Supermarkets spell the end of civic life

Today sees the publication of a report from the think-tank Demos which argues that supermarkets should be seen as an intergral part of creating the so-called ‘Big Society’. The report’s author said:

“[The supermarkets] have a role to play in helping deprived communities to regenerate by reducing stigma, boosting community morale and bringing low-cost quality produce into the area. It’s easy to be cynical about mainstream retail chains, but they can be the game-changer for transforming perceptions within and outside rundown neighbourhoods.”

The only problem being that, in the USA at least, supermarkets have been linked with a decline in civic life and the closure of those very institutions that the Big Society claims to promote.

When two economists, Stephan Goetz and Anil Rupasingha, carried out a detailed study [1] in the US of the links between Wal-Mart and “social capital” – the community cohesion and mutual support that makes neighbourhoods work – they were astonished to find that the presence of a Wal-Mart nearby brought the voting turn-out down.

Other measures of social capital went down too. They found that communities that gained a Wal-Mart during the decade had fewer local charities and local associations such as churches, campaign and business groups per capita than those that did not. But why?

It seems that by crushing smaller businesses and losing the local knowledge and relationships they embody, the supermarket economic model – used by its UK subsidiary Asda, and widely copied by rivals such as Tesco – cuts the threads that hold an engaged community together. Big supermarkets, often lured by grants into regeneration areas, have not acted as useful anchors but instead have competed, often unfairly, with the surrounding businesses – sucking money out of the local economy.

Governments have mistaken being “big business-friendly” with being pro-enterprise. And supermarkets have not only killed the rich diversity of producers, suppliers and shops that are essential to a resilient economy, they are also dissolving the glue that holds communities together.

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[1] Stephan J. Goetz and Anil Rupasingha (2006) ‘Wal-mart and social capital’, American Journal of Agricultural Economics, Vol 88, No 5.

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Why Tesco’s arithmetic doesn’t add up

David Boyle is a nef fellow, a writer and the editor of nef‘s newspaper, Radical Economics.

Are Tesco's claims about jobs correct?

Tesco’s spokesman Lucy Neville-Rolfe claims that the government’s new competition test will cost 25,000 jobs over the next decade.  This is highly misleading, and not just because Tesco are now firmly in the anti-competition camp.  Actually, as most people have known since Adam Smith, more competition usually means more jobs.

What this nonsense seeks to avoid is the truth which has devastated so many local economies over the past decade – some retail developers build the local economy; some corrode them.

It is highly misleading to suggest that all Tesco developers create jobs, when research suggests that most big supermarket developments are net destroyers of jobs.  It’s as if Lucy Neville-Rolfe and her kind are able to add, but are blind when it comes to subtracting.  The jobs in a new Tesco have to be offset against those which disappear as a result.

Local authorities need to do much more to distinguish between new stores which will be genuine anchors – which will bring in more customers to the local high street, and increase the money that stays circulating in the local economy – and those which won’t.

Sadly, many Tesco stores are not actually providing anchors to the surrounding shops.  They are intending to compete with them and, since the big four supermarkets are semi-monopolies – which have huge power over suppliers – they will tend to drive out any local competition.  Companies which, like Tesco, intend to compete in nearly every local market will rarely be effective anchors.

If you wonder why so many of our local economies have been hollowed out, here is the main reason: we have been using wealth destroyers as anchor stores.

So next time someone like Lucy Neville-Rolfe talks about the jobs that are not being created because someone has had the temerity to put some mild block in their path, ask them to do some proper arithmetic.

Every little helps?

Veronika Thiel is a researcher and project manager on nef’s Access to Finance team.

The ClubCard creates a huge database about customer spending habits. Tesco's new current account will only add to the supermarket's knowledge about the way we shop.

Yesterday, Tesco has announced plans to provide current accounts in thirty of its stores. If this pilot scheme is successful, then the supermarket giant will roll-out banking services nationwide.

In principle, this isn’t a bad move. Britain’s banking sector isn’t really a competitive one anymore. According to an Office of Fair Trading report written before the Lloyds TSB-HBOS merger, 79 per cent of current accounts held by four high street banks. Any injection of competition into the market is, therefore, a welcome thing. And with 2,115 stores across the country, Tesco outstrips the network reach of any single bank.

