Rising prosperity. Plenty of innovation. Tons of stuff in the shops, loads of jobs, and a openness to fresh talent and ideas. There are lots of things to like about free-market capitalism. But every system has its counter-example. And in the UK, it comes with two letters and a single word, usually in white and blue and surrounded by shabby carpets and badly arranged half-price chocolate bars: WHSmith.
Many people might have fond memories of the High Street chain as the place where they spent their pocket money, their Christmas gift voucher, or stocked up on pencils and crayons on the last day of the summer holidays. But that is all pure nostalgia now.
It is hard to imagine even the most excitably small child looks forward to a visit to WHSmith any more. The chain has just been voted the worst retailer in the country for the second year in a row by the consumer magazine Which?.
Its dismal shops have become legendary for their shoddy appearance, sullen staff and over-priced tat. So legendary has its miserable, decaying appearance become, it even has its own Twitter feed @WHS_Carpet, a brilliantly snarky celebration of its mis-placed stickers, over-flowing bins and, of course, worn and frayed carpets. There are plenty of bad companies out there. But WHSmith is in a league of its own.
And yet here is a strange thing. According to the economics textbooks, WHSmith should have gone bust by now as many other failing retailers have done. Or else it should have been taken over by a rival that actually cared about selling things. Instead, it has not only survived, it has been minting a fortune. Its shares have been soaring. They are up almost 500 per cent in the last decade and its board have paid themselves handsomely while being congratulated on their wisdom and careful management.
It is not hard to work out what has actually been happening. The company has deliberately under-invested, letting its shops get tattier and tattier, and pushed up prices to eye-watering levels. Sure, it is short-termist, and very, very cynical. But for a while anyway it works. Despite relentlessly falling sales in its High Street stores – although not in its airport and train station outlets where it has a captive market – profits keep on rising.
It is hard to really blame the people in charge. Making a success of retailing in the last decade involved flair, and vision and imagination, and clearly no one at WHSmith has any of those qualities.
The real problem is that the stock market has allowed its management to get away with it, when it should have thrown them all out years ago and replaced them with people who care about its future.
The chain will surely go bust one day. But until then it is a stain on the stock market and an embarrassment to the shareholders who have been rewarding the most cynical management strategy imaginable. Free market capitalism remains the best way to run an economy. But it doesn’t always work – and unfortunately WHSmith is example of that.