Crawshaws Butchers has just gone into administration – the polite way of saying gone bust – putting 600 jobs on the line. Which is exactly the point at which we should start celebrating the ability of this free market capitalism thing to make us all richer. For that’s exactly what we’re watching here, the process of all of us getting that richer. True, those 600 might be in for a tough time of it in the short, perhaps even medium, term. But the end result is indeed going to be a richer country and a richer people inhabiting that country.
The trick to understanding this is to think, well, why did Crawshaws go bust? And what are those 600 going to do once they find their feet again? For it is what they do, other than butchery, which is going to be our increased wealth. We’ll be richer by exactly their output in fact:
A meat retailer has gone into administration putting up to 600 jobs at risk.
Crawshaws has more than 50 stores across the Midlands and North of England.
The company said it did not have “sufficient cash resources” to carry out a restructuring after it failed to raise funds from investors.
Earlier this month, the retailer said it was attempting to raise equity to restore growth and profitability.
According to its latest set of results for the six months to 29 July, the group posted revenue of £21.6 million and a pre-tax loss of £1.7 million.
That’s the news. The reason as to why this happened?
A statement on the Crawshaws website read: “As previously announced on October 26, the board was considering a number of remedial actions including raising additional funding through an equity capital raising in order to address the key issues it had identified with the company.
“Since then, the board has been in discussions with existing investors and prospective investors.
“Unfortunately these discussions have not been successful in raising sufficient capital to address those key issues.
“The company does not have sufficient cash resources to effect the required restructuring of the business.
OK, so the capitalists decided that putting more capital into this business wasn’t going to work. But why?
Crawshaw has also faced increased competition from Aldi and Lidl, which are putting pressure on the big four supermarkets – Tesco, Sainsbury’s, Asda and Morrisons – to cut prices.
And that’s the first way we’re being made richer. Those more efficient retailers are, through free market competition, forcing down prices for us consumers. We’ve therefore more to spend upon other things, we’re richer. And this is how irruptions into the retail market do indeed work, as this from Jason Furman (formerly Obama’s chief economist) shows:
There is little dispute that Wal-Mart’s price reductions have benefited the 120 million
American workers employed outside of the retail sector. Plausible estimates of the magnitude of
the savings from Wal-Mart are enormous – a total of $263 billion in 2004, or $2,329 per
Even if you grant that Wal-Mart hurts workers in the retail sector – and the evidence
for this is far from clear – the magnitude of any potential harm is small in comparison. One
study, for example, found that the “Wal-Mart effect” lowered retail wages by $4.7 billion in
Aldi and Lidl are just the latest iteration of this process. But there’s also that second effect. Those 600 workers. Imagine that there’s just no place for them at all in retail. They’ve now got to go off and do something else. Very well then, in aggregate we’re all richer by the output of those 600 people. We’re still getting retail services, those are just being provided with the use of the human labour of 600 fewer people. So, we’re richer by what those people go off and do instead. One becomes a ballet dancer, 20 become nurses, 500 do summat and 79 enjoy more time with their families. As a society we’re richer by dance, health care, summat and leisure while still enjoying those same retail services.
That is, the older and less efficient producers of whatever it is going bust under the competition pressures from the newer and more efficient is exactly what makes us all richer. Capitalism advances, markets advance, by the bankruptcy of the old and ain’t it all just great?