As a consumer who has not set foot in a mall in over three years, I didn’t exactly have a visceral reaction to Wednesday’s Wall Street Journal headline that the nation’s largest operator of malls, Simon Properties Group, is bidding for its bankrupt rival, General Growth Properties. Clothes shopping for my family had long ago shifted to the Internet and out-of-the-mall discounters such as Kohl’s.
For a family on a limited budget, it is good to have a Kohl’s nearby. About twice a year Kohl’s send us their coveted “take an extra 30% off” coupon. Usually these coupons come between fashion seasons. We shop their racks for 60% to 80% off items and combined with our extra 30% coupon (and no sales tax in New Hampshire) we walk out with bags of clothing for a very modest price.
Yet, it was not too long ago that it would have been almost impossible to shop at a discount clothier occupying the niche between Wal-Mart and full-service department stores. For many, during the 70s, 80s, and 90s, a day at the mall was the ultimate shopping experience. Before that, going “downtown” to a major department store was the norm. From 1992, when Kohl’s first had a public stock offering, until today, they have gone from 80 stores to over 1000.
While Kohl’s has prospered, many malls and their traditional department store anchors are in a state of their irreversible decline. Allow me to ask a few questions:
- Did the president, Congress, or a federal agency direct the consumer transition from shopping at malls to shopping at stand-alone stores like Kohl’s? Did they tell Kohl’s where they must open, what products they should stock, and what prices they should charge? Did any government agency tell Kohl’s to whom to extend credit and then guarantee to backup the credit Kohl’s extended?
- As the fortunes of traditional department stores declined, did the federal government care about guaranteeing the jobs (and the bonuses) of department store executives?
- Are there unclothed masses of Americans because department stores are closing their doors?
- Should there be government subsidies for department stores to prevent further closings? Should we be forced to abandon Kohl’s and Internet shopping in order to shop at malls? Should we revitalize the inner-cities by subsidizing the re-opening of downtown department stores?
- Does anyone miss shopping at a mall?
Of course, my questions are ridiculous. No one directed anything, and subsidies would direct resources into areas that are not in keeping with the preferences of consumers. The growth of Kohl’s and the decline of department stores happened as a result of consumer preferences and the rise of the Internet. This is part of a natural cycle of growth and decline from which no industry is exempt.
In the not-too-distant future, the growth of Kohl’s will begin to peak, as new entrepreneurs find new ways to better satisfy consumer needs. The free market is demanding; it requires you to do your best every day; and when you no longer choose to do so, the result is inevitable. So inevitable that many firms and individuals expend their human energies not in serving the public, but in trying to exempt themselves from the natural cycle of growth and decline.
Do you long for equilibrium—a world with less change? If so, who would you place in charge of deciding the pace of change? How much of your standard of living would you be willing to sacrifice? In other words, would you be willing to pay a premium price for clothing so that malls thrive?
This may seem to be a far-fetched example, but it is not. It gets to the crux of the matter of how markets work. Again, consumer preferences are revealed through the marketplace every day; and capital and labor are continually reallocated by entrepreneurs who are sensitive to these preferences. To the extent we thwart these preferences, we destroy the engines of our prosperity, and we harm real people.
This past weekend, as we checked out at Kohl’s with our shopping basket filled with $4 turtlenecks and other bargains, my wife and I began a conversation with the friendly, energetic cashier. The lines had been steady all day, but she was not complaining—she was glad that the store was thriving. She told us she had a twenty-three year old son at home who neither walked nor talked. Now, I’m under no illusions that being a cashier at Kohl’s is a well-paid occupation; but this cashier was clearly glad for the work. Perhaps the store provided her needed flexibility in scheduling; perhaps it was simply an oasis from the demands of her daily life.
Would my family be better off if a government agency, rather than the market, was in charge of the clothing industry? Would the cashier be better off? Apparently, millions of Americans would say “yes”—not to this specific example—but to the generic idea that it is too risky to allow the market to reveal the changes that are necessary for an economy to thrive. This false idea has impoverished nations throughout history.