• The Invisible Hand

Are the High Streets Worth Saving?

They are thought of as a classic part of British life, yet they are increasingly going into disrepair.

The decline of high streets is a very poignant topic at the moment. Areas where our parents and grandparents spent their youth are now running into decline. In fact high street stores are now closing at a faster rate than during the recession. As an economist though should we condemn these places to failure if they are no longer profitable? Or should we consider ‘non-economic’ factors such as community cohesion? For any economist it is a challenge balancing these factors.

Joseph Schumpeter (1883-1950) argues in favour of creative destruction which says that unprofitable firms should be allowed to fail. Instead they will be replaced by firms which better meet consumer needs. In this case, this means if consumers are visiting high streets less, shouldn’t we acknowledge they are no longer needed and focus on alternatives such as online retail. Ideas such as an online sales tax only serve to punish more competitive online firms and help more inefficient physical stores. High streets are naturally more expensive because they have higher staff and rent costs especially after a recent fall in the value of the pound. Perhaps in this instance we should acknowledge that the market knows best and that high streets are not worth saving.

In some ways, however, it would be a significant loss as for many people shopping is a major leisure activity. More people may be confined to indoors using laptops on sofas rather than walking around town. We also like to think of many high streets representing the fight of traditional, independent businesses against multinational, online firms. However, in actual fact many high streets are made up of similarly large firms and trying to revive this sector, only boosts the pay packets of their shareholders. There is an argument to protect jobs, but as economists we must consider that by making a market more efficient, more jobs will be created in other sectors such as the online retailing sector.

There is also a prominent argument which states that even if we did want to save the high streets it would be too difficult. For many years, the UK government subsidised British manufacturing in particular the manufacturer British Leyland. Eventually the costs became too great that eventually Thatcher had to allow the industry to collapse. Although this create much social dislocation at the time, it was necessary in the long-term to create the stronger service economy which we have today. The same I believe is largely true of the high streets. We should recognise the economic benefits of keeping them are far outweighed by the costs of maintaining them.

Instead we should look for a different role for the high streets rather than retail. Recent trends in entertaining are exciting. More millennials have been involved in projects such as escape rooms and attendance of the cinema and bowling alleys has been strong. Modern entertainment which has modernised and utilised social media can create social areas to replace high streets. We should not mourn this development and instead embrace the new position of the high streets as centre for business and entertainment.

It is a hard prospect to accept that the high streets as we remember them could be gone. We British seem to have a traditional sentimental attraction to these communities and small business. However, like manufacturing we need to accept that our economy should be allowed to move in a new direction rather than remaining in a bygone age.

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