The present spate of transfer mania in European football is, in many ways, worryingly reminiscent of the peak of the property boom. Clubs are building up ever larger piles of debt, players are being traded for transfer fees that bear no resemblance to their revenue-generating potential, and the business plan seems to be buy, buy, buy. Most ominously, salaries seem to have lost any grip on reality. Without any form of regulation, catastrophe is imminent, particularly among lower clubs, but also among some of the biggest names in the sport. Even mighty Real Madrid are not immune from the danger, as mounting debts and a trophy drought may force a serious reappraisal of the clubs financial priorities.
Those footballing observers who subscribe to the ideas of Adam Smith and Milton Friedman might ask "so what?". The free market has losers too. If a club is dumb enough to overspend and goes to the wall, that's their business. The problem is that this presupposes that normal market forces are at play in Europe. This is a deeply flawed assumption.
