What German Football Has Done Right

Published: July 13, 2014 18:31 IST
(Anush Kapadia is a lecturer on political economy at City University in London)

The rise of German football is popularly seen as the inevitable result of the brutally-efficient Teutonic machine doing what it does best. Not only is this racial typing harmful in all kinds of ways, it is, like most typing, simply wrong.

The resurrection of German football over the last 15 years can be ascribed to a deliberate organizational effort that bears all the hallmarks of the variety of capitalism the Germans have crafted for themselves in the post-war period.

This slow-burn, coordinated form of capitalism is cultivated by an institutional matrix that prioritises long-term improvements in efficiency and productivity with gains shared broadly across society.

By profoundly illustrating the globally-competitive success of its brand of capitalism, the German economy, including its football economy, ought to open up our imaginations here in the developing world.

Consider the key organizational elements of the Bundesliga, the German Football  Federation. First and foremost, all the member clubs have to be majority owned by the local members themselves (with exceptions of company teams Wolfsburg and Bayer Leverkusen). This 51 percent rule is itself a relatively recent phenomena, down from 100 percent fan ownership in the early 1990s.

While clubs can raise capital through ownership dilution up to 49 percent, control remains with the local community. This results in clubs that are financially smaller on average than bloated behemoths in England and the Continent and thus less unable to splurge on the top-shelf talent.

Further, league rules strictly control the amount of borrowing a club can undertake per season. For much of the last decade, this financial rectitude was thought to keep German clubs too small to compete for Europe's top club prize, the Champions League. The recent success of German clubs at the European level (the 2013 final was contested between two German clubs at London's Wembley stadium) and of course the ridiculous consistency of the national team belies these doubts. How has this worked?

After an embarrassing defeat at the 2000 European championships, German football authorities decided that it was time for a radical overhaul. Machinic and dull play was to be replaced by learning from the Spanish and Dutch styles. To execute this vision, a new system of grassroots academies was installed. Every club had to perforce establish a youth academy to bring talent through. Financial constraints lead to a focus on cheaper local talent, with the result that till today, 60 percent of the players in the Bundesliga are German as opposed to the English Premier League which sports 40 percent local content.

With a fund for struggling clubs and a federation-sponsored network of academies staffed by the largest complement of UEFA-licensed coaches in Europe, the Germans were clearly organizing a domestic league with the national team at its apex.

The federation, the institutional element that coordinates all these moving parts, is a prestigious organization offering respectable jobs, not the sour schoolmarm that is the English FA. The adversarial relationship between the FA and the more glamorous clubs is replaced in Germany by a cooperative relationship where the German federation takes on many of the clubs' functions, especially training academies, and prevents a dilution of popular rules like member ownership.

At the critical grassroots, the academies have a structure that maximizes the chance of discovering talent. By having coaches who also have some teaching background, the academies manage to build in substantial teaching time into their schedule. Given that 80 percent of the 16 to 19 year olds will not make professional grade, this heavy educational component reduces the trade-off between sport and regular education, thereby widening the pool of applicants and maximising the chances of discovering talent.

The spread of talent and finance means that competition in the German league is real and deep; its not the same handful of teams at the top every season. With deeper competition operating on a closely-trained local talent pool augmented by immigration, standards improved as their youth teams progressed. Fan-controlled clubs also kept ticket prices modest so that a broad swathe of society can participate in the games.

By controlling the ownership and finances of the clubs, creating a deep pool of local talent, and ensuring real domestic competition, the German domestic league created an engine for high productivity achieved with high degrees of equity. Barring the voracious Bayern Munich, German clubs build talent rather than buy it. This is both economical and more successful competitively: return on equity and debt sustainability measures are the most robust in Europe. In this, German football mirrors German capitalism more generally.

Political economists have long recognized that there is no such thing as capital "C" capitalism: market economies come in radically different shapes and sizes. One popular distinction made is between coordinated market economies and liberal market economies. Think of Germany vs America.

In the cooperative form, the main relationships between firms happen outside the open, arms-length market, that is, through non-market institutional relations such as unions and industry associations. Financing, wage setting, collaborative training schemes, and supply-chain relations are all managed through relatively open, informal contractual forms. By contrast, firms in the liberal mode of capitalism relate to each other through brutal competition through the price system. Whereas in liberal market economies, the market is the agent of discipline between firms that are only formally related to each other, the coordinated form of capitalism sees dense industry ties and informal sanctions perform the role of disciplining production.

A regulatory code hostile to takeovers and a cooperative internal firm structure where works councils have major say in production create incentives for long-term but incremental improvements in quality and thus competitiveness, avoiding competition merely on price that damages the productive ecology. Standard setting across industries results in talent and technology equalization, improving the entire industry while constraining individual firms.

Thus the coordinated shape of German football ought to come as no surprise. "Die Mannschaft," the national team's nickname, might sound formidably Teutonic, but its prosaic meaning cuts much closer to reality. "The Team", like the national economy, is really just the product of a deep ecology of cooperative competitiveness.

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