Aug 282017

Walk around any town centre in the United Kingdom and you are likely to encounter the same chain shops, the same chain cafes, the same chain restaurants and pubs. British highstreets have become zombified, they are boxed-in with chains, charity shops, pound shops, bookies and nail bars. None of which is inevitable, and none of which hasn’t occurred without choice made by governments to support a narrow and limited franchise-version of the marketplace. This is the result of tax-breaks and preferences that go to large corporations that are centralised, branded, vertically integrated and stultifying in their operational form.

The British high-street lacks diversity, it lacks independence and it lacks charm. Each town I visit has the same products on sale, from the same companies, in the same format, and for the same prices. I thought that capitalism was supposed to promote a marketplace of competing services, products and ideas? Instead, the British high-street has the flavour of Soviet Russia, with uniform businesses selling products that are chosen centrally by a committee, and which are pushed-out to consumers with a dull regularity that leaves them with little expectation of creative difference or variation.

The usual line that is trotted out is that economies of scale are what deliver low prices to consumers, but if this was the case, then those who make this argument would be making a strong case for the complete centralisation of all consumer services and the supply of all goods, as variation is so obviously wasteful. What they don’t account for are the other factors that market diversity brings, like innovation, or local identity, or tradition, or craft, or civic engagement and pride.

It used to be the case that a town or city centre would be populated with local businesses that were run by families who had a stake in the civic life of the community. The owners of these businesses, the shopkeepers and the stall holders, the managers and the suppliers, all interacted and supported the good running of the town. If you work as a manger in a chain, however, what interest would you have in being part of the civic infrastructure of a community? None as far as I can tell. You would be more interested in your relative position within the company network.

The centralisation of things like cafes and restaurants has had a knock-on effect, as all the marketing and publicity work that could otherwise be done locally is locked-up in the headquarters of the holding company. This might be in London or New York, but it’s not driven by local ideas and using local design services and skills. The centralised market is therefore a poor experience for consumers, while simultaneously hollowing-out any allied or associated businesses that might develop around them.

Dull and repetitive marketing patterns emerge that are reliant on large-scale marketing, a rapacious speculative property system, and a de-localisation of services. When we walk along a British town centre high-street, the shops and the cafes with the most money spent on them are all the same. There is little variation. They are homogenised and identikit. To put it bluntly, they are boring and suck the joy out of life. They dominate the market and all that is left is for charity shops and fast-food shops to fill the void. This is hardly a successful and innovative market environment in which new suppliers can emerge and offer different types of products or services that meet more local needs. Its differentiation by global brand, not by innovation, and it’s boring.

So, what can we do about it? Well here’s a couple of ideas that rely on some simple changes to our corporate tax laws and which use the market mechanism to foster a different culture of enterprise. There is an economic model that isn’t discussed a great deal these days, but it is actually one of the founding principles of the European Union, though it doesn’t get a lot of attention these days. Distributionism says that those things that can be done at the lowest level of society, should be done at the lowest level of society.

For example, in 2008 when the financial crash hit, Thornton’s the chocolate retailer had one thousand stores across the UK. They nearly went broke and had to flood the market with cheap products in order to get cash into the company. Remember the stacks of boxes of mass produced chocolate that stood in supermarkets and petrol station shops? In one fell-swoop this bloated and centralised company, churning out its factory produced chocolate would have gone bust, with the jobs and associated services it would take with it.

However, if we had a distributionist model of retail businesses in the UK, and rather than running a national chain of chocolate shops, there would be a network of independent and family-run businesses, some of whom might have gone bust, but many who would have survived. They would be making and producing their chocolate products locally, they would have embedded local skills, they would be part of a civic network, they would be family oriented, and so on. If Thornton’s goes bust the loss of skills is negligible in each of the towns they are based. It is a simple retail operation that can easily be reproduced. In a sense, the only skill needed to run a Thornton’s shop is to stack shelves and cash-up the till.

Centralisation and economies of scale are not the answer. Diversity and innovation don’t come from companies that are vertically integrated and centralised. In Leicester, the independent coffee shops are cheaper than the chains. So the price mechanism argument doesn’t hold water either. If the market was about competing on price, why is so much price conformity in the UK so consistent, with the exception of London that seems to demand a premium, the prices in the coffee chains around the UK are consistent and don’t vary much. It’s contradictory that people argue on the one hand for market flexibility, while on the other hand they apply universalist prices?

There is a rule of thumb that we can use to enforce more local provision and local market mechanisms, and it fits with the distributionist principle quite well. Malcolm Gladwell described it in the Tipping Point, when he explained the one hundred and fifty rule. This is the general number of people who can form a social network or community without having to impose bureaucratic management systems. At no more than one hundred and fifty people in an organisation or a community, it can be managed through inter-personal relationships and connections. People who have different roles and do different types of work in these companies or communities get to know each other, they can relate to each other, and they can interact directly with each other.

So here is my list of suggestions for changes in the UK retail and services sector: Apply distributionist principles by applying the one hundred and fifty people rule. This means that any retail business that employs more than one hundred and fifty people faces progressively higher taxes. If a business grows to employ more than this number of people, then it has two options, to pay more tax on these roles, or to split and subdivide the companies into separate and autonomous units that are managed independently and sustainably from within the new company.

This means breaking-up the vertically integrated product and services model, and reinstating a network of independent businesses that can choose between suppliers in an open and transparent marketplace. The large manufacturers and producers would be able to sell their services and products to these companies, but they would not be able to tie them into contractual relationships that prevent alternative suppliers or service providers also entering the market. The choice and the responsibility for getting this right would be that of the people working in the local business. If they get it wrong, they lose their jobs.

Another couple of actions would be necessary to help this work. Firstly, any form of undeclared labour must be taxed, not on the profits of the company, but on its operational revenue. How is it that in the UK, customers are forced to do the work of the companies that are selling them their products, and making profits from them? Standing in queues at counters is a form of undeclared labour that these companies benefit from.

We need a queue or a tray tax, something that will dissuade businesses from ripping-off their customers by making them do the work. It is quite common across the rest of the world for customers to be seated and served at their table. In fact, it is more efficient and more pleasant. Standing at a counter or a bar is a way of a company getting its customers to do their work for them.

Customers in bars and cafes should always be seated and served at their table. This would limit the number of customers that can be serviced at any one time, and push-out customers into other businesses, and would be regulated by the price mechanism. The more popular a café or bar, the more they can charge. Those who wish to compete can do, but on the basis of either price or innovation, and not by abusing their market position and crowding-out competition as happens far too often now.

One additional factor has to happen to make this work. When a bar, café or fast food shop sets up, it must offer seating and toilet facilities, and it must use washable plates and cutlery as the cheaper option for eating. This means taxing disposable and transportable containers that just end up in the bin. It is a job for someone to wash these dishes and clear these tables. It is social contact for people who eat in cafes and sit with a proper meal. It is good business sense to spread and open the market so that it is sustainable and independent, rather than centralised and corporately managed.

Whatever happens with Brexit, the culture of the service industries have got to change in the UK. This can only be done, however, by turning the market mechanism around on itself, decentralising, breaking the vertical stranglehold, ending the franchise model, promoting local and family ownership, applying sustainable principles to waste, applying sociability principles to service delivery, and getting people to spend more time relaxing and enjoying these services. This is not an anti-business agenda, its more pro-business than the dumb system we cling to at the moment. It’s time to change it.