Why we need supermarket chains
To an economist, technology is just a way of doing something. We all think of it slightly differently -- the steam engine is a technology, the coal-fired power plant is a technology.
Both the latter are methods of producing energy or perhaps liberating it to the physicists, but what matters is how they are used and that’s the sense that an economist looks at them in.
A steam engine requires a certain disposition of the equipment in a factory to make use of it. There will be the one engine which then powers different pieces of machinery, the energy being transferred by belts likely enough.
This leads to factories being tall buildings -- it’s easier to run the belts vertically than over long distances horizontally. The nuclear plant might end up running exactly the same machines in the end.
But we transmit the power over electricity wires, not physically. And we can run many more machines off the one plant too. This leads to factories that are dispersed laterally, over larger areas of land and more likely on just the one floor.
Simply because we can now. We just don’t have to worry about the physical proximity of the machines now running on electricity.
To the economist, that shape of the factory, that difference in optimal layout, is just as much technology as the different shape or type of boiler being used to burn the coal. Ways of doing things, ways of organizing things, they’re all technologies.
At which point, we should consider what the Food and Agriculture Organization has been telling us about food waste. In the poorer countries, much as 50% of food rots between farm and fork.
The system of food collection, storage, and then distribution is inefficient, that is, wasting a lot of what has been grown along the way.
Clearly, we’d rather like to reduce this waste -- if we could do so then we’d have no problem at all with feeding the larger population expected in the next few decades.
This means improving those logistics chains that handle the foods. And there’s a short-hand for that entire complex system -- a “supermarket.” Sure, we think of those as being just large food shops, with many different varieties of foodstuffs.
But looked at with a technologist eye, they’re not that at all – they’re those immensely complex logistics chains which fill the shops with that fresh food.
You can, after all, build a shop as large as you like, but if you can’t get the food into it, nice and fresh, then it’s not of much use. Yes, agreed, it’s a bit of a squint, but it’s a useful squint.
Walmart isn’t those big box stores just out of town – it’s the network of trucks, refrigerated warehouses, and all the rest that supplies them.
Having explained our terms, we can welcome the beginnings of such supermarket logistics chains in Bangladesh. The government is subsidizing some 500 “cool chambers” for vegetable growers across the country.
These aid in preserving the freshness of the foodstuffs, as they move from farm to retailer or for export. Sure, this is government aid, not some private sector shopping chain. But it is.
Again, in that economist’s eye, the same technology is being applied. We’re getting at least the start of the modern logistics chain which reduces food loss and thereby makes us all richer.
We can see here that it is government pushing along that adoption of the technology. We can also hear the echo of my insistence that markets do this better. The point is not that the government cannot do these things, that only markets can.
It is, rather, that markets do them faster. And that is about it too, that’s the economic efficiency argument in favour of markets and competition.
Systems that use those incentives tend to adopt these new methods of organization faster than those systems which try to use planning and markets. The reason should be obvious.
In a system where individuals make profits by being better at something, every individual has the incentive to improve the way something is done.
Where it’s the planner who gains a promotion by improving things, then only the planner is so motivated. And perhaps not motivated all that much either.
The Bangladeshi food logistics system is getting better, is adopting more modern and more efficient technologies. This makes us all richer of course -- we get better and cheaper food as a result.
And when we’ve got the same method of organization, the same technologies, as the rich countries, then we’ll have, just as they do, the supermarket chains. Because the two are the same thing -- that technology and that name for it.
Whether it’s privately owned and capitalist corporations that own it, or farmers’ cooperatives, or the government, isn’t really of great interest to the observing economist. That it exists, that it makes us richer by existing is.
The only point is that a free market and capitalist surrounding environment will make the arrival of that desired logistics chain, that technology, rather earlier, get it to us rather faster.
Tim Worstall is a Senior Fellow at the Adam Smith Institute in London.