the interim, than to hang on to those flawed systems until
a better proposal is put forth. Instead, all efforts could be placed into study
and research to remedy the obvious flaws.
Conversely, the free market in modern
football would not appear to improve the situation for the kind of club I have
identified frequently throughout this series, and although it may eliminate the
hindrance effect, destination clubs would have their pick of players and poor
clubs would undoubtedly lose all talent. Furthermore, if a system of
redistribution was to be created that clearly improved football and the
free-market approach had been adopted in the interim, a valid consideration
might be the difficulty the relevant bodies would have in re-introducing a
system of redistribution, having gone back to the free market for a
period. It is for these reasons that I
can not endorse such an approach, however sympathetic I am to abolishment and
the idea of alleviating hindrance and promoting free movement.
c) FIFA
Funded Solidarity: A New Model
As he addressed the Confederation of
African Football’s (CAF) 42nd ordinary general assembly, FIFA President Gianni
Infantino said, “I
believe in Africa. I count on Africa, and you can count on me to help you to
bring Africa to the top.” However admirable
and applaudable are the purported goals of FIFA for Africa, and the sentiment
warm, one cannot help but wonder if this African project, relevant to this blog
series, could not be expedited by a substantial FIFA based investment.
Infantino went on to say, “I
want to see at least 50 national teams and 50 clubs from all over the world that
can compete for the title of world champions with realistic chances of winning.
And why shouldn’t Africa be at the top, with the incredible talent that we see
shining every week, mainly in Europe’s top clubs? I am convinced it’s only a
matter of commitment, work and engagement by all of us together.”
To answer the President’s question, one
cannot see African clubs on top in a global sense, so long as all the best
African players play, as the President said, in Europe. Further, we will
continue to be less likely to see an African national team win a World Cup, whilst
some of the best African players play for other nations to which they moved
when they were younger, and whilst African federations are unable to organise
like European federations, given they do not have the same resources. I could of course go on, but one likely
gathers my point.
So, could FIFA make an investment
sufficient to prop up Africa as it supposedly desires? Perhaps. How about an
amount equal to the frequently referred gap between what is owed and paid when
it comes to the redistributive mechanisms of FIFA? Could FIFA at least cover
that gap? If one considers the annual financial reports, certainly, and
probably further and in a more specific and deliberate fashion. Surely direct,
targeted investment is preferable to leaving redistribution to the whim of a club’s
good fortune to have registered a player that would go on to be a professional.
That is, of course, if that player’s club did not have to waive training
compensation to render a transfer possible.
The FIFA
Forward Development Programme is
described by FIFA as “global football development and the way we share the
success of the FIFA World Cup”. It is an encouraging and frankly exciting
initiative, and again one must applaud the efforts. Under the Infantino
administration, FIFA has pledged more funding in this way than ever before. “On
13 June 2018, the FIFA Congress decided to increase investment in the FIFA
Forward Development Programme still further for the next cycle of 2019-2022
with a 20% increase in the annual entitlement for each of the 211 member
associations and six confederations.”
Anyone can go to the webpage for the FIFA
Forward Programme, roll their cursor over the interactive
map and see that FIFA are investing money in
places of need. Disappointingly, not overly specific information is provided
regarding the exact use of funding, though there are encouraging articles
that unpack some of the investments and initiatives and these efforts should be
commended (the FIFA Foundation Community Programme is another example of some
of the encouraging work being done). One
element that is interesting and appealing within these funding programs, is the
toying with an application process to be granted some form of investment. This perhaps
shows an increased awareness that money ought to be distributed specifically
and deliberately, to address a genuine need. Though not a trial per se, this
kind of process could be used as one and may turn out to be preferable to clubs
in need, who would for instance prefer to bypass the national association if
that relationship is not so sturdy.
At first glance, the almost even
allocation of investment per member association found in Circular
no. 1659 - FIFA Forward Development Programme
– regulations (FIFA Forward 2.0) may seem equitable, though taking into account
that some of the wealthier associations may be the beneficiaries of the systemic
exploitation and drain that has featured in this blog series, might render the
near even distribution questionable. Whilst “an additional amount of up to USD
1,000,000 is available for member associations with an annual revenue of USD 4
million or less”, one might reasonably wonder if that amount of extra funding
to smaller and/or poorer associations is sufficient to affect real change.
Whilst I hope I have made clear that
FIFA’s efforts ought to be commended, the overarching theme of this section is
to consider if more could be done and if so, might those extra efforts to
distribute funds be preferable and able to replace the current systems of
redistribution connected to the transfer system. I do not find impressive the
self-congratulatory theme of the statement from Alejandro Domínguez, Chairman
of the FIFA Finance Committee, of being hundreds of millions of dollars under
budget in the 2019 annual report, as well as possessing “sufficient liquidity”.
FIFA, a not-for-profit organisation, was delighted to report that “at
the 2019 year-end, total assets had increased to USD 4,504 million (four
billion, five hundred and four million), chiefly made up of cash and financial
assets (82%). Reserves also remained at a very satisfactory level at
USD 2,586 million (two billion, five hundred and eighty-six million),
clearly above the amount budgeted.”[11]
Proposing FIFA fund more redistribution is
not a risk free, nor a concern free proposition, but it does appear the idea could
be taken more seriously by the relevant stakeholders. FIFA’s predominate money
maker is the FIFA World Cup, which is in a sense, a way of using the produce of
the richest clubs in the world, which have in turn benefitted from some of the
poorest clubs nursing the players until they are of age. FIFA, filling the
frequently mentioned gap from the profits of the World Cup makes as much sense
as any proposal. Is this not simply a case of, if more can be done then more
should be done? Going off FIFA’s reports, it has the resources.
Within this potential alternative, where
FIFA are responsible for raising and redistributing funding that would
otherwise supposedly come from the current redistribution systems, is a change
to the modality of redistribution. From what is currently intimately connected
to training and transfers, this alternative provides for the much-needed decoupling,
not only based on the philosophical flaws, but additionally due to the
preferable practical implications that divorcing redistribution, training and
the transfer market could achieve. In terms of a body or mechanism to implement
an alternative like this, how might a Clearing House kind of project unfold,
that adopts a specific and deliberate ethos to distributing FIFA funds? To
expand, following a substantial process of planning and allocation of adequate
resources, the creation of a specific arm dedicated to researching and
identifying those areas of football most in need, as well as receiving and
vetting applications for funding. Might that or a similar solution be
achievable? It could be in-house or outsourced the same way the Clearing House is
intended to be, geared to make suggestions, provide expert economic advice and
proposals, reporting its findings back to FIFA for an extra layer of approval.
Food for thought in any case.
3. Concluding Remarks
There is a core of wealth in football that
has benefitted from, been propped up by, and drained the periphery. It is
important to ensure the strength and survival of football outside this core of wealth
and to actively make sure value is added to the periphery. Football needs to
promote this notion and in doing so ask the question, where will the big clubs turn
for talent and youth if those reservoirs which they drain are emptied and
unable to continue to produce talent?
If one is convinced that it is not
necessary to incentivise training, that the current regulations have
significant negative effects, that any system of redistribution should be
non-discriminative, provide minimal hindrance to free movement and pursue
deliberate legitimate aims, then one is in favour of overhaul. Further then,
surely there is an obligation to address what can be in the immediate sense.
Namely, to either default to the free market, until a convincing system of
redistribution is created, or perhaps preferably, for FIFA to take the reins
and fund redistribution to the periphery of football to a greater extent.