Are you seriously trying to tell me that people have more to spend overall if shoes are more expensive?

"So where does the other $9m paid to the shoemakers go? Tools, raw materials, rent. And the people who supplied those things will now all lose their source of income."

Wrong. No they won't. The toolmakers, raw material manufacturers, and renters will simply find a new buyer (possibly the "outside" shoe company). In fact, the old shoemaker might even keep his old tools and materials and manufacture a different style or better quality shoe.

"The $10m lost profit is indeed spread out much more widely than just the shoemakers, but that's irrelevant; the net effect is still the loss of $10m in spending power, only half of which is compensated for by cheaper shoes."

Wrong. There is no loss of spending power! The shoe buyers still spend the same $10 million, it's just that now they only spend half of it on shoes, and the other half on other things.

You are sadly mistaken. I'm a nice sort of person. Seriously, if you admit you're wrong, I won't gloat.