Victoria Beckham – Teaching us about some hard economics (the wrong way)

Several sources (including the Guardian http://www.theguardian.com/lifeandstyle/2014/oct/26/victoria-beckham-britains-most-successful-entrepreneur) have written about ‘Management Today’ having Victoria Beckham at the top of their list of entrepreneurs. The Guardian (and others) should know better than to spout this nonsense as a neutral story

The fact that the successes in increasing turnover and profit have come from selling “T-shirts for more than £700 and handbags for up to £18,000” is ludicrous in itself and should have put us on the alert – but the attempt to make it look like she is doing anyone other than herself a favour by this activity is desperately off the mark.

This whole thing just tires me so much, but I must draw a few lessons from it, for life, for the good of business and for people who want to understand economics properly.

The report says that “her staff has grown from three to a 100-strong team.” But remember that these jobs are (almost entirely) not ‘additional jobs’. For the most part she will have taken money/business off someone else, somewhere else. So most of those jobs will equally be drawn from elsewhere.

But it gets worse.

All these people are doing is taking something worth a few quid (t-shirt, handbag) and convincing people to pay an absolute packet for it. These 100 people are not doing any work of benefit apart from lining VB’s pockets with cash.

And of course it gets double worse.

These people could have been doing something useful like making people happy. OK, at the moment they are making one/two people happy per handbag. But they could be riding a unicycle, looking after someone during their illness or even (god forbid) innovating for a real entrepreneur. They are not available to do that because they are selling things worth £2 for £700. [If you feel the need to study economics this is called opportunity cost.]

Anyone who tries to tell you that “if the market values something at £700 then that is what it is worth, so those people are doing productive work” is eihter mistaken or trying to fool you. The person who tells you that should be confronted to consider why the market values a £2 t-shirt at £700 but values the service of someone wiping down an elderly person who has soiled themselves at £4.50 per hour. If they don’t come up with the answer that the super-rich having all this money is a market distortion then they should be ignored in anything else they say.

If people have enough money to distort the market in that way why don’t we balance off the ‘distortion’ of taxation against the distortion of the super-rich until they cancel each other out. So let’s tax the super rich until Mrs Beckham goes out of business or drops her prices to a non-distortionary level.

Giving the top spot in entrepreneur awards to someone with this business model is very dangerous. The implication is that we can build a successful economy on selling-on over-priced tat to people who have too much spare cash.

As the income distribution becomes ever wider those at the bottom have less to spend on things that have a valid contribution to GDP, social value and well-being. I’m not being sophisticated in my sense of GDP, social-value and well being – food, energy and basic clothing all contribute to those three in a big way. The people at the top have more to spend on what is fundamentally a £2 t-shirt, which distorts GDP, adds nothing to social value and, in terms of net well-being, makes one person feel great that they are spectacularly t-shirted but makes many other people feel badly off.

So, in conclusion, so because Beckham and her pals have the economic power to divert labour to the vapid activity of making t-shirts sell for a lot of money we see the whole supply and demand of labour is perverted.

Work of high social value is not only undervalued, but crowded out more and more by work of no social value at all.

If you think I have added more social value by writing this blog post than by selling a handbag for £18,000 please get in touch and I will tell you how to give me some of your hard-earned cash.

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About stuartastill

Consultant: interested in analysis that impacts politics i.e. everything! Can do difficult equations - but avoids when working with humans
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