Wednesday, 22 August 2012

The MOU, Big Box economics and shopping centres

Paul Sweeney: The Rule Book by which Ireland is presently run, “The Memorandum of Understanding” (MOU) between the Troika and the Government, is forcing the government to impose a high level of austerity and some welcome reforms, like the belated regulation of the rotten banking system; reform of the legal system which is run by lawyers for lawyers; and then some other “reforms”.

One such other “reform” in the MOU which has actually been implemented is to allow more Big Box supermarkets on the edges of towns, with vast car parks, hollowing out urban centres.

Right wing economic ideologues love Big Box economics. Some little ideologue slipped this “reform” into the MOU and now it is being enacted. They hope that it will bring down prices. It may for a while, till the competition has been eliminated and urban centres destroyed.

Too many economists are indifferent to the non-economic impacts of economic decisions. The destruction of urban centres and replacement by Big Boxes is outside “pure economics”, they will argue. They may however, concede that once competition has been wiped out, prices may rise again, but console us with their belief that the market will operate and it will eventually bring in other Big Boxes in competition with Big Box No 1.

Dundrum Shopping Centre, while less of a Big Ugly Box than many others, has sucked much of the heart out of Rathmines, Dun Laoire, Bray and other south Dublin urban town centres.

Supermarket sizes had been regulated by the state under retail planning laws in Ireland. They were “relaxed” to allow IKEA to drop its vast box into Finglas. IKEA threatened to hover up all the business from Northern Ireland and not to pay any VAT here. The government caved in.

Now more big boxes are to be allowed to be built all over Ireland thanks to the section on retail size inserted into the MOU.

In the light of the news that Ireland has the highest number of shopping centres per head of population in Europe, this will not happen too soon. This information on the flood of shopping centres is revealed in a survey of 24 countries by the commercial property consultancy, Jones Lang Lasalle. I do not think we needed a survey to find out that we had lots of empty shops, but nonetheless such empirical evidence is very useful to inform future decisions.

The survey found that Ireland had almost 500sqm of shopping centre space per 1,000 people - more than twice the average European of 179sqm per thousand. Most of our shopping centres had being constructed during the boom. Too many are located in regional locations which cannot now sustain all of their units.

It is therefore no surprise that even when the bust ends, Jones Lang Lasalle predicts that even a return to a healthy retail trade will not be enough to provide tenants for all of the retail space that has resulted since the boom.

State regulation has its faults, limits and errors are made, but the superiority of the market as the alternative has been found deeply wanting in Ireland, even before this relaxation of the retail planning laws. The inane property boom has cost us all muchos dineros, but will leave also a horrible physical blight on our cities and towns for decades to come.

Perhaps after we say goodbye to the Troika, if it happens, in 2014, the government will reassert itself as a government for the people and will reinstate the retail planning laws to protect our urban heritage from this clause in the MOU which enshrines suburban retail Big Box Blight all over Ireland.

1 comment:

Brian Woods Snr said...

@ PS: "... the government will reassert itself as a government for the people ..." Labour took the shilling so they will follow the drum.

Not a snowball's chance in Hell. I should not worry about the retail sector. Its essentially living on life-support. Further increases in energy costs will curtail consumers and direct their attention toward survival.

You will have to explain some simple math to our politicians. They can only spend what they take in by way of taxation. Borrowing for day-to-day spending creats a debt burden which will be unpayable (taxpayer's incomes are falling). So attempting to take more tax for from less income is what class of math? Einstein's definition of lunacy comes to mind.

And do not expect the Growth Fairy to help out. The economic paradigm of Permagrowth is over, but like a headless corpse it has a few strides to go yet.