But as others have pointed out, ride buying has always been a part of racing. We worry about foreign formula-car ride buyers coming in and displacing American short-track roots racers, as they did in CART. But the question needs to be asked: Americans can buy rides too, so why don't they? (Dr. Jack doesn't seem to have much trouble doing it.) And there are lots of plausible answers to this, some of them not very complimentary: American drivers don't hustle for rides, they just sit and wait for the phone to ring. American drivers only care about the money, so they just want into NASCAR. American drivers want to keep driving what they came up in and aren't willing to learn anything new. There's a certain amount of truth to these charges, unfortunately. But there are legitimately some market factors working against the Americans.
There have been some really wild proposed solutions. Now, it's great to see that people are thinking, but I just don't think that banning rear-engined cars and bringing back the 1950s roadsters is the answer; no one would ever take the series seriously if it did that. And one thing that I most definitely don't want to see is restrictions on who can participate -- the notorious Indy 25/8 rule created plenty of bad publicity in the short time it existed, and while it can be argued that it was necessary at the time, I don't ever want to see anything like it again. (The 25/8 rule was a rule that reserved starting positions in the Indy 500 for teams that were in the top-25 in IRNLS entrant points; its stated purpose was to help get IRNLS teams off the ground in the League's early days. It went into effect in 1996 and was eliminated after two years.)
Can IMS join the WTO?
So what's to be done about it? Well, first of all, we need to identify what the specific problem is. Now, as we've discussed above, American roots racers can certainly engage in ride-buying as well as foreign drivers. But there is a difference that gives the foreign drivers an advantage. The patient reader will discover it in the next few paragraphs...
I, your fearless author, when not engaged in discourse concerning our favorite form of racing, am employed in the aerospace industry. Although I don't work on anything having to do with airliners, I follow that segment of the industry, and I've seen some old and disturbing patterns of behavior recently. Specifically, government subsidies and protectionism, after looking like they were on their last legs as the last decade dawned, are breaking out all over the place again. One that's been in the news is the loan guarantees and alleged sweetheart deals that the European airplane maker Airbus is getting to develop its new jumbo jet. I'll withhold my own opinon and not comment it on it further, except to note that there's s a full-blown trade war brewing over this. Today's global marketplaces are quite vulnerable to the entry of subsidized competitors that don't have to worry about making a profit; they have potential to cause great harm by forcing non-subsidized companies with better products out of the market, and countries that depend heavily on international trade are no longer willing to tolerate it. In the Airbus case, a January 11 article in the Wall Street Journal predicted that the ramifications of this dispute may result in the breakup of NATO. That's how serious it is.
A more relevent example to us is what's going on in the opposite end of the jet-plane spectrum: regional jets. These are the small jet planes that fly to secondary markets and are rapidly replacing the old turboprop planes; advancing technology has made it possible for those of us who live in "flyover country" to fly like everyone else does. The two industry leaders in this part of the industry are Bombardier of Canada, and Embraer of Brazil. (Starting to sound vaguely familiar?) Now both of these companies make fine aircraft (I've flown on both) and can be justly proud of their efforts. But... both of them are significantly subsidized by their respective governments. Embraer, which started out as a government-owned corporation, receives heavy subsidies in the form of a Brazilian export administration which makes loans and pays rebates to airlines that buy Embraer aircraft, and the company also benefits from government contracts that are awarded to it on a non-competitive basis. As for Bombardier, it also gets government money to help airlines finance purchases of their aircraft, and benefits from non-competitive contracts, as well as receiving direct aid from something called the Canada Account (described by the Toronto National Post as a "slush fund"). About two years ago, the two contries filed charges against each other with the World Trade Organization, but when the WTO unexpectedly ruled that both were violating trade rules, the two nations ignored the ruling and jacked up their subsidies further in an attempt to beat the other country's subsidies.
An the point is... there is a third company in this market, and it's a very un-subsidized American company (with a German component) called Fairchild Dornier. And the subsidized competition from Bombardier and Embraer is systematically putting Fairchild Dornier out of business. Like Bombardier and Embraer, they are a company with deep roots in the industry and they make a good product, but they can't compete with the subsidized incentives that the other companies can offer. As a result they have received only a handful of orders for their jets, compared to the thousands of orders taken by the others, and without further business they will soon be forced to shut down their production lines. Employees will lose their jobs and investors will lose their shirts.
And here is the crux of the problem...
