The sun sets on Sears
Zombie retailer Sears has finally filed for Chapter 11 bankruptcy protection, and observers are delivering a catalog of explanations about what it all really means. Perhaps the gradual-then-sudden decline of the 125-year-old retailer reflects the harmful financialization of the U.S. economy. Or maybe it symbolizes the decline of the American middle class. How about the job-killing impact of Big Tech? Probably all of the above. "Late-stage" capitalism is a complicated business.
But this much the critics are certain of: Something somewhere has gone terribly wrong. What that something is exactly ... well, take your pick.
Of course, little of this navel gazing is particularly satisfactory. After all, Sears was troubled before hedge-fund billionaire Eddie Lampert — once touted as the "next Warren Buffett" — became its CEO, largest shareholder, and largest creditor. Sears failed to meet the Walmart challenge and then that of internet shopping. Lampert's 13-year tenure is a story at least as much about business incompetence and long-term retailing trends as Wall Street greed and financial engineering.
Equally underpowered is the notion that the collapse of the middle class greatly contributed to the collapse of Sears. This theory is undermined by the reality that the American middle class has not actually collapsed, unless one thinks a 42 percent rise in middle-class incomes since 1979 qualifies as a collapse.
And while Sears, like many other retailers, has failed to meet the Amazon challenge, the so-called retail apocalypse is so far a myth. Research by economist Michael Mandel has found that e-commerce jobs well exceed job losses at brick-and-mortar retailers. Thankfully, it is just this sort of "creative destruction" that seems to be the Sears analysis most favored by the Trump White House. As America's businessman president told reporters on Monday, the Sears bankruptcy — while a "very, very sad" moment for nostalgic baby boomers like himself — is the result of the company having been "obviously improperly run for many years." Trump economist Lawrence Kudlow put it this way: "Things happen; they change. New companies come in and take out the older companies."
So for once, thankfully, the head of what is supposed to be America's pro-market political party is embracing the constant churn necessary for the proper functioning of a dynamic market economy. It was hardly obvious he would do so. Consider: The core belief of Trumponomics is that free and open trade has made America a poor country. America's golden age? When it was a pre-globalization industrial powerhouse of steel and coal, the factory floor of the world. Trump seems unable to grasp that America is a far wealthier nation than it was when Sears was the original "everything store" in communities across the country. If Trumponomics is trying to save the jobs of 70,000 coal miners, why not the nearly 70,000 remaining employees of Sears?
It's not hard to find folks proposing just that. Greg Petro, a retailing consultant and Forbes blogger, has argued that the American retailing sector is undergoing a depression akin to the one suffered by automobiles and banking during the 2007-2009 financial crisis. "A bailout would give debt relief and a chance for traditional retailers and brands to innovate," he says.
Unlikely, sure. But it's really not that much crazier than what's happening now with American agriculture, where the U.S. government is borrowing money from China to help farmers hurt by Trump's trade war with China. Once government starts subsidizing the losers from the creative destruction of market capitalism — at least the corporate losers — it can be tough to figure out where to stop. That's one important lesson from the Sears denouement. Another is that history continues to remind us that there are no forever companies, at least no companies that are forever dominant even if they hang around for a long while. Not even Big Tech. The sun is setting on Sears just as it surely will also eventually on the supposedly unstoppable companies of today.