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The United States is the face of capitalism and individual liberty. There’s a cultural emphasis on competition and self-reliance in your role creating unity to succeed in American sports, as Basketball, American football, hockey and baseball tactics heavily rely on targeted 1v1 strategies.
The NBA has the smallest roster of the 4 major sports at max 18 players per team, so it’s the most player focused league – many fans primarily support players over the franchise - thus should embody individualism the most. Surprisingly it doesn’t.
The NBA’s success lies in its unconventional economics. The NBA has created a sustainable model by focusing on collectivist and redistributive policies, proving that alternative economic policies can work in a capitalist environment.
It’s crucial to stress that the NBA is not a socialist league because the teams are privately owned by individuals. With that in mind, the 1st feature worth addressing is the draft system. The NBA draft is successful because it acts as a mechanism to redistribute talent.
The draft works based on the preceding season. The worst performing teams get the top picks of the draft, but poor performances don’t guarantee a successful draft pick. To prevent exploitation the worst 14 teams are put into a lottery draft system. All teams are represented by numbered balls and 4 are randomly drawn by a machine, the number picked first determines the 1st pick and so on. After the lottery draft the remaining teams make their pick – the worst performing teams being first and the NBA champions being last.
The draft system is a staple of the 4 major American sports, which goes against America’s greater individualist culture. The draft resembles a social welfare system. To prevent wealth from creating rising inequality talent is proportionally redistributed according to help struggling teams and this collectively benefits the league.
Comparatively redistributive mechanisms are largely absent in the American economy because of their focus on free market trade. American social welfare is primarily targeted at the elderly and low-income people, with many benefits being tied to employment. Other developed nations have more expansive social safety nets which includes healthcare, education and unemployment benefits.
The NBA’s draft is not perfect. It functions within a closed league, facing continuous criticisms that it prevents teams from truly being punished/ rewarded for their performance. Additionally, players often lack freedom to decide where they want to go, brining into question their rights. But what we can learn from the draft is that without systems that actively create opportunity for the disadvantaged, unregulated competition leads to entrenched inequalities.
Another uniquely collectivist features are the salary cap and luxury tax. The NBA has a “soft” salary cap, certain exceptions allow teams to exceed the payroll limit, however it’s limited to the luxury tax.
The luxury tax prevents teams from accumulating too much talent with their wealth. The thresholds change every season, but the underlying logic stays. In 2021/22 for every $5,000,000 spent over the luxury tax $1.50-3.25 per dollar was fined. Repeat offenders pay a dollar more per level. The penalty revenue is then shared amongst the teams that stayed under the limit, which is crucial to maintaining the NBA’s economy. Teams use the funds for infrastructure, staff and sponsorships.
Notably, NBA commissioner Adam Silver introduced the Apron system under the 2023/24 Collective Bargaining Agreement (CBA). These are harsh penalties for significantly exceeding the luxury tax, preventing acquisitions a team can make. For the upcoming season the 1st Apron is $195,900,000. Violators face 3 major penalties: frozen trade assets, inability to claim expensive waived players (That keeps them above the Apron) and a ban on sign-and-trades. The 2nd Apron is set at $207.8 million. Violators get additional punishments on top of the 1st Apron ones. They lose action to trade exceptions, sending cash in trade agreements and access to the mid-level exception in free agency. All these policies ensure that wealth cannot dominate the league, and excess expenditure is used charitably rather than hoarded by the league.
Essentially the taxes function as a progressive taxation system: The more a team spends over the limit the heavier the penalty. The revenue is then distributed to smaller market teams; mirroring a socialist principle where taxation is fundamentally redistributive to support the most vulnerable, directly funding public services to promote equity within the system.
Another collectivist contrast to the U.S’ individualistic culture comes from the NBA encouraging player empowerment under the CBA. The CBA sets out the terms and conditions of employment for all professional basketball players and the rights and obligations of the NBA, the teams and the player association.
The current CBA, ratified in 2023/24, entitles players to an annual pension plan at $56,000 after 3 years – a higher rate than the NFL. Lifetime healthcare coverage for retirees where the NFL only lasts for 5 years and while MLB has lifetime coverage it is more costly. NBA contracts are also fully guaranteed; they get post-secondary tuition reimbursement and more significant care for mental health and substance issues compared to the other major sports.
Due to the league’s small size, being 450 players and being a player centric league compared to other sports the player union is very strong. This is unique even within American sports and it explains why the average NBA salary is the highest out of the major sports. The NBA’s revenue per player is much higher due to basketball’s small roster and the players effectively leverage this.
Overall unions aren’t strong in the U.S despite 67% of Americans supporting them, the highest in half a century due to the stigmatization of trade unionists being slow and disruptive workers. This unconventional employee empowerment ensures that basketball players can advocate for stronger benefits and working conditions, which positively correlates with productivity.
Employee empowerment, redistribution of wealth and services to support smaller market teams and punishment of overspenders have resulted in arguably Adam Silver’s greatest success, the “Era of parity”.
Historically the NBA has been dominated by superteams. Only 20 teams won a championship before Silver’s appointment in 2014, and the last 3 decades were dominated by 4 teams: the Boston Celtics, Los Angeles Lakers, San Antonio Spurs and Chicago Bulls won 24/30 titles. Despite commercial success the league wasn’t as competitive as its national sport rivals.
Since Silver’s tenure, despite the dominant Golden State Warriors and Cleveland Cavaliers making 4 consecutive finals matchups between 2015-18, the 2020s has been dubbed the parity era. There’s been 6 different champions since 2019, and this has only happened once half a century ago (1975-80). This trend doesn’t seem like stopping, with betting odds for multiple teams winning a championship improving. Last year, 12 teams entered the year with title odds of 25-1 or shorter. Six years earlier at the peak of the Warriors-Cavs run, there were only three such teams.
Critics argue that dominance is punished while incompetence is rewarded, but to use these as an attack on the socialist policies is mistaken. I want to clarify that dominance is not punished, but collective competitiveness is rewarded instead, and this benefits the entire league. This was Silver’s vision “A real incentive for players to stay in [smaller] markets.” Collective competitiveness makes dominance feel earned rather than bought.
Ultimately the NBA’s economic success is tied to its subtle embrace of socialist principles regarding wealth and talent distribution, employee empowerment and spending restrictions to ensure parity. While the NBA and the other major American sports are inherently capitalist, they have unique features not present in comparable sports leagues (Like the Premier League), most apparent in the NBA, that creates a similar level of success. This isn’t a call for socialism or an anti-capitalist post, but one that examines the success of alternative economic principles in American society, and how blending said principles can result in real world success.
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