Wiping Out Millions of Jobs is the Whole Darn Point


This little story comes from the Indian retail sector but the same story is writ small across the US and the UK. In the US it's the fighting against the "big box" stores, the idea that when WalMart comes to DC or Chicago that jobs in all the little Mom and Pop stores will disappear.

In the UK it's that when Tesco or one of the other supermarkets turns up then all of the neighbourhood shops, the butcher, the baker, the fishmonger, will disappear. The attempted liberalisation of retail in India is being held up because those foreigners, those WalMarts and the like, will destroy the jobs of millions in the more traditional small shops.

Last week, and after years of fevered speculation, Indian prime minister Manmohan Singh said foreign retailers would be allowed to own up to 51pc of supermarket chains in India.

The move effectively paved the way for the world's largest retailers to run their own shops in the $450bn (£290bn) market.

However, in an about turn on Saturday, Mamata Banerjee, chief minister of West Bengal and a member of India's fragile ruling coalition, said plans had been put on ice while a new "consensus" was formed.

The move followed protests from politicians and domestic retailers, who fear that opening up the market would wipe out millions of small-scale operators.

Well, yes, wiping out the jobs of those millions of small-scale operators is actually the whole darn point of the exercise. That's what we're trying to do, destroy jobs.

The first objection to these replacements of small retailers by larger is that people prefer shopping at the smaller ones and to allow the large to open deprives them of this choice. To which the answer is that this is nonsense. Revealed preferences shows that. If people did in fact prefer shopping at the small shops then they would: that they in fact, when offered a choice, go to the large ones shows that they prefer the cheaper prices to the haggling and social life but higher prices that comes with the small shops.

The other argument is that by allowing the larger shops we put those millions of people out of their jobs. Yes, this is true but this is also the point. In whatever it is that we try to do, grow trees, cure the ill, distribute food, keep the lights on or build houses, we would always prefer to do this in whatever manner it is that uses the least resources.

We don't say that using 5 tonnes of copper to wire a house is better than using 500 kg to do the same job. Well, we don't say it is better just because we're using more copper that is. So why would we say that having a retail sector that employed more rather than fewer people would be a good idea?

Quite, we shouldn't, for the claim is a claim that we should be using more of a scarce resource, labour, to get a job done, the distribution of consumer items. We should no more want to use more labour here than we should use more copper in wiring a house.

So, to complain that allowing in the supermarkets, those more efficient retailers, will deprive millions of their jobs is to miss the point entirely. For this is what we're actually hoping to do: destroy millions of jobs and thus get retailing done with less resources, with the use of less labour.

Sadly, the political game doesn't always follow logic.

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