Charming Charlie, Karl Marx, and Charlottesville’s Creative Destruction

By. Neil Williamson, President

2019 Summer Economics Series: This summer The Free Enterprise Forum will examine a number of economic theories that impact business development, housing affordability, transportation, and quality of life in Central Virginia.  In all cases these issues relate to local government policy not any one particular project.

Now I’ve never met ‘Charming Charlie’ but opening my Saturday morning (7/27) Daily Progress, I felt a tinge of regret reading the headline,“Charming Charlie adds to stores exiting Fashion Square”  by Allison Wrabel.

Charming Charlie, a jewelry and accessory store, filed for Chapter 11 bankruptcy earlier this month and has plans to close all of its 261 stores, including the location at Fashion Square.

The store has become the fifth at the Albemarle County mall since December to declare bankruptcy and ultimately close, joining Sears Holdings, Charlotte Russe, Crazy 8 and Payless ShoeSource.

Clarks, Regis Hairstylists, Go! Calendars, Games & Toys and Bare Minerals also have closed in recent months.

Parent companies of Gap, Victoria’s Secret, JC Penney and Foot Locker also have said they will close stores this year. All have locations in Fashion Square, though it is not yet known whether any of the stores would close locally.

imageI also wondered if ‘Charming Charlie’ had ever met Karl Marx or had heard of ‘creative destruction’.  Those watching Albemarle County and Charlottesville closely can see creative destruction all around us.

Creative destruction refers to the incessant product and process innovation mechanism by See the source imagewhich new production units replace outdated ones.  In real estate terms it also can mean the change of users or use of a parcel or building due to market conditions.

The theory of creative destruction originated with Marx’s Communist Manifesto although he never used the specific term.   Marx’s explained the cycles of capitalist economies to be driven by internal and external forces such as war, famine, overproduction and worker revolt.

It was Austrian economist Joseph Schumpeter who popularized the expression “creative destruction”, particularly in his book Capitalism, Socialism and Democracy, first published in 1942.  One key concept honed by Schumpeter is that capitalist economy can not stand still.

Capitalism […] is by nature a form or method of economic change and not only never is but never can be stationary. […] The fundamental impulse that sets and keeps the capitalist engine in motion comes from the new consumers’ goods, the new methods of production or transportation, the new markets, the new forms of industrial organization that capitalist enterprise creates.

[…] The opening up of new markets, foreign or domestic, and the organizational development from the craft shop and factory to such concerns as U.S. Steel illustrate the process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one. This process of Creative Destruction is the essential fact about capitalism. It is what capitalism consists in and what every capitalist concern has got to live in.

[… Capitalism requires] the perennial gale of Creative Destruction.

One might say I felt the “gale of creative destruction” as I read of the many retailers leaving Fashion Square Mall (FSM).  This is interesting because each and every week someone asks me about FSM’s future.   The conversation usually includes fifth hand information about a local educational institution (or their foundation) expressing an interest.  This story will no doubt fuel more FSM gossip.

We are witnessing creative destruction all around us.

While Willowtree and Dairy Central are both somewhat ‘adaptive reuse’ of buildings, the creative destruction theory still holds.

Creative Destruction economists would generally agree the one thing Fashion Square Mall will not be in twenty years, is exactly what it is now.

Stay Tuned.

Respectfully Submitted,

Neil Williamson, President

Neil Williamson is the President of The Free Enterprise Forum, a privately funded public policy organization covering the City of Charlottesville as well as Albemarle, Greene, Fluvanna, Louisa and  Nelson County.

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