Smaller shops? What we need is bigger supermarkets

“Stop Clone Town Britain!” is the new rallying cry of left-wing intellectuals who view supermarkets as the symbol of global capitalism they dread so much. The slogan is the brainchild of the New Economics Foundation, an anti-globalisation “think and do tank” which dislikes economic growth. They demand that supermarkets be broken up and permitted only an 8% market share.

They propose “local bans on ‘formula’ business, defined as businesses that adopt standardised services, methods of operation, decor, uniforms, architecture, or other features virtually identical to businesses elsewhere”. They even have researchers working on the abolition of money, favouring a return to a feudal barter economy (though they call the current economic system feudalism).

Unfortunately, although the ideology of “new economics” is deeply flawed, some of its ideas are catching on. A new campaign called Tescopoly takes work done at the New Economics Foundation, adds support from the Small and Family Farms Alliance, and promotes anti-supermarket propaganda on university campuses.

In Westminster, parts of “new economics” are gaining support: the All-Party Parliamentary Group on Small Shops recently released a report concurring with the opponents of supermarkets. Quite rightly, the British Retail Consortium accused the Group of “trying to turn the clock back and reverse some well established trends in consumer shopping habits”. And now the Office of Fair Trading is looking at the competitiveness of supermarkets again even though prices have been falling.

In fact the whole notion of Clone Town Britain is nonsense. There are more retailers in Britain than ever before. Every week hundreds of new independent shops and restaurants open. But what consumers have made perfectly clear is that they want small shops to either compete on price or to provide something special. The days of the old-style butcher, baker and candlestick maker may largely be over, but consumers love delicatessens. They reject the old-style cafe that served instant coffee, but they love the independent gourmet coffee house. Retailing is extremely competitive, and small shops have to keep improving to win business. It would be totally against the interests of consumers to intervene in the marketplace to give corporate welfare to small shops: that would raise prices and lower quality for consumers. The only beneficiaries would be special interests.

Balham in south west London is a vibrant community with no less than five supermarkets. Some independent retailers couldn’t cope when the supermarkets first opened up, but the high street is not dead: it’s now full of interesting, diverse shops, good restaurants and wine bars. Left-wing ideologues see the Morissons and the Sainsbury’s and scream with rage, but everyone else goes for a Mojita and a Cuban in the Firefly bar.

The power supermarkets are alleged to have is blown out of all proportion. The problem that British farmers have is not due to supermarkets but because they are internationally uncompetitive. Britain simply does not have a comparative advantage in most farming. Despite huge subsidies from the Common Agricultural Policy, British farmers are often more expensive than producers like New Zealand and Argentina, even when transport costs are added. It is no wonder the Small and Family Farms Alliance would like government intervention to force up prices.

But instead of lobbying for government favours, their members should follow the advice of a report last year by Cameron Carswell and Anthony Batty, two economists from the University of York. They say farmers should respond to market forces and quit farming or become more specialised, producing high-end organic produce which naturally commands higher prices. Farming in Britain is an environmental disaster because we grow things for which we are naturally not suited. They propose a one-off payment to farmers covering several years’ income from the CAP (funded by issuing bonds) as a politically-astute way of abolishing agricultural subsidies, and letting much of the farming go overseas.

Cheekily, the Tescopoly campaign also says that supermarkets are hurting developing country producers. The truth is that supermarkets have hugely increased our access to overseas foods. In fact, they help offset some of the pernicious effects of Europe’s protect-and-subsidise agricultural regime. Because they are very competent at buying from developing countries, they provide access to British markets that never before existed. The anti-trade ideology of “new economics” would effectively ban world trade, locking developing countries in the shackles of poverty.

At the same time, it is simply not true that supermarkets do not value local produce. They have massively increased choice for consumers, they are now major sellers of locally-produced products. Tesco sells 7,000 of them. Moreover, there is nothing stopping consumers from buying from a farmers’ market if it provides specialty cheeses and jams they can’t find in the supermarket. But consumers have made perfectly clear that they don’t want the hassle of going to a farmers’ market for value cheddar.

Moreover, it is simply not true that Tesco has an undue influence over the planning system. In fact, restrictive planning laws mean British supermarkets are needlessly small: French ones are 50% bigger and American ones 90% bigger. Research by the McKinsey Global Institute shows that Americans enjoy 38 feet of retail space per person whereas we Brits have a mere seven square feet per person. The result is higher prices for consumers. Supermarkets find getting permission to build on new out-of-town sites very difficult, which is why they are interested in smaller high-street outlets. It is no wonder that Tesco is looking to California to expand: its ability to expand in the UK is being strangled.

Attempts to increase regulation on supermarkets will mean just one thing: consumers will be made worse off. That is why the OFT’s proposed full investigation can only be bad news for consumers and taxpayers who will have to foot the bill for yet another investigation. The correct thing for government to do is to look at freeing these venerable beasts from captivity, allowing more and larger stores, particularly so that supermarkets open near others, thereby encouraging very fierce competition (which supermarkets might not like but which will be great for consumers).

Ideological opposition to supermarkets is fine for affluent middle-class intellectuals who find global capitalism terribly vulgar. But for millions of hard-working Britons, supermarkets are a godsend. We like them because they mirror British society: they fit around our hectic schedules, opening long hours and allow us to do our shopping quickly and efficiently and get back to our families and friends. Because they have important brands, we know we can trust them to ensure the food they sell is safe. The proportion of weekly income spent on food has tumbled from 34% in 1960 to 12% today, raising living standards. Attacks on supermarkets are not just attacks on companies but attacks on the poorest, most vulnerable sections of our society, such as struggling students, recent immigrants and unemployed people who find money very tight. Intellectuals may sneer at the 9p Tesco Value Baked Beans or the 15p loaf of bread, but forcing us to return to local shops would be a smash and grab raid on the lowest income Brits. Supermarkets thus have an important social role: we should not let the ideologues and trendy middle classes force up prices.