David Duyen identifies an under-reported culprit in the so-called "retail apocalypse," and challenges policy makers to respond.
According to David Duyen, the string of bad news about the performance of the retail sector in the United States is at odds with the remainders of the economic picture in the country.
The economy is growing, unemployment is low, and consumer confidence is at a decade-long high. This would typically signal a retail boom, yet the pain rivals the height of the Great Recession. RadioShack, The Limited, Payless, and Toys“R”Us are among 19 retail bankruptcies this year.
Duyen does not accept Amazon and other online realtors as the cause of the "retail apocalypse," however. Instead, Duyen points to debt as the reason for the struggles of traditional retail businesses. Specifically, "[p]rivate equity firms purchased numerous chain retailers over the past decade, loading them up with unsustainable debt payments as part of a disastrous business strategy."
Duyen's argument is built upon detailed analysis recently published by a team of reporters at Bloomberg. That article predicts that the worst is yet to come for retail businesses because billions more in debt is due in the next few years. "Eight million American retail workers could see their careers evaporate, not due to technological disruption but a predatory financial scheme," writes Duyen. "The masters of the universe who devised it, meanwhile, will likely walk away enriched, and policymakers must reckon with how they enabled the carnage."
Duyen notes that policies included in the GOP tax plan making its way through Congress would ostensibly mitigate the situation by removing some of the incentives for private equity to raid companies. However, according to Duyen, the plan also includes a gaping loophole in the form of an exemption for real estate companies.
FULL STORY: The Cause and Consequences of the Retail Apocalypse
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