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More thoughts on food

I guess the rise in commodity prices – as I alluded to in my post below on farming – has galvanised a fair bit of commentary on the business of producing, shipping and selling food. Perhaps it is a welcome sign that in an affluent age such as ours, when so many people are utterly divorced from this most basic human activity, we have been reminded of it. Anyway, it tells one a lot about the state of the culture that this is considered a good headline in the Daily Telegraph: “Big supermarkets are not evil.”

Of course they are not evil. But at a time when any business, even if it has to operate in a ferociously competitive one like retail, is regarded as morally dubious if it is simply big, it is at least good that some in the MSM are, however belatedly, sticking up for such enterprises. About the only thing I can think of that counts as a legitimate criticism of supermarket chains is when their bosses exploit, or actively seek, to get governments to pass eminent domain, or compulsory purchase, laws to make it easier for them to build their sites. That is a just cause for free marketeers to complain about. Otherwise, though, bleating about supermarkets is largely nonsense. If they do “force” smaller shops out of business, the truth is more often that regulations, high taxes and extortionate rents are hurting small shops. It may well be that low-price supermarkets, which exploit economies of scale, are biting into the margins of some mid-tier shops that neither have the benefits of bigness nor the niche attractions of a high-margin, specialist retail outlet. But I suspect that a lot of the dislike of this trend is more aesthetic than economic. Oh the vulgarity!

One issue that tends to be overlooked is that in our prosperous age, we have lost some of that early awe, even excitement, that people used to get when they had walked into a massive shop for the first time. Back in the early 1950s, when there was still some rationing in Britain, my father remembers how impressed he was by walking into a supermarket in Canada. You could, he noted, buy anything from a suit, a tractor, to a tin of salmon. He thought that was fantastic.

9 comments to More thoughts on food

  • I remember walking into a (medium size) supermarket for the first time after arriving in Israel from Russia in 74. I was awe struck.

  • Good point.

    In my follow-up thoughts on your last post, it occurred to me that the market solution to “food security” is for someone to buy insurance against high food prices, the premiums of which could be used to keep capacity on stream. Supermarkets would be a potential buyer of such insurance.

    However, that would produce political complications because of the unpopularity of supermarkets.

  • Gregory

    I guess it’s not just a question of using eminent domain. I greatly suspect that one of the major reasons for this dislike against supermarkets is because they believe they will do the ‘Microsoft’ (embrace, extend, extinguish). IOW, they go in with low, low prices, and then when all the other sellers have been chased out of the area, they start abusing monopoly power.

    Which is nonsense on the face of it. My Marketing lecturer once gave us a walkthrough on how Carrefour (she’s French) managed to keep their prices below cost, and it had nothing to do with undercutting the competition (they leveraged the difference between cash at hand/their credit terms from the credit card companies and their creditors’ credit terms, usually 90 days, and used the cash flow to generate income, something like that but it takes far more time than I’m willing to spend explaining it).

    Ever since then, I shop at the large chains. Who cares about their service? Not like I’m gonna get better service from anyone else.

  • owinok

    Well said but its important to make those most in need of this to take cognizance. If I were accorded three wishes, one of them would be that Walmart ‘et al” do find some space in south Asia and Africa today. However, I suspect that it would not be worth their while today with the statists, protectionists and thieves leading most of these nations.

  • RRS

    The famous: “Location, location, location …”

    can now be recited as: “Distribution, distribution, distribution….”

    The “advanced” economies (economic perimeters) are now all distributive economies; that is, efficiencies of distribution are the chief element of improving standards of living.

    There does seem to be adequate “production” of food stuffs (subject to some marginal substitutions) difficulties arise in the modes of distribution, many of which are entirely “political” in origin.

    With proper distribution infrastructures (that are not yet being adequately addressed) Russia could quickly rebuild the world’s wheat stockpiles. Today, much of its wheat production is unmillable, large quantities never make it from “on the ground ” storage into markets.

    In contrast, rice production and distribution, from the U S could (but may not for non-market reasons) rebuild world stockpiles.

    A quick look at how much of the end use prices for food stuffs is directly attributable to distribution costs (at all levels) will give one a clue as to the importance of that function.

  • cerebus

    The combination of compulsory purchase with regulation/tax/rent forcing out smaller competitors seems like strong grounds for criticism, a recipe for extremely harmful corporatism.

  • Oli

    When a supermarket uses its legal arm to prevent national competitors into its rural areas. This is not free market retailing.

    Protectionism is bad – whoever does it. Dressing it up as environmentalism, localism or just nimbyism is no good – it is still a deviance from free market economics

  • My thinking is that many of the folks who don’t like supermarkets and retail chains because they are “too big” also stop liking particular bands once they “go commercial”.

  • Owinok,
    I helped open a Wal-Mart in Xiamen, China about 4-5 years ago.
    Customers were almost banging the doors down.