...with the foreign ride buyers: they're subsidized, and like Fairchild Dornier, the would-be American ride buyers aren't. It's been gratifying to see how democracy has swept over the world's developing countries over the past two decades after the ruination of Communism in the middle part of the 20th century, but a lot of these countries haven't quite gotten the free-market part right yet. It's quite common to find what is called "crony capitalism", meaning that although markets are nominally free, they are often dominated by companies that have official or unofficial ties to government, and as a result either receive direct subsidies or else get favored treatment in the form of sweetheart deals, discriminatory taxation of competitors, or outright monopoly. Now, a company that doesn't have to worry about competition is going to charge higher prices and turn a much larger profit margin than a company that has to compete in a free market. And this is very common in recently (and some not so recently) emerged democracies, such as in South America, Asia, and some of the European nations.
Fight fire with fire?
A company that has access to these kinds of resources can in turn afford to subsidize national champions of its own. And some of those champions are race car drivers. (One reason why is that these protected companies are often, for some reason, involved in the automotive or transportation sector; most of the world's nations have nationalized or monopoly oil companies, for instance.) If you start looking at the backgrounds of some of the ride buyers that we see in the U.S., you often find that they have ties to such companies that go back a long ways, to the extent that for must of their adult life they have never had to think about anything other that practicing and racing. In effect they are themselves subsidized. And that's the part where the American driver is at a disadvantage. First of all, Americans don't generally regard their athletes as national champions, in the same way that many of the world's nations do. And second, American companies which have to compete in an open market (which sometimes includes subsidized foreign competition) must operate on much thinner profit margins. These two things make American companies much less likely to want to support a driver; it's hard to make the business case for it, and sponsorship of any sports entity inherently has a fair amount of uncertainty -- you never know if your driver is going to qualify for the race, or how well they will run, or how much TV exposure you will get out of it. Add to that the fact that the IRNLS admittedly still isn't a mature entity, and it becomes a very tough sell; although there is a huge potential poyoff, most companies can't justify the risk to their stockholders.
Now in the strictest sense, this is a trade war. Domestic sellers (American drivers) are having to compete on an open-market basis for rides against foreign competitors who are subsidized. If this was airplanes Washington would be filing charges with the WTO, but something like the IRNLS is of course way below their radar. Long term, there is a happy note: crony capitalism in the long run is probably doomed (just ask anyone in Japan), and so eventually the problem will solve itself. However, the IRNLS doesn't have that much time. And given that the current behavior isn't going to stop soon, it appears that the only way to put the playing field back even is for the IRNLS to subsidize some American drivers.
If you're cringing over that last sentence, I don't blame you. How can this be done in a manner that doesn't play favorites? How can the appropriation of funds be managed so that it goes to the intended purpose, and doesn't just wind up lining someone's pockets?
A modest proposal
I'd like to see the following program established. For four IRNLS rookie drivers each year, the program will provide support in the form of chassis insurance (insurance that pays to replace the chassis if it is totalled), plus an engine rebuild after every 4th race. In order to be eligible, the driver must meet these criteria:
Drivers apply for these grants by submitting resumes to the IRNLS. The IRNLS evaluates the drivers for eligibility, divides the eligible drivers into three categories, and prepares a list of the 10 most qualified in each category. However, the drivers cannot claim the grants themselves. Team owners claim the grants by signing a qualified driver from the list and then signing a contract with the IRNLS for the grant. The terms of the contract for the team owner is that they must sign the driver for the entire year, they must agree to enter all the races, and they must have or purchase a current-model-year chassis. The IRNLS makes four grants each year, on a first-come, first-served basis. The categories and the number of grants per each category are:
I think that the current going cost of chassis insurance is around $40,000 per race, and a pretty good engine rebuild probably also runs around $40,000. (IMS can probably get a better deal on the insurance by doing it as a package deal with an insurer.) For a 13-race season, the total cost of the program for four granted drivers would be $2.56 million. This seems like it should be withing the League's finances, and perhaps Northern Light would be willing to put up some addiional funds to make it happen.
And while we're on the subject...
One thing that this proposal doesn't address is how prospective IRNLS drivers are going to get laps in an Indy-type car. For this reason, it is absolutely essential to get a U.S. ladder system going. The Formula BMW is a good step, but it's only one rung on the ladder. The IRL could start by buying out USAC (it wouldn't take that much), and dragging it, kicking and screaming, into the 21st century. Yes, this means rear-engined Sprint and Silver Crown cars. They could work out something for keeping the current front-engined cars in the mix, either with equivalency rules or perhaps as a parallel series, but if USAC is to have a future, rear-engined cars and being part of an IRNLS ladder is it. Time is running out for USAC and they really don't have any other choice. The opportunity is now.
| Underground Home | Race Results | Points Standings | Team Links | Buried Cables | Stat-o-Matic |