Aren’t free markets just the most fantabulous?
Apparently, when private equity capitalism goes wrong it’s the consumers that benefit:
Asda’s executive chairman last Friday unveiled a “war chest” to fund price cuts, improve availability of products and refresh tired stores. Leighton said he was “fixing the basics”.
The supermarket has not disclosed how much it is spending on the effort but analysts suggest it could be close to £900m over the next three years.
Asda’s not doing very well trying to pay down its debt mountain apparently. So, cut prices to boost turnover. Works for us.
While Leighton insists he is relaxed about the financial pressure, it is clear he must stop the rot. To do so, he has fired the starting gun on a fresh supermarket price war.
Everyone else also has to follow the price cuts because that’s how markets work. Works for us.
The thing is, when free market capitalism works, does not go wrong, this also benefits the consumer. Back 25 years there was lots of toothsucking over how awfully the supermarket sector served consumers. Net profits were as much as 6% of turnover - a globally high number. Then in come Aldi and Lidl - just free-market competition looking to get themselves some of those profits - and supermarket margins are down to 2 and 3% today.
Free market capitalism benefits the consumer when it goes right and also when it goes wrong. Which is pretty fantabulous.
We’ve made the point a number of times that we’re not very worried about the capitalism. Yes, a very useful tool that does indeed work. But we’re not outside Waitrose and the Co Op demanding that such socialist - and they are, they’re both coops - organisations be closed down to benefit the capitalists. Rather, we revel in that free market in ownership forms as well as all the other manifestations.
All of this works for us. The consumer benefits both coming and going from that free market part of competition among capitalists.
As one of those memes the cool kids like so much goes. Doesn’t matter, had markets.
Tim Worstall