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Britain’s Christmas closing down sale

The tsunami of bankruptcies that has washed along UK High Streets this year has left mainstream media excuses looking decidedly lame.  Those who still remember the long hot days of May and June 2018 might also remember how news outlets blamed poor sales figures on the heatwave and the world cup.  Then, in August and September they tried to blame some mystical hangover from the heatwave for a collapse in holiday and car sales.  It will come as little surprise to anyone, therefore, that the spectacular collapse in retail sales in the run up to Christmas is also – so we are told – weather related.  As the BBC tried to persuade us:

“Bad weather and the lure of online shopping saw consumers shun UK High Streets on one of the busiest days before Christmas.

“Retail experts Springboard estimate numbers were 9% lower on Saturday, compared with the same time last year…

“On Friday and Saturday, Storm Deirdre brought freezing temperatures, gales, snow and rain to many parts of the UK, dampening any hope for a pre-Christmas retail bounce.”

Online sales, of course, are one of the MSM’s favourite bogeymen; deployed to distract attention from the unfolding catastrophe that is actually washing the foundations out from beneath the British economy.  The other is the long shadow of Brexit; which by forces unknown – apparently – explains why workplaces across the UK have cancelled their Christmas lunches and why the British people are buying fewer mince pies this year.

Pro- elite news outlets like the BBC and the Guardian cannot resist throwing Brexit into any bad news story about the UK economy despite their being little evidence for a Brexit effect on consumer spending.  Indeed, even with large ticket items like cars, prices are likely to be much lower today than they will be next April when tariffs are applied.  So while Brexit is causing businesses to defer investment decisions, it is unlikely to have much effect on consumer spending.

Online sales are a different matter.  Clearly, the economies of scale, tax advantages and lack of rent and maintenance costs on physical premises have allowed online retailers to out-compete legacy High Street retailers… and that is a good thing to anyone other than an ardent communist (who would have the state own everything) or a kleptocratic neoliberal (who would have the state tax everything).  For hard-pressed shoppers whose wages have yet to recover to pre-2008 levels, online shopping has allowed a level of consumption that simply would not have been possible at High Street prices.  As the Office for National Statistics (ONS) reports:

“Traditionally, more money is spent within stores than online. Nevertheless, online spending is growing at a faster rate than store sales, contributing positively to the overall increase in all retailing over the last decade. From 2014, store sales have remained relatively flat.

“In 2017, online sales increased by 15.9% from the previous year; an increase of £8.2 billion from £51.6 billion to £59.8 billion. This is in comparison with an annual increase of 2.4% within stores; increasing by just over £7 billion from £299 billion in 2016 to £306 billion in 2017.”

Despite the higher percentage increase in online sales, physical stores continue to account for the majority of sales.  Nor is it clear that all or even most of the losses in High Street retailing are due to the increase in online shopping.  Indeed, in key sectors like restaurants –where there is no online alternative – we have witnessed a similar drop in spending.  Just this week, the BBC was forced to concede (although even here it could not resist throwing Brexit into the mix) that:

“The number of restaurant businesses becoming insolvent jumped by a quarter in 2018 as consumers shunned the High Street, new figures show.

“Accountancy firm Moore Stephens said there had been 1,219 insolvencies, ranging from standalone restaurants up to large investor-backed chains – up from 985 in 2017.

“It blamed overcapacity at a time when Britons are eating out less.”

The collapse in discretionary spending in a sector of the economy that has no online equivalent points to something far more serious than the weather or the government’s mishandling of the Brexit negotiations behind the retail apocalypse that is unfolding before our eyes.  At its simplest, as explained by the ONS, Britons have cut their discretionary spending on items such as clothing, recreation and culture, transport, alcohol and eating out.  At the same time, non-discretionary spending – particularly housing costs but also public utilities – accounts for an increasing proportion of spending.  That is, rather than looking within the retail sector for a transfer of spending between High Street and online outlets, the real crisis is the growing cost of non-discretionary items which has simply left increasing numbers of people with less money to spend on retail purchases.

