With the budget looming and coalition economic policy still awaiting definition, the call for a new, stricter approach to competition has come under elliptical attack from our friends on both the political right and left
In his recent CiF piece, Supermarkets can be local heroes too
, the head of Demos' Progressive Conservative project, Max Wind-Cowie, argued that:
“It is all too easy for the middle classes to sneer at retailers such as Tesco, Sainsbury's and Asda. Indeed, grocery chains have been accused of tax avoidance, depriving farmers of a livelihood and functioning as modern-day monopolies that drive local businesses out of communities. All of these points have substance, but they ignore a crucial social role that supermarkets play.”
What is this crucial role, for which we should knowingly "deprive farmers of a livelihood" and "drive local businesses out of communities"? According to Wind-Cowie, supermarkets can address “Brand deserts – areas that lack the retail opportunities most of us take for granted - [which] exist in the most deprived communities ... [and] add to a sense of segregation and disenfranchisement that is keenly felt.”
As someone living in a deprived area with virtually no local bank branches or (until Tesco recently introduced one) even free cash points, I don't doubt that brand exclusion – to coin an awful, pseudo-progressive term – exists, nor that it can have very negative effects in deprived areas. While Wind-Cowie focuses on the social and psychological effects of brandlessness (which I also know to exist, having spent an entire childhood without the “right” trainers), it would be remiss to forefront these somewhat abstract concerns above the tangible poverty premium
which people in deprived areas often pay because they cannot access affordable consumer goods and services.
In this vein, Tim Montgomerie's Tesco, purveyors of jobs, cheap food and social justice
defended the more tangible benefits that access to big supermarkets entails for consumers:
“The Leahy [outgoing CEO of Tesco] revolution has driven massive price-cutting competition between the food giants. This competition has not been without its casualties but has helped family shopping bills to tumble in size. Food prices fell by nearly 10 per cent in the 1990s and by a further 8 per cent in the past decade.”
Progressives need to think very carefully about this line of reasoning. How important are grocery prices compared with long-term market competitiveness, small business ownership and the livelihood of agricultural producers? This is not intended as a loaded question. The average family spends 11 percent of their income on food, and this rises to 15.9 percent for those on the lowest incomes. Taken together with Montgomerie's figures for food deflation, this suggests that decreases in food prices considered in isolation over the past two decades have increased the standard of living for the poorest by approximately 2.75 percent, before inflation is taken into account. Which is certainly a major victory for progressives, and one which we should not seek to sweep under the carpet.
However, it is also not the end of the story. Those benefits must be weighed against the wider costs of this economic model, in terms of environmental damage, reduced standards of living of shop owners and food producers, hidden state subsidies (not least in the form of the tax avoidance ceded by Wind-Cowie) and distortions caused by market monopolies.
Similarly, when Montgomerie argues that, “supermarkets have also been enormous job creators. Tesco created one new job every 20 minutes in the Noughties. On disadvantaged estates they fulfil a similar role to the military. They give jobs, structure and skills to some of the hardest-to-employ people”, progressives need to have an account of the relative social values of wage labour and business ownership. What proportion of the jobs created by supermarkets have come at the expense of a shop owner or their employee? As Andrew Simms, policy director of the new economics foundation, notes in his response to the Demos piece
, to claim that supermarkets are responsible for job creation “hides the net destruction of employment that follows in the wake of supermarket expansion.” And how do these new jobs in supermarkets compare in terms of personal welfare and security? What is the wider impact on local employment, given that large supermarkets spend half as much as their smaller competitors locally? Unlike the food price argument, defending supermarkets on the basis of their net benefits to their local employment market seems less tenable.
On our own blog, Alexis Rowell of Transition Belsize
challenged the market reform approach we have advocated from the polar opposite end of the political spectrum:
“I don't see anywhere ... in anything Phillip Blond or David Cameron have said ... any convincing explanation of how you can make Tesco and local shops work well together. All the evidence is that out of store supermarkets destroy town centres, that supermarkets lead to money and resources leaking out of local economies, that town centre supermarkets lead to the closure of independent food shops.”
On Rowell's account, piecemeal economic reforms, such as revisiting the Competition Commission's findings on supermarkets, will not address the core problems with this dynamic, “the solution is not to give those who are at the margins of society more assets so that they can play at the materialist roulette table - the solution is to change the underlying values of society.”
This is where I part company with Rowell and Montgomerie and Wind-Cowie, as I believe that the overriding progressive priority today should be ensuring that regular people have assets - ahead of brands or low priced goods or new values alone. Increasing asset ownership needs to be a cornerstone of any new economic settlement. Income and affordable goods are a crucial element of social welfare, but assets, of which the ownership of a farm or shop is just one example, provide unique opportunities for full economic participation and give their holders a tangible stake in society. They provide the sense of esteem and inclusion that Wind-Cowie advocates and the social justice that Montgomerie praises. And while widespread asset ownership may not be "the solution" needed bring about the environmentally sustainable society that Rowell and the Transition Movement hope to create, these must not be viewed as mutually exclusive goals.