Wednesday 16 January 2013

The Death of the High Street

To lose one household name during a period of supposed economic recovery is unfortunate, but to lose three is careless. With the collapse of Jessops, HMV, and Blockbuster approximately 10,000 people face a very uncertain future. So what's going on?

If you read the BBC's reporting, it's all just a case of bad management and outmoded business plans. For example, Ajay Bhalia of Cass Business School, City University London says:
The company, like HMV, failed to transform its business model early enough. When it did, it found a fundamentally altered competitive landscape where the platform model had destroyed the traditional retail one.

Firms like Blockbuster failed to face up to the enormity of the change and altered their business model on the fringes (eg selling second-hand products), rather than coming up with an innovative offering. It is shocking that the board and executive management failed to make bold choices.
This is backed up by Steve Musson of Reading University, who also said "the retail businesses that we have seen going into administration since Christmas have a lot in common - they have large numbers of stores and have struggled to adapt to changing retail habits."

In the Darwinist world of retail, none of these companies were able to adapt quickly or adequately enough to the changing environment around them. They died because they were unfit.

Well, I'm sorry, I don't buy this. If you follow Adam Smith, the market expresses the preferences of a myriad of self-interested actors. Left to its own devices, economic development is blindly driven forward by the competition between firms to meet these demands. And success is always conditioned by how well actors respond to the 'signal' the market sends. But despite its dynamic and unconscious character, markets are not a natural force - however much they may resemble one. 

The failures of Jessops, HMV, and Blockbuster cannot entirely be left at the door of their hapless management. Markets always exist in specific institutional contexts and in Britain, the power of the state and the monopoly it possesses on legislating the rules of the capitalist game means it has an unparalleled degree of say over what goes in the British domestic economy, and its direction of travel. In other words, when economics was collectively known as political economy, it was called that for a reason.

The so-called 'death of the high street' we are said to be undergoing at the moment, is no natural demise. It has the finger prints of our LibDem-supported Tory government all over it.

There are two policies (or rather, non-policies) that are driving this process. The first of these is the explosion of internet shopping. Increasingly, we are told, shopping for white goods, video games, DVD/Blu-ray, and music on the web is edging out the traditional chain stores. The reason is, apparently, convenience and price. While undoubtedly true, the reason why some of these internet-based firms - particularly Amazon - are able to undercut their rivals is by dodging tax. Their avoidance is being paid for by monies lost to the treasury, AND the livelihoods of their rivals. So while the government makes a big show about tackling evasion and avoidance, it has absolutely nothing to say on the dodge this particular multi-national pulls. Their failure to act, therefore, is a political non-decision.

The second is the Tories de facto wage deflation policy. Even the dogs in the street have woken up to the idea that by hacking away at the public sector and piling people up on the dole, you suck demand out of the economy. However, as the government likes to point out job losses from cuts have been made good by the growth of private sector jobs - over one million of them in the Coalition's first two years, in fact. True, even though this contains the reclassification of 196,000 FE employees, the uncounted number of people in work placements, and public sector workers transferred to private companies, the job market is indeed growing. However, jobs lost are not being replaced like-for-like. The numbers of part-time workers is at a record high, accounting for half of all job growth. Around 655,000 people on temporary contracts has grown over the course of the last year, and the pay gap between full and part-time workers is widening. As Jonathan Portes of the National Institute for Social and Economic Research notes in the Telegraph piece above, "There’s been little growth for two years but the labour market has responded to that very well. We’ve seen employers push through a reduction in hours and wages decreased."

If you take the overall lower wage bill, the prevalence of part-time and insecure working, the forced reductions in social security payments and combine that with rising prices across the board, retail is going to be squeezed. Again, there is nothing stopping the government from addressing this. They could, if they wished, make people more secure in work by legislating for greater workplace protections. Dispensing with the easy-come, easy-go employment culture carefully nurtured by successive governments would yield significant economic benefits as people feel secure and therefore spend more. They could, if they chose, decide against sucking demand out of the economy by not kicking the poor and the vulnerable who are forced to subsist on unemployment, disability and tax credit payments. It is also within the government's gift to pursue a full fledged plan for economic growth instead of hoping for the best.

But they do not and will not do these things. Partly because they stupidly believe that things will sort themselves out, and partly because they and the interests they represent are largely untouched by the austerity foisted on the rest of us.

None of this is natural. The death of the high street and falling wages are the results of deliberate political decisions by a government out of its depth and utterly unsuited to rule. As we stare an unprecedented triple-dip recession in the face, never forget that this is a downturn engineered in Downing Street.


Alex Dawson said...