But those 2,115 are also turning our high streets into Clone Towns, robbing the UK of its retail diversity. And although Tesco has successfully monopolised the nation’s grocery shopping, it shows no signs of slowing down. Tesco is quickly becoming a cradle-to-grave company. You can buy your baby food, school uniform, kitchen appliances, computers, books, internet access and telephone (both mobile and landline), fill up your car and get it insured, get a health check and prescription and, yes, even plan your funeral at Tesco. In many communities, the only pharmacy is in Tesco. It’s becoming the one-stop-shop for your entire life.

In this light, Tesco’s banking plans hardly look like a diversification of the market or the creation of some healthy competition.

Tesco also has one of the biggest databases storing customer information. If you use your Tesco ClubCard regularly, then you can be sure that the supermarket has a wonderfully clear map of your spending habits: what you buy, where you buy it, when, and how often.

Now that they’re throw banking services into the mix, they’ll have another database at their fingertips. My bank can quite easily tell what I do from my transactions: whenever I pay with a card, they know what I bought. That’s why I quite often use cash. I don’t have loyalty cards: they save you very little money, but they do make you a perfectly observable consumer.

Now, I’m not suggesting that Tesco will breach customer confidentiality or abuse the data that they collect. Due to banking rules, they will be unlikely to be able to match a bank account with the data collected on a Tesco ClubCard.

Nevertheless, the information that Tesco will hold about a person with a ClubCard and a current account would reach frightening proportions. This concentration of information is worrying. If you think that the Government holds way too much data about your person, then think again. Tesco is likely to know more about you than your local council or your GP. And if you are lured by their offer of a current account, they will soon know even more.

Whilst Tesco’s move into banking is, on the face of things, a welcome addition of diversity to the retail banking market, it also is the opposite: concentration. Concentration of the provision of goods and services in one company, and concentration of data collection.

Let’s make sure that Tesco isn’t the only new bank on the block. Support our campaign to offer banking services at the Post Office. Write to your MP and tell them to support Early Day Motion 1082. Chose to bank at a place that you trust and that will also support your local community: the Post Bank.

UPDATE: You can now sign a petition supporting the Post Bank.

Supermarkets, shopping centres and the death of small shops

David Boyle is a nef fellow, a writer and the editor of nef‘s newspaper, Radical Economics.

Disease caused by doctors is called ‘iatrogenic’. There is a lot of it about. But it maybe that we will have to come up with a new word, invented for the recession, for economic disease caused by regenerators. And the worst of the iatrogenic disease caused by conventional regeneration is the over-supply of heavily subsidised shopping centres.

Many of them, like the new Westfield shopping centre that now dominates Shepherd’s Bush, are now busily moving round retail business that existed before, draining existing centres and smaller shops in particular. Other new supermarkets, so excessive in their provision in the past decade, are now draining nearby high streets – making local economies and their populations more dependent and more vulnerable to global recession than they were before.

That has been the legacy of the expansion of Tesco in the UK and Wal-mart in the USA. More dependence, less enterprise.

Now we are in a global down-turn, these things matter enormously. Because their local councillors have colluded with powerful retailers to build a new supermarket, they will be poorer than they would have been.

So the first impact of the triple crunch on UK retailing is going to be a new way of measuring the impact of potential shopping infrastructure, working out the impact plans are likely to have on the local circulation of money. Will it keep money in local circulation and build local economic independence, or will it corrode it?

The other impact is going to come from the energy crisis. If oil is going to be a great deal more expensive – and it is – then the whole basis of our monopolistic retailing is going to have to change. We will no longer be able to fly in tomatoes from the Caneries, or shuttle vegetables down to Italy and back for packaging. We will have to reconnect local people with local production, because it will be affordable.

The third effect is going to be the increasing cynicism of people when they are faced with marketing, spin or corporate claims. There is already a growing demand for what is authentic, real, unspun, local and human – not yet by anything near a majority, but a growing minority nonetheless. This, and the other impacts, are going to change retailing enormously: shops will be smaller, and their networks will be more local, more responsive.