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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 Telegraphpiece 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 things out by themselves, 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.

This post first appeared at A Very Public Sociologist.

One Comment

  1. Laban says:

    “So what’s going on?”

    Since at least 2008 wages have lagged inflation. That wage lag is mostly driven by high unemployment – which is in turn driven by mass immigration*.
    Many essentials (fuel, electricity, insurance) have gone up in price even faster than inflation. Disposable incomes have dropped.

    So the only way to keep High Street spending up is to send the wife out to work or take on more debt.

    But the wife’s been at work since 1981 – how could you ever have afforded a house on one income? – and no one’s going to take on more debt in this economic climate.

    So retail sales will fall, and retailers go to the wall. It doesn’t help that some of their online competitors are tax avoiders so can have lower prices.

    But this was the situation under the last government as well as under this one. To pretend that this is uniquely the result of Coalition policies – well, it shows why sociologists shouldn’t do economics.

    * “The main purpose of the bourgeois in relation to the worker is, of course, to have the commodity labour as cheaply as possible, which is only possible when the supply of this commodity is as large as possible in relation to the demand for it”

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