A Soviet leader’s famous visit to an American supermarket revealed the power of markets. New York City’s latest experiment tests whether those lessons were ever learned.
The Soviet Union was just months away from collapsing when Boris Yeltsin visited a Randalls supermarket in Houston, Texas, for a 20-minute unplanned pit stop. He’d just been treated to a tour of NASA’s Johnson Space Center — an event designed to dazzle the representative from the Soviet Parliament. If he’d been impressed by the mock-up space station or the groundbreaking technology he’d seen, he didn’t admit it.
But then he saw the Jell-O Pudding Pops in the freezer section at the grocery store.
Apparently, that sight alone (and the fact that the displays in the store were filled with thousands of options at prices patrons assured him they were happy to pay) convinced him that the socialist economic model wasn’t exactly everything it had been made out to be.
All this to say, Mamdani’s little project is initially going to be quite popular.
Per a biography written later by Leon Aron, Yeltsin spent much of the plane ride to Miami that followed sitting motionless, “his head in his hands. ‘What have they done to our poor people?’ he said after a long silence.” Later, back in Moscow, Yeltsin confessed he’d felt pained “for our country so rich, so talented, and so exhausted by incessant experiments.”
Nearly 40 years later (apparently long enough for us to forget these things), New York City Mayor Zohran Kwame Mamdani has announced his city is going to get five socialist grocery stores to the tune of $70 million.
Earlier this week, he held a press conference in front of a tastefully arranged grocery display to assure New Yorkers that his new socialist grocery stores will be offering staple foods — fresh veggies, meat, seafood, plant-based proteins (because, of course), dairy, and eggs — 30 percent below what every other grocery store in the area charges. The plan is to update prices just once a month to “reflect market conditions.”
You and every other capitalist like you immediately see the problem with Mamdani’s plan.
There are more than 5,000 grocery stores in New York City, the vast majority of which (north of 85 percent) are owned by guys trying to feed their families, not major chains. That number, of course, doesn’t include the thousands of bodegas and special ethnic markets that many New Yorkers frequent as well. Additionally, grocers don’t make a ton of profit; on average their margins are just one to three percent on a single item.
These brand-new socialist grocers, though, won’t be paying taxes or even rent — the city (i.e., the taxpayer) will have that covered (kind of a big deal in New York where real estate is precious and property taxes are atrocious). So yes, they’ll be undercutting the local grocers who can’t keep up because they have to actually pay their operating costs, putting those grocers out of business.
Mamdani, of course, insists that it isn’t so. City grocery stores won’t be selling alcohol, lottery tickets, hot food, or cigarettes. The small guys will be just fine, he assures us. That might be true if the small guy turns his grocery store into a full-on liquor shop, but eventually even the liquor market will be oversaturated. Provided he carries through with his plan, many of those unique grocery stores around New York will disappear.
Meanwhile, the taxpayers will be shelling out tens of millions collectively (at least) to keep the whole thing afloat, and the city — because it’s a city and governments are bad at budgeting — won’t even be using that money efficiently.
Take the proposed city grocery store location in Manhattan, which will come in at 9,000 square feet and cost the city a projected $30 million in start-up costs. Per a New York Post analysis, that number is four times as much as it would cost a private owner to set up a store of the same size. Meanwhile, it’s expected to lose at least $300,000 a year, never mind making up that initial $30 million. One grocery chain owner in the city told the New York Post he could probably build 10 grocery stores with the initial $70 million the city has set aside for the project. One assumes he could also run those stores for a profit.
From the point of view of the consumer, the whole thing doesn’t seem so bad. The fact is, groceries are expensive. Remember, 95 percent of Americans believe we’re suffering from an affordability crisis — partly because rent, gas, and ground beef are coming out to a much larger percentage of their mostly stagnant incomes than they’d like. Whether you think those Americans are justified in their concerns or not doesn’t erase the political reality that cheaper groceries sound good to all of us. Meanwhile, taxes, for the average employee, are something you think about once a year when the government sends you your tax refund.
All this to say, Mamdani’s little project is initially going to be quite popular. When his first grocery store opens next year, our YouTube feeds will be flooded with videos showcasing how cheap and how nice everything is. We’ll see interviews with New Yorkers talking about what they’re doing with all their extra cash. The thing will look like an incredible success — coincidentally in the year before a presidential election when democratic socialists are looking to make major headway at the polls.
When it all comes crashing down (assuming nobody stops Mamdani), the news cycle will have moved on and a New York, exhausted by “incessant experiments,” will be left to manage the consequences as best it can.
https://spectator.org/zohran-mamdanis-socialist-grocery-stores-ignore-boris-yeltsins-lesson/
https://spectator.org/the-mamdani-warning/
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