The employment law issue is one that can easily be nailed with a decent opposition approach; make it easier to sack people, and people will be sacked and not replaced.

Phil said...

But we can't possibly talk about workplace issues. They're just not sexy enough. And besides, class is so 1970s don't you know.

Anonymous said...

Economic contraction is the predictable consequence of pro-cyclical policies. These companies are collateral damage in the class war. The government know precisely how destructive austerity is, but the prospect of shredding what's left of the social contract is just too attractive to resist.
Meanwhile, the big investment banks are getting public money at zero percent, lending it at thirty percent and handing out record bonuses, so who cares? Nobody in the political mainstream.

We're approaching the 'end game' of financialization: an impoverished population in debt to a predatory oligarchy, with a declining economy and shrinking social rights.

Chris said...

These companies do have the problem of being established pre internet. The new companies do not have to get rid of loads of staff at stores making huge losses, whereas the older stores do have this problem. New capital can be constructed to mirror current reality.

Under capitalism this process of change is very messy and ruins lives but let's be honest, under socialism the world has to move on, and our argument should be that under socialism change is more efficient and less destructive. In the long term at lest, in the short term change would be very messy indeed!

Phil said...

Exactly. The other thing about change in a socialist world is that it would be *planned* by all concerned.

Chris said...

"it would be *planned* by all concerned."

Too vague, how exactly would it be planned by all? Say a workers co-op ran a Camera outlet and new technology made the model inefficient. This would mean that some of the workers would have to change jobs. Those decisions could not be made by all concerned. You would need some kind of central authority deciding these planning decisions. The post Soviet version of socialism, co-ops all acting independently of each other in some kind of non capitalist market, has the whiff of utopia. The Soviets had to live in the real world remember. This is why I prefer the socialism of, say, Paul Cockshott, who I think recognizes this reality.

But if you have managed to theorise a socialist society without the need for authority I would love to see it.

Phil said...

I was being vague, yes. What I had in mind was a series of documents - that I haven't been able to since turn up - that was commissioned by the NUM prior to the Miners' Strike. I came across them when I was researching an article for my old Weekly Worker column way back in the day.

Anyway, I recall them accepting that the mining industry was one in long-term decline. Therefore it proposed a plan for re-equipping the communities it represented for the future, in terms of new jobs, extra training, investment in infrastructure, giving working miners new opportunities and so on. In other words, a managed transition away from a primary industry.

That's the kind of thing I had in mind during my earlier comment - though I don't expect you to be able to divine what I'm thinking, Mystic Meg style.

Anonymous said...

The model of co-ops and self managed institutions is pre-Soviet, not post soviet. In fact, it was the mainstream 'socialist' position (GP Maximoff, Pannekoek, and others) . There's no need for a cental committee to decide on technological matters. Working people can decide on questions of efficiency, which are often moral questions, and too complex for central control - it might be more 'efficient' in narrow terms to clear cut a forest rather than manage it sustainably - the question can't be decided by executive fiat.

Chris said...

Yes, the idea of co-ops pre dates the Soviet union (obviously) but the point is that some socialists have developed what I think is a Utopian schema based around co-ops existing in an undefined socialist market, and this was a reaction to the fall of the Soviet Union.

You say working people can decide on matters of technological efficiency, but what happens when one technology has a negative affect on some workers but not others?

Who decides if a dam is to be built? Who takes a view on the infrastructure? Some sort of central authority is an inevitability, whether it be a central committee, a parliament, local government or workers councils.

Technological issues are not moral, if a machine can do the work of 100 men then that means progress. History shows this to be an objective fact.

Anonymous said...

Who takes a view on a dam? In theory all those affected - the local community, the people building the dam, the people who will recieve the power. The producers the consumers the community. Who shouldn't have a view? The corporation or the central committee. Both forms of unaccountable, private power.
Most decisions about technology are moral - a nuclear reactor can do the work of a million wind turbines, but the cost to future generations may be too great. A factory that maximised production at terrible human expense would not be tolerated in a rational society. Words like 'progress' and 'efficiency' are essentially meaningless.

Chris said...

Yes, but to even get to the point, do we need a dam, you need some experts working on the problem. I.e. you need some kind of central authority that allocates resources to such areas. Now this central authority may be a worker council, a worker parliament or whatever.

But even Mondragon has a Central authority.

You can not have Robert Owen like islands of socialism all somehow coming together in a market place. That is libertarianism and Libertarianism is always utopian.

I agree (up to a point) with Engels when it comes to science, he said the more disinterestedly science is allowed to progress without morals getting in the way the more it will inevitably proceed along progressive lines.