This collapse in discretionary spending power is responsible for the collapse in UK car sales, which fell by a staggering 20 percent in September (when the new registrations are issued).  Then, the excuse was a change in European regulations which had delayed several new models coming to market.  We were promised, however, that the 20 percent slump would be cancelled out by increased sales in the following months.  Except, of course, those boosted sales failed to put in an appearance.  Instead, sales have continued to slump; with the latest figures for November showing a further three percent drop.

As with the hospitality sector, these vehicle sales matter because they have no direct online alternative.  Sure, in metropolitan areas, flash in the pan tech companies like Lyft and Uber allow a few of us to forego car ownership (although their primary effect is to undercut existing taxi services) but the effect is too small to account for the steep decline in car sales.  Less obviously, for most ordinary folk a car is the second largest purchase they will ever make.  The drop in sales also represents a drop in the number of loans being taken out to buy cars.  And since new loans are the primary means by which new currency is issued into the economy, this also points to a tightening of the money supply.

A house is the biggest item that most people ever buy.  As such, mortgages are one of the most important ways in which the supply of currency in circulation is regulated.  The more mortgages are taken out; the more new currency is issued.  So when – like now – the housing market begins to seize up, it is almost always an indicator that a recession is coming; simply because there is now more currency leaving the economy than is entering it.  The recessionary impact is compounded by the combination of higher interest rates and higher taxes which, at this point threaten to turn a recession into an economy-shattering crisis at least as bad as the one in 2008 (and that’s without factoring in a likely crisis in diesel supplies).

Less obvious in data that uses averages (wages, households, spending, etc.) is the way in which the UK’s slow motion economic collapse has impacted different sections of the population.  To some extent, this mirrors the ongoing collapse of the working and middle classes across the developed world on the back of four decades of falling energy per capita and the neoliberal politics that has accompanied it.  However, the British variant of neoliberalism has been particularly vicious in its attacks on the poor even as it doled out lavish corporate welfare to the rich.  Moreover, this trend has accelerated following the election of a Tory government in the wake of the 2008 crash.

For Britain’s rapidly shrinking affluent classes (which include most politicians, academic economists, bankers and MSM journalists) the period since 2010 has been a relative boom.  It is only in the UK’s wastelands outside the Cambridge-Oxford-London triangle and the archipelago of top-tier university campuses that we find the true economic collapse that awaits us all.

Credit – the supposedly positive force which kick-started the 1995-2005 boom years – has turned into debt – the evil force behind the 2008 crash and the ongoing decline of the global economy.  The difference between the two was to some extent a confidence trick; the pretence that somehow all of those loans, together with the interest, would one day be paid back.  After 2008, those outstanding loans became unrepayable debt.  The only remaining question to be settled was who was going to eat the losses – and the elite, the bankers and their lackeys in government chambers around the world made certain it would not be them.

Look at the plight of Britain’s working poor and you get a taste of what awaits us as our economic and social system eats itself from the roots upward.  It used to be that “problem” (i.e. unrepayable) debt was associated with social problems like gambling, alcohol and drug use, relationship breakdown and mental illness.  Beyond this, a proportion of working families would struggle with debts run up in emergencies or on the back of excessive spending; but these debts tended to be manageable rather than unpayable.  Since 2008, however, there has been a big shift in the nature of UK indebtedness.  As a September 2018 report from the UK’s National Debt Helpline (NDH) explains:

“The 10 years since the financial crisis have been a decade of change and uncertainty for the UK economy, with far-reaching consequences for household finances.

“Ten years ago a typical caller to National Debtline was struggling to pay credit cards, personal loans or perhaps a mortgage. Today, callers are struggling with smaller but trickier debts – often arrears on everyday household bills.”

Ironically, the low interest rates used to prevent a cascading collapse of the banks since 2008 has contributed to a gathering debt crisis as low income families have used borrowing to act as a brake on their collapsing living standard, as the NDH report notes:

“The availability of low-cost credit, along with incentives to buy goods and services in a competitive market presents an attractive and reasonable proposition. However, for some this ‘credit bubble’ presents risk, particularly in the event of an unexpected change in circumstances, and can leave people trapped in a debt spiral, using higher cost credit to cover the cost.

“In 2000 households owed £675 billion in debt representing 93% of their disposable income. In 2017 this had risen to £1,732 billion, and 133% of their disposable income.”

