is reborn. The shared fan angst about their club disappearing has a useful psychological function: it’s a communal ritual that gives people a chance to join together to affirm their love of the club. After administration, Portsmouth slid down the divisions and spent a few miserable years bumping along in League Two, the bottom tier of English football. In summer 2017 they celebrated an emotional promotion to League One, and were then taken over by Michael Eisner, former chief executive of Disney. Like almost every English professional club that has ever existed, Portsmouth still exist.
Yet in another way, Portsmouth’s story is exceptional. They are the only club in the Premier League ever to go into administration. The other sixty-six cases of insolvency in English football from 1982 to 2010 involved teams in the lower divisions. That is something that doomsayers should note. They often complain about the debts of rich clubs, such as Manchester United. They ask how Chelsea would survive if Roman Abramovich falls under a bus.
In fact, though, big clubs are not the problem. Across Europe, lower-tier teams live on the edge of insolvency, while the top-tier teams, even though they too mostly lose money, seldom become insolvent. The highest risk of all in most countries is for recently relegated teams. We have been able to identify about a dozen Western European clubs that have disappeared from professional football during the post-2008 economic crisis: UD Salamanca, Lorca and CD Badajoz in Spain, Evian Thonon Gaillard in France, Haarlem, Veendam, AGOVV and RBC Roosendaal in Holland, FC Brussels and Beerschot in Belgium, MyPa in Finland and Gretna in Scotland. (Vanishing clubs are more common in poorer Eastern Europe, where almighty sugar daddies come and go, and especially common in Ukraine, where the Russian invasion hit several clubs very hard.)
None of the Western European clubs vanished after gambling tens of millions to compete with the big boys. Rather, they were midsized to tiny outfits (Badajoz in its 107 years of existence never once made it to Spain’s top division) that had soldiered on gamely through the years. When the crisis hit, they were overwhelmed by their relatively puny debts. Haarlem, for instance, owed a fairly manageable €1.8 million when they folded in 2010. It’s just that hardly anybody was interested enough to fight for the club’s life. Anyway, several of the defunct clubs were immediately re-founded in a slightly different form. Gretna 2008 now plays amateur football in Scotland, as do RBC and AGOVV in Holland. Unionistas de Salamanca, the successor club to the one that died, now plays in Spain’s third tier. MyPa are in the Finnish fourth division.
Perhaps because English professional clubs are older established brands than most continental teams, even the littlest among them survived the crisis. But if people are determined to worry about clubs going bust, it’s the Accrington Stanleys they should worry about, not the Chelseas. And they probably shouldn’t worry too much about the issue at all. If European football clubs really did collapse beneath their debts, there would now be virtually no European football clubs left. ‘We must be sustainable,’ clubs say nowadays, parroting the latest business cliché. In fact, they are fantastically sustainable. They survive even when they go bust. You can’t get more sustainable than that. Match-fixing, say, is a much bigger problem for European football than bankruptcy. The near immortality of football clubs makes you wonder exactly what problem UEFA’s rules on ‘financial fair play’ are meant to solve.
Michel Platini, from 2007 until his ban from football in 2015, was always worrying about clubs’ debts. But it’s precisely because clubs are practically immortal that they have such large debts. They know from experience that they can take on whatever debt they like, and survive. If things go wrong, they simply don’t repay their debt, the old directors walk away, and new ones come in promising to sweep up the mess (while also buying shiny new Brazilian centre-forwards). A club like Bayern Munich, which shuns debt, is in fact missing a trick. Bayern could easily borrow a few hundred million euros to make itself invincible against human opposition in the long term. Even if it flushed the money down the toilet and then said ‘Nanananana’ to the lenders, the club would survive. Right now Bayern is a marvellous self-sustaining debt-free business. But the point of a football club isn’t to have nice accounts – after all, the clubs with horrible accounts survive, too. The point of a football club is to win trophies. From 1976 to 2017, Bayern won the Champions League just twice. That’s a meagre return for the biggest club of Western Europe’s biggest football country.
Once again, the comparison between football clubs and ‘real’ businesses breaks down. When clubs get into trouble, they generally ‘do a Leeds’, a manoeuvre named in honour of the spectacularly badly run Leeds United of the early 2000s. ‘Doing a Leeds’ means cutting your wages, getting relegated and competing at a lower level. Imagine if other businesses could do this. Suppose that Ford could sack skilled workers and hire unskilled ones to produce worse cars, or that British Airways could replace all its pilots with people who weren’t as well qualified to fly planes. The government would stop it and, in any case, consumers would not put up with terrible products.
Football clubs have it easy. Recall that almost every English professional club has survived the Great Depression, the Second World War, recessions, corrupt chairmen, appalling managers and the post-2008 crisis. By contrast, economic historian Les Hannah made a list of the top one hundred global companies in 1912, and researched what had become of them by 1995. Nearly half the companies – forty-nine – had ceased to exist. Five of these had gone bankrupt, six were nationalized and thirty-eight were taken over by other firms. Even among the businesses that survived, many had gone into new sectors or moved to new locations.
What made these non-football businesses so unstable was, above all, competition. There is such a thing as brand loyalty, but when a better product turns up, most people will switch sooner or later. So normal businesses keep having to innovate or die. They face endless pitfalls: competitors pull ahead, consumers’ tastes change, new technologies make entire industries obsolete, cheap goods arrive from abroad, the government interferes, recessions hit, companies overinvest and go bust, or simply get unlucky.
By contrast, football clubs are immune from almost all these effects:
A club that fails to keep up with the competition might get relegated, but it can always survive at a lower level. Some fans lose interest, but clubs have geographical roots.
A bad team might find its catchment area shrinking, but not disappearing completely.
The ‘technology’ of football can never become obsolete, because the technology is the game itself. At worst football might become less popular.
Foreign rivals cannot enter the market and supply football at a lower price. The rules of football protect domestic clubs by forbidding foreign competitors from joining their league. English clubs as a whole could fall behind foreign competitors and lose their best players, but foreign clubs have financial problems and incompetent management of their own.
Governments are not about to nationalize football.
Clubs often overinvest, but this almost never destroys the club, only the wealth of the investor. At worst, the club gets relegated.
A club’s revenues might decline in a recession, but it can always live with lower revenues.
In most industries a bad business goes bankrupt, but football clubs almost never do. No matter how much money they waste, someone will always bail them out. This is what is known in finance as ‘moral hazard’: when you know you will be saved no matter how much money you lose, you are free to lose money.
There is a strange parallel here between professional football and communism. When we ask, ‘Why do football clubs almost always survive?’ we are echoing the great question asked about communism by one of our favourite economists, the Hungarian János Kornai. He grew up in Hungary, briefly worked for a communist newspaper despite knowing that the system was all nonsense, and after making his way to the West tried to answer the question: Why exactly did communism not work?
Kornai’s
