My Economics teacher once told the story of a Russian Food Ministry official visiting London in the 1950’s. When he asked if he could meet his British opposite number he was told there wasn’t one. “So who makes sure that all these people get bread?” he asked, to much smug chortling and shaking of heads. That, like most of their other needs, was taken care of by Adam Smith’s “Invisible hand” you see.
Quietly and efficiently the market provided the right bread, of the right quality, at the right price, in the right quantity, in the right place, at the right time. And so it did, or at least made a massively better job of it than some party apparatchik rationing out cardboard loaves to lengthy queues.
But something has gone quite awry with the market for bread and other items in the last few years. Our parents and grandparents would have had a very good idea of the price of a loaf of bread, and its value to them. If things got a bit dear, they would grumble and shop around, if things got too dear they would not buy them until the price went down again. Not nowadays. Whilst the Grocers, Butchers, Greengrocers, Fishmongers etc. of their day would add a necessary margin on everything they sold, a bit more on the more exotic, the supermarkets now adopt a much more fluid and intense management to their prices. Whilst driving the prices that pay their suppliers ever downwards (16p to farmers for a pint of milk!) their shelf prices go up and down like a dog’s hind leg, sometimes doubling or halving overnight.
Lacking imagination or a better vocabulary, I have dubbed this confusion marketing and it has three benefits to the supermarkets :-
1. It makes it difficult to compare prices between supermarkets.
2. This means that they can continue to make enormous profits whilst bankrupting suppliers and promulgating the fabrication that they are involved in some kind of ongoing vicious price war with each other for our benefit … and most importantly
3. Over time it destroys our concept of the right and proper price of things.
This last is already so successful that the chaps who sell artisan (i.e. a bit rough looking and burned on one side) bread at markets always sell out at £2.50 a loaf. You can make better yourself for well under a quid.
I think this is an important indicator of how decadent a society we are becoming, in the sense of not understanding the sources of our wealth or the value of what our society produces. If we let these people corrupt the invisible hand of the market much more we will soon be unable to scoff at those 1950’s Russians taking what they’re given, we’ll be in danger of becoming them.
Successive governments have made a show of having inquiries into the manner in which the dominant supermarkets may be mistreating their suppliers and providing a disservice to their host communities and customers, but with nothing being changed. This means either I am wrong and nothing needs to change, or that inquiries are useless at investigating stuff like this.
If the latter, these oligopsony buyers / oligopoly sellers are working against the public interest and we need to sort them out. I say we give them a year to mend their ways or we’ll tell the Queen what they are up to. She’ll fix them.