A sideways look at economics
A salary of £1 a second would be nice.
A quid every second.
One pound. Every second.
Even while you sleep!
Assuming that footballer Carlos Tevez gets a full eight hours every night, he will wake up nearly £30,000 richer each morning after he agreed to join Chinese club Shanghai Shenhua, where he will earn a salary of £1 per second. That’s £3,600 per hour, or £615,000 per week, or £32 million per year. Whether he is scoring a cup-winning goal. Or simply taking a nap.
The money being thrown around Chinese football these days is eye watering. What is going on? China aren’t even any good at football! According to the latest FIFA ranking, its national team is ranked 82nd in the world, behind the footballing powerhouse of Saint Kitts and Nevis, whose population is just 54,000, or 0.004% that of China’s.
Those who like a good conspiracy theory might claim that these vast sums are being bandied around as a way to circumvent capital controls. Overstate the value paid on transfers as a way of getting cash out of the country? Sounds like a good plan and similar to how some Chinese firms overstate their imports in order to get cash out of the country. China bears might like to believe this too.
This is not impossible, but the inferior quality of the Chinese football league compared to, say, the English Premier League, means that good players like Carlos Tevez can only be tempted to play there by even higher salaries than they are typically accustomed to. One Fathom employee claims that if he were Carlos Tevez you’d have to pay him even more than £32 million a year to play for Shanghai Shenua! (Note: the average employee at Fathom earns less than £32 million per year.)
It is no secret that the Chinese government has plans to turn the country into a football powerhouse. Perhaps the owners of Chinese football clubs are spending big in order to win favour with the government, what with its policymakers doubling down and all.
The merits of Chinese clubs spending such large sums of money has caused some debate here at Fathom.
One camp argues that such large salaries and fees might turn out to be a wise investment, if they help to mobilise a potential market of 1.4 billion people to fork out money on season tickets, satellite TV subscriptions and club merchandise.
The other camp argues that this is just another speculative bubble.
We don’t claim to be experts on football finance and don’t intend to provide a definitive answer either way. Nevertheless, the author of this particular TFIF has a little more sympathy with the latter camp and just happened to stumble across a striking similarity between the rise in the price of football players in China this decade and the rise in the price of tulips in Holland between 1634 and 1637.
There may not be an obvious similarity between footballers today and tulips in 1637. But it might be worth considering what happened to the price of tulips next.