I have a cousin that lives in Neuchatel, Switzerland just down the street from Stade de la Maladiere where Neuchatel Xamax FC ply their trade. The club was formed in 1970, through the merger of FC Cantonal (1906) and FC Xamax (1912). They wear black shirts with a red sash, they were runners up for the Swiss Cup in 2011, and on January 26, 2012 they declared bankruptcy.
The financial struggles of European Clubs has been well documented. Leeds United, after making it to the 2001 Champions League semi-final took out loans based on future prospects that didn't materialize. They had to sell of Rio Ferdinand, Robbie Fowler, Robbie Keane, and still ended up insolvent. They were relegated, and eventually dropped all the way to the third tier.
Celtic declared bankruptcy in the 90s. Rangers FC are now in the third division after entering the liquidation process. Maurice Edu and Carlos Bocanegra are still there under contract, but with the club in debt some 134 million pounds, who knows how long they will stay.
Europe's football system is profoundly capitalistic. Owners are allowed to give their chairmen whatever budget they wish. Clubs have to sustain their own economies, which makes winning even more of a financial imperative. Still, fans have the security of knowing the club in their town will still carry on, even if it's in the lower divisions on a smaller scale.
For Neuchatel Xamax, financial crisis came with further embarrassments. The Chechen owner of the club was arrested hours after declaring bankruptcy. He was under investigation for fraud. Neuchatel Xamax are two time Swiss champions whose honorary president is Sepp Blatter. This all happened midseason.
Imagine, your hometown club that you grew up with declares bankruptcy mis-season, the owner is arrested, the club is relegated. All because of things happening behind the scenes you may or may not have known about.
Xamax's website now has a banner asking fans to help it rebuild brick by brick. Operation reconstruction. The history buff in me can't help but think of Civil War reconstruction. Having to rebuild a whole way of life one brick at a time.
Even with MLS' single entity structure, the league had it's dark days. AEG ended up floating half the league, while expansion clubs in Florida had to be shut down. The American sporting world is all about socialism. The rich pay taxes so the poor can stay afloat. You don't have to worry about your favorite club folding, though they may move to another city.
It's worth critically thinking (I don't think there's a right answer) which system is better. This is not a long argument for promotion and relegation. This is just a call to think.
Are sports teams public institutions? When the San Jose Earthquakes were having troubles of a financial nature, there wasn't an option for them to downsize and ply their trade in USL for a few years and come back to MLS. Houston ended up with a ready made soccer team in their laps. San Jose just did without soccer for a few years.
Seattle, Portland, Vancouver, all seem to consider their history contiguous pre-MLS and now into MLS. That's a rarity. San Jose has rebuilt the dominant franchise they had before AEG picked them up and moved the team to Houston. Brick by individual brick.