loss leaders
A draft law on the “modernisation of the economy” unveiled yesterday threatens, according to its supporters and some of its critics, to revolutionise shopping in France. Other critics suggest the draft law is too timid. Large French shops will mostly remain closed on Sundays. Little effort will be made to diminish the regional domination of French supermarket chains.
The draft presented by the Economy minister Christine Lagarde will make it simpler to build medium-sized supermarkets. That should encourage “hard-discount” chains such as Lidl and Aldi, which have a relatively small share of the French market.
If approved by parliament, the law would also abolish the existing complex rules which, in theory, forbid sale below cost and force manufacturers to provide goods at the same wholesale price to hyper-markets and village shops.
With inflation gathering pace and wages stagnating, the law is intended to help to fulfil the President Nicolas Sarkozy’s promise to increase the purchasing power of French people.
The federation of large shopowners predicted that the law would reduce prices of food and basic household goods by 2 per cent. Serge Papin, head of the Système U chain of supermarkets, predicted price cuts of up to 3 per cent.
Michel-Edouard Leclerc, head of the Leclerc chain, said the law would “cut inflation in half” by allowing shops to refuse the “excessive price rises” demanded by manufacturers. He predicted a “vast spree” of price-cutting from September, if the law is passed.
Yes, it will slightly cut inflation doubly. On the one hand, grocery prices will go down slightly. On the other hand, massive numbers of workers and owners of small groceries will likely be put out of work and either stay out of work or accept the low wages offered by the hypermarkets that walmartized their shops out of existence. We’ve seen this before - back during the boom in the US the greenspanites couldn’t stop talking about the fact that Walmart singlehandedly kept inflation at safe levels. What they didn’t discuss much is the fact that this is in part accomplished by the proletarianization of the workforce.
The French ban on loss-leaders always seemed to me an incredibly sensible piece of law, one that at once supported employment and consumer convenience and urban vitality. Prices at hypermarkets may go down some, but it seems to me the net effect has to be that prices at small shops will simply go up.
As if we needed to be reminded that each crisis - whether deflation or inflation, whether demand failure or food crisis, poor farmers or expensive food, too-expensive houses or too-cheap ones - will always be met with the same set of responses: deregulation, lower taxes, and the dismantling of the social state.
perils of going plastic
Just try doing this with your Visa card:
we’re winning! or, we’re losing!
Strange and a bit refreshing to see this from Brad Delong….
But, over the past generation, confidence in the “Kuznets curve” has faded. Social-democratic governments have been on the defensive against those who claim that redistributing wealth exacts too high a cost on economic growth, and unable to convince voters to fund yet another massive expansion of higher education.
On the private supply side, higher returns have not called forth more investment in people. America’s college-to-high-school wage premium may now be 100%, yet this generation of white, native-born American males may well wind up getting no more education than their immediate predecessors. And increasing rewards for those at the increasingly sharp peak of the income distribution have not called forth enough enterprising market competition to erode that peak.
The consequence has been a loss of morale among those of us who trusted market forces and social-democratic governments to prove Marx wrong about income distribution in the long run – and a search for new and different tools of economic management.
Never thought I’d see the day….
