The Zohran Mamdani City-Owned Grocery Store Is Bad Economics

A decade ago, Sen. Bernie Sanders (I-VT) became the face of socialism in the United States. A couple of years later, Rep. Alexandria Ocasio-Cortez (D-NY) launched the AOC brand, which was another iteration of the socialist movement. Today, New York mayoral hopeful Zohran Mamdani has entered the national conversation, promoting more socialist schemes, including a city-owned grocery chain that will inevitably fail like every other hallmark of Marxist dogma.

The Zohran Mamdani Grocery Store

Is the Big Apple poised to run out of apples in the next few years? It is a possibility, given that New York City is filled with registered Democrats, which lends Mamdani a strong chance to win the mayoral election this fall. If he succeeds, Mamdani wants to offer free bus fare, free gender transitions, free child care, and ... well, you get the bit. But one of the most outlandish proposals is the idea of a government-run grocery chain.

Before Mamdani became a household name nationwide, he made the social media rounds by promising to establish a network of government-owned grocery stores. The objective, Mamdani says, is to concentrate “on keeping prices low, not making a profit.”  He calls it a "public option,” and he believes his concept can work since these city-owned supermarkets would not have to pay rent or property taxes, effectively reducing overhead and passing savings to shoppers.

History hasn’t been kind to the concept of government controlling food production and distribution. One does not need to study the days of the Soviet Union to realize that this is the mother lode of bad ideas. In fact, in Venezuela, where pretty much all food options fell victim to socialism, the food was putrid, stores were subject to corruption, and the government made the population dependent on the state.

So, why would the Democratic nominee for mayor’s supermarket chain be a horrific experiment to test? It is elementary economics, my dear Watson.

Groceries 101

Like every other market function, the profit incentive is critical. No matter how much socialists vilify the p-word, it is a vital component of a civilized society. Profits enable motivation, innovation, and stellar service. And, of course, profits breed competition. Without the competitive nature of a free-market system, businesses will not respond to market changes, adapt to evolving consumer preferences, or trim costs to stay profitable.

These are ingredients for running an entity into the ground. Remember, the grocery industry runs on very tight margins – profits average between 1% and 3% – so even a single misstep can lead to long-term struggles to stay open. Indeed, if a private chain fails, shareholders pay the piper. If a government-run enterprise loses money, taxpayers are required to bear the financial burden.

Despite the criticisms of Big Food in recent years, well-established supermarket chains succeed through economies of scale and negotiating better prices with their long-term suppliers. A New York City-owned grocery store may not possess the necessary manpower, resources, or expertise to negotiate competitive prices that achieve the goal of affordable food.

Now, let's say that basic economics are tossed out the window and the subsidized Zohran Mamdani grocer becomes a big hit in the City That Never Sleeps. Not only does this create unfair competition, as taxpayers are mandated to foot the bill, but it will also lead to store closures in the broader grocery industry, reducing consumer choice, which in turn causes less competition and higher prices.

The Fatal Conceit

Legendary economist Friedrich Hayek espoused one of the most comprehensive critiques of socialism in the entire field of economics: The Fatal Conceit. Hayek asserted that socialism fails in both practice and principle because the ideology asserts that central planners can design and control economic systems, foregoing the spontaneous order and dispersed knowledge features of the marketplace.

Mamdani's campaign proposal suggests that New York City bureaucrats can run grocery stores at low costs without hiccups. What's more, they can do it better than the thousands of others already in place, be they major chains or independent mom-and-pop shops.

Since the odds of a Zohran Mamdani victory are high – betting website Polymarket places his chances of victory at 74% – the United States will again witness a real-world socialist experiment. As usual, when this model crumbles, the socialists will shout: “But that wasn’t real socialism!”