In addition to the general post-2008 economic stagnation, the NDH report points to a series of government policies that have removed social safety nets from those on low incomes (and those currently in the affluent class who will need them when they lose their jobs, become sick or experience a relationship breakdown).  At the same time, changing banking regulations have closed down access to less expensive forms of credit; resulting in a growth in expensive small loans; notably from a revived and migrated online catalogue and rent-to-buy industry.  However, by far the most troubling of all the growing debt problems facing the UK is that increasing number of households are turning to credit to meet their non-discretionary spending commitments:

“Whilst credit use has seen considerable growth, at National Debtline we have seen a shift from people predominantly struggling with repaying borrowing on consumer credit, towards people struggling with a broader range of everyday household bills…

“Perhaps the most significant trend we have seen over the decade, however, is a significant increase in people calling whose budgets are fundamentally broken – with simply not enough income coming in to cover their essential spending.”

One of Karl Marx’s most important contributions to our understanding of how the modern economy operates was his description of cyclical “crises of over-production.”  As the mass of the working population is impoverished, so collectively they are no longer able to purchase the goods and services they work to create.  As spending drops, firms cut back on their costs – the largest of which is usually the wage bill – further impoverishing the working population and further curbing their spending.  In reality, a crisis of under-consumption that can only be exacerbated by further cuts to people’s spending power.   For all of Marx’s errors (chief of which was his mistaking labour rather than energy as the source of value/profit) his description of this kind of cyclical crisis looks very similar to what we see unfolding before our eyes in 2018… Right down to the mass revolt of the yellow vests across France.

If, as the happy-clappy MSM journalists would like us to believe, all that we were seeing was a shift in spending from Britain’s High Streets to online retailers, then at the very least we might expect the online companies to be thriving.  They are not.  One of the main causes of the stock market declines in 2018 was a drop in the value of so-called FAANG stocks (Facebook, Amazon, Apple, Netflix and Google) as online sales growth faltered.  In the UK, too, we are witnessing a slowdown in online sales, as the BBC reported yesterday:

“Online fashion retailer Asos has warned of weak profits this financial year after ‘unprecedented’ discounting hit its trading in November… After reports of dismal High Street activity last month, the Asos warning indicates the pain is spreading online… economic uncertainty plus weaker consumer confidence had led to ‘the weakest growth in online clothing sales in recent years’.”

Nor is Asos the only online retailed to be impacted by the decline in UK discretionary spending.  According to the Daily Mail online retailers have joined their High Street rivals in what looks suspiciously like a closing down sale for the UK economy:

“Troubled online stores yesterday joined in the panic-selling sweeping high streets.  They cut prices to jumble-sale levels in a desperate attempt to drum up business…

“On Saturday the Daily Mail reported that high street stores were knocking as much as 80 per cent off their wares.

“Asos boss Nick Beighton said he had never seen such low prices, adding: ‘There’s more than Brexit going on here, there is a weakening in consumer confidence and some of that has got good economic reasons behind it’.”

For those of us who take a long-term view of energy economics, the unfolding collapse of UK retailing is merely the latest chapter in the collapse of the western global civilisation built in the aftermath of World War Two.  Declining energy and resources coupled to the environment-destroying fallout from the industrial processes that allow 6.5 billion of the 7.5 billion humans on the planet to exist, are producing a catastrophe that may well prove to be an extinction event for the human species.  It is no accident that UK life expectancy has fallen for the first time since the nineteenth century.  Nor is it any surprise that a growing part of the population is in revolt against the elites who have been leading us down this path for several decades.

The damage is done.  Its consequences are irreversible.  No amount of non-renewable renewable energy-harvesting devices are about to change that.  The Christmas fire sale on the UK’s High Streets and in retail outlets is merely the latest manifestation of the gathering storm that awaits us.  US Author Kurt Vonnegut – a former GI who was forced as a POW to clear up the charred remains of people killed in the Dresden air raid in February 1945 – had a saying: “Eat, drink, and be merry, for tomorrow we die.”  It is, perhaps, apt for what may well prove to be the last consumerist Christmas before the collapse.

As you made it to the end…

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