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Sir Philip Green And The Arcadia Bankruptcy

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This was prepared for elsewhere and then not used, overcome by the media cycle:

The move of Arcadia into administration is a glorious victory of free market capitalism. We, or perhaps the younger among us, used to like buying our clothing from high street stores. Now we, they, don’t, preferring the internet instead. Some combination of technological change and consumer tastes differing has meant the old retail services are no longer desired. Societally we require some manner of clearing out that dead wood and repurposing the productive assets off to something we do value. Bankruptcy, widely defined, is that method. We could even say that the need is for the new to feast upon the rotting corpse of the old just as nature intended.

There are problems and costs associated with the process of course. The establishment glee at the downfall of the bumptious schmutter boy is unseemly in a country dealing with those claims of a racist past. We’ll be regaled with stories of pensions and greed without being told of the Bank of England’s part in this. An entirely righteous and just part of course, quantitative easing had to happen, but lower interest rates have eviscerated pensions schemes. The transition itself isn’t going to be enjoyable for the staff and other stakeholders, such interregnums never are.

And yet this is exactly the point of the system. What we can do, how we can do it, changes over time. What people want done does so ditto. We need a system that allows, encourages, enforces, change. For the move of economic assets – land, buildings, human labour – from lower to higher value uses is the very definition of wealth creation.

Free markets allow anyone with an idea to have a go. Some will succeed as boohoo, Pretty Little Thing, Amazon, are. Older methods will at times fail as Arcadia has. The capitalism part provides the incentive for the attempts both at the new and the avoidance of the corporate death – those who get it right enjoy hot and cold running superyachts.

Places which have been this roughly free market and roughly capitalist for some time are rich. Those places which have become so recently are getting richer. Those places which have never tried it are still as poor as we all were before we did. It’s us that really benefit from the system which is why we use it.

Two decades back Sir Philip Green was the aggressor, the scavenger, in this scene. Soon enough there will be those that eat the carcasses of the internet usurpers, all to our benefit.

We consumers, us out here, have decided that we no longer want Arcadia. Arcadia is to disappear – why wouldn’t we want a system that did this?

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4 COMMENTS

  1. The eviscerating pension schemes bit isn’t entirely accurate. Pension funds keep some of their funds as cash. Holding cash is a burden and eviscerates value, true. Pension funds keep most of their funds in listed and unlisted stocks and in property. Since QE went straight into the stock and property markets, not stopping for an instant to even glance at technology and manufacturing investment, pensioners have gained.

    • It’s true that QE caused the value of assets held by pension funds to increase. But the associated fall in interest rates caused their liabilities to increase, and by a substantially greater amount.

  2. UK defined benefit pension schemes are only found in the public sector now, but there are old private sector schemes still in existence — with staff that have already accrued benefits since before Gordon Brown taxed them to death — and which pay out to those retirees. These schemes are regulated, and the regulars use the Ogden rate to determine how much a pension scheme should hold now in order to meet its future obligations. That the Ogden rate (currently -0.75%, yes, minus) and real-world returns are divorced is not something that the regulators are interested in, so companies which have vestigial pension schemes are on the hook for vast sums — given the negative rate, vaster sums, in fact, right now, than they are ever liable to pay out over the lifetime of the fund. They also have to hold a certain proportion of their assets in govt bonds, which give near-zero returns (how convenient for the govt).

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expunct

in British English
expunct (ɪkˈspʌŋkt)
VERB (transitive)
1. to delete or erase; blot out; obliterate
2. to wipe out or destroy

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