Wins, Losses, and Empty Seats: How Baseball Outlasted the Great Depression

1. The American Economy and the State of Baseball Profits

1.  The American Economy and the State of Baseball Profits Major League Baseball was not immune to the effects of economic fluctuations . We can presume that economic activity affected the demand for baseball games, although the relationship was not always obvious. Baseball owners faced a severe economic crisis after the 1929 season. Some contemporary observers felt that the economic downturn and the accompanying unemployment might initially boost baseball attendance , as fans would have more leisure time.1 An extended economic downturn, however, would more likely erode fans’ willingness and ability to attend games, although the immediacy and the magnitude of the response are not well understood. This chapter provides a description of the national economy and how baseball fared between 1929 and 1941. Although this work places considerable emphasis on profit/loss figures, the reader should recognize that interpreting profit and loss information is problematic at best. Sometimes owners cried “losses” when things weren’t so bad. The owners could, of course, camouflage losses through adroit manipulation of accounting rules. I will describe how fluctuations in attendance, revenue , and expenses affected profits and losses in subsequent chapters. The Economic Downturn There are different ways of measuring economic activity. Although modern economists prefer to use gross domestic product (all goods 8 Financial Side of the Game and services produced in the United States) rather than the more traditional gross national product (all goods and services produced by Americans, whether here or in other countries), we will use the gross national product (gnp) figures, as they were used more frequently during the era being examined. The gross domestic product and gross national product tend to track closely. The gnp peaked in 1929 both in nominal and in real (inflation-adjusted ) terms (table 1). By 1933 nominal (gnp) was almost halved. However , because the price level fell by roughly 25 percent, the real gnp in 1933 was about 70 percent of the gnp in 1929. gnp rose throughout the remainder of the decade in both nominal and real terms, although there was a downturn in 1937 and 1938. By 1940 real per-capita gnp was above the 1929 level. Thereafter, gnp figures were increasingly distorted by government purchases of military goods and services.2 This is the simple story of the U.S. economy. More important for Major League Baseball owners was the extent of the economic downturn in the northeast quadrant of the United States that encompassed the ten cities with Major League Baseball. There are some crude measures that show how various states and regions, as well as industries, fared. The number of employees on nonagricultural payrolls fell by one-fourth between 1929 and 1932.3 The number remained stagnant in 1933 before rebounding in 1934. A second drop occurred between 1937 and 1938, after which the number of such employees increased up until the war. The number of employees , of course, is not a perfect measure, since many workers may have had reduced hours or reduced real wages. Different industries had diverse experiences during the period. Mining , contract construction, manufacturing, and transportation suffered larger-than-average proportional declines in employees. Wholesale and retail employment closely reflected the general decline, but finance, insurance, and real estate and services suffered smaller proportional losses in the number of employees, which was probably good for the baseball owners if their chief clientele was white-collar workers.4 One 9 American Economy and Baseball Profits industry did well during the era: government. The number of employees in the federal government actually rose between 1930 and 1933, even before Roosevelt assumed the presidency. The employment numbers do not give us definitive clues as to how individual cities fared. A city such as Washington dc might have endured the Depression without too much job loss, given the increase in federal employment. The U.S. Department of Commerce provides a second clue from its estimates of per-capita income by state beginning with 1929. On average, nominal per-capita income fell by 44 percent between 1929 and 1932. As economists Thomas Garrett and David Wheelock point out, the decrease in nominal per-capita income differed greatly across states.5 States that began the period with relatively low per-capita incomes generally suffered larger percentage declines than states with high per-capita incomes. During the recovery in the second half of the 1930s, the states with large percentage declines during the early 1930s tended to have larger...