Zohran Mamdani’s socialist superstore stunt won’t help poor New Yorkers
Zohran Mamdani’s plan to open five state=owned shops with subsidised groceries will make little to no difference to the lives of New Yorkers, so why are you reading about it? Ask Kristian Niemietz
New York City has a population of over 8.5m people, or close to 20m if we include the wider metropolitan area, and tens of thousands of retail units. In one sense, Mayor Zohran Mamdani’s plan to open five state-owned retail stores with discounted prices is a complete non-story, which will make little difference to anything. It is neither going to deliver ‘Socialism in One City’, nor is it going to bankrupt New York. My guess is that it will turn out to be a useless gimmick, but then, I say this about lots of policies, and New York is rich enough to be able to afford a few useless gimmicks.
Nonetheless – the fact that Mamdani’s grocery store plan is being reported internationally is telling us something. This is unusual. How often do you read about New York (or, for that matter, any city, other than maybe the one you live in) setting up some new municipal agency? Under what circumstances would you care about that?
The reason why Mamdani’s plan attracts so much attention is that sometimes, a policy is not just a policy. It is also a communication device. It tells a story. It encapsulates assumptions about economic life.
The Gary Stevenson effect
We have several domestic examples. Britain may never get a wealth tax, but via their advocacy of it, Gary Stevenson and Zack Polanski have successfully convinced the country that wealth inequality is spiralling out of control, and that the wealthy do not pay taxes. (Neither is remotely true.) Britain may never get full-fat rent controls again, but via their advocacy of them, activists have successfully convinced millions that Britain’s high housing costs are a product of ‘landlordism’, as opposed to supply shortages.
Mamdani’s grocery store plan fulfils a similar function. It is not just a policy. It is a story. It is a product of – and further entrenches – the fashionable ‘greedflation’ narrative, the idea that the inflation spikes we have seen in recent years are a product of corporate greed and profiteering. Mamdani is not the only one peddling that idea. The socialist economist Isabella Weber has become a minor public figure on the basis of her advocacy of that idea, and in the UK, James Meadway, another socialist economist, is trying to jump on the same bandwagon.
The reason why it works is that, in this anti-capitalist day and age, most people vastly overestimate profit margins across the economy. The IEA commissioned a poll on this earlier this year, and found that the average respondent thinks profit margins in the retail sector are around 50 per cent: they think half of their grocery bill is someone’s profit. The true figure is two to four per cent (in the UK; figures for the US are similar). Retail is a fiercely competitive sector, and even if all retailers decided to become charities and forego their profits, it would barely make a difference to our shopping bills.
What they gain in their role as grocery shoppers, they will lose in their role as taxpayers
With that in mind, how will Mamdani’s Socialist People’s Stores be able to offer the 30 per cent discounts for selected groceries that Mamdani has in mind? Simple: because they will benefit from subsidised rents and tax exemptions. In the aggregate, New Yorkers will not benefit. What they gain in their role as grocery shoppers, they will lose in their role as taxpayers. Of course, some people will benefit. If you live near a Mamdanistore, and you don’t pay much tax, you are probably a net beneficiary. But if the aim is income redistribution, I could not think of a less efficient way to achieve that than subsidised grocery stores. The implicit subsidy contained in discounted groceries is a completely untargeted benefit, since rich and poor alike will be able to shop at the Mamdanistores. I could even imagine them becoming a magnet for affluent urban hipsters, who shop there as a way to signal their support for Mamdani.
In the US, the tax and benefit system is much more decentralised than in the UK: Mamdani could simply have used those levers to increase cash benefits for poor New Yorkers. But if he had done that, nobody would be talking about it, and I would not have written this article. It’s a bad social policy, but a clever communication tool.
Kristian Niemietz is editorial director and head of political economy at the IEA