The knock on effects of the coronavirus has brought the U.S. economy to a standstill. An untold number of businesses have been shut down and millions of workers have been displaced. Amid social distancing, consumers are spending less which has decimated air travel and the transportation sector, prompting Goldman Sachs to predict an unprecedented 24% decline in Q2 GDP.
The NBA temporarily suspended its season until the outbreak becomes more contained. Commissioner Adam Silver will likely wait until May before deciding whether to resume the season or scrap it altogether. According to Portland Trailblazers CJ McCollum, about one-third of NBA players are living paycheck to paycheck. There will be a salary cap reduction next year due to lost revenues. Amid a deep recession, it is unclear whether fans and sponsors will return in droves to support the league. For now, a large part of the country is in survival mode.
Coincidentally, it was SLAM Magazine and Eldon Khorshidi that warned the NBA about the “pain ahead.” It is highly-unusual for a basketball magazine to discuss the economy, recession and GDP, but that’s what sets SLAM apart. In October 2012 SLAM held a Q&A with Ralph Baker, author of Shock Exchange: How Inner-City Kids From Brooklyn Predicted the Great Recession and the Pain Ahead. The book explained the stock market and the economy through the eyes of the New York Shock Exchange, a travel basketball team and financial literacy program Baker started for his 11-year-old son and other boys his age. The article was a highly-technical piece which Khorshidi handled with aplomb. SLAM and Khorshidi put LeBron, Steph, Kawhi and the rest of the NBA up on game:
Very seldom do the worlds of basketball and economics intersect. Sure, the NBA, like any other business, is directly affected by economic underperformance. Attendance falters, TV deals decrease and team owners lose money. And when total revenue—or Basketball Related Income—takes a hit, the salary cap lowers and player incomes decrease, too.
But in a general sense, GDP growth or the unemployment rate or the state of the housing market isn’t usually associated with sports. Over the past few weeks, as Barack Obama and Mitt Romney’s economic policies have been discussed ad nauseum, not once has basketball been mentioned. Not as a reference point, to connect any set of imaginary dots, as part of a larger narrative or otherwise.
That’s why Ralph Baker’s new book, Shock Exchange: How Inner-City Kids From Brooklyn Predicted The Great Recession And The Pain Ahead is so unique and, to those who have an interest in both finance and basketball, refreshing.
In Shock Exchange, Baker howled that bailing out Wall Street and corporate America in 2008 and leaving the populace high and dry was pure economic folly. Trickle-down economics did not work. It would simply delay the inevitable – another recession potentially worse than the Financial Crisis. It would also lead to social unrest as an angry populace grew tired of corporate bailouts at the expense of the public.
In my opinion, the coronavirus has exposed a weakness in the economy. The government is now faced with a dilemma it cannot fix by simply having the Federal Reserve print more money. Khorshidi’s article now appears prescient. It is a must read for the NBA and other major sports leagues. It may not have been SLAM‘s most-popular article, but it is shaping up to one of its most-important.