Lately, major and minor chain stores are going bankrupt at an ever-increasing rate. The usual explanation is that e-commerce is wiping them out - they simply couldn't handle the competition. But actually, competition from e-commerce is not the primary cause of
these bankruptcies. Toy-R-Us, for example, was still profitable. The
primary cause of the retail apocalypse is hedge funds.
They (Bain Capital, in the case of Toys-R-Us) borrow to acquire
control of a retail chain, often in a hostile takeover. Once in control, they have the chain take out massive
loans; in the case of Toys-R-Us, a loan for five billion dollars. Some
of those funds are used to repay the very loan that the hedge fund took out
to acquire them in the first place. The rest of those funds are taken by the hedge fund
itself, along with anything else of value that they can loot from the company. I suspect that that usually includes as much of employees retirement
funds as they can get.
Burdened with impossible debt, the chain struggles to avoid
bankruptcy - but the debt is simply too high. Eventually the chain capitulates and declares bankruptcy. In the meantime, the hedge
fund(s) move on to their next victims. Rinse, lather, and repeat.
We’ve only seen the tip of the iceberg so far. Hedge funds have been
doing this a LOT lately, and we’ve seen less than 5% of that debt come
due thus far. In the next five years, there will be an enormous increase
in hedge-fund-caused bankruptcies. America may well be left with more empty
chain stores than open ones.
It’s worth noting that chains which are still in private hands are
generally doing well. Costco, for example, has seen its profits
skyrocket. Competition from e-commerce did kill off brick and mortar
chains in some sectors, such as book shops and video stores. But in general, the
destructive effect of e-commerce is more a myth than reality: a myth
that conveniently ignores the fact that these retail deaths are
deliberate murders, rather than failures to compete.
Which is exactly how the hedge funds and the oligarchs want it, of course. They'd much rather that Americans see the destruction of their economy as the result of business failure, rather than what it is: the inevitable result of crony capitalism run amok and cannibalizing everything it can get its hands on. With, of course, the eager cooperation of the political establishment - itself probably the most profitable buy-out that the hedge funds ever made, if not actually the most profitable investment in history.
Of course, it can only be considered profitable if we ignore the cost of losing the Earth as a human habitation. But that's not a cost that is figured on balance sheets - yet.
