Socialism Has Happened Before. Will it Happen Again?
The Cato Institute ranks New York State as the least free state in the United States.
All of this has happened before. And will happen again—the same plot from beginning to end, the identical staging.—Marcus Aurelius
Living in New York City is not easy. The Cato Institute ranks New York State as the least free state in the United States. On top of high state income taxes, New York City residents pay an additional tax of 3.876 percent on income above $50,000. The total New York City sales tax is 8.875 percent.
Along with the tax burden, New York City and State residents endure extreme regulatory burdens. Huge bureaucracies and corruption go together, and NYC has no shortage of either.
In NYC, bureaucracy and corruption result in the staggering educational cost per student of $36,293, the highest in the country. You would be wrong to believe that huge spending results in educational excellence.
And now, the Democratic mayoral nominee, Zohran Mamdani, claims he wants to “lower costs and make life easier” for NYC residents by spending even more. He promises a rent freeze, free buses, free childcare, and government-run food stores.
Mamdani tells us his grocery stores will focus “on keeping prices low, not making a profit.” These government stores won’t pay rent or property taxes and will “pass on savings to shoppers.” Mamdani promises to magically recreate the modern miracle of food distribution: “They will buy and sell at wholesale prices, centralize warehousing and distribution, and partner with local neighborhoods on products and sourcing.” In his TikTok ad he tells us private food store prices are “out of control” and his stores won’t price gouge.
In the Democratic primary, Mamdani won votes from the college educated. One of Mamdani’s economically illiterate but “educated” supporters from a “conservative family in upstate New York” texted his mother after the election: “It was nice to feel like my vote mattered and is actually helping pave the way to a world I want to live in.”
The world this voter imagines will not be one he wants to live in.
Instead of tax and regulatory reform, Mamdani’s socialist plans will fix everything with freebies, wild spending, and a generous splash of “globalize the intifada,” antisemitism, and anticapitalist sentiments.
F. A. Hayek explained why many people support politicians touting socialist plans. In The Road to Serfdom, he explained that people want to be “relieved of the necessity of solving [their] economic problems and…the bitter choices which this often involves.”
Mamdani blames capitalism for the economic choices we all must face. In Hayek’s words, voters “are only too ready to believe that the choice is not really necessary, that it is imposed upon them merely by the particular economic system under which we live.”
With those mindsets in place, Hayek warned us to expect “irresponsible talk about ‘potential plenty.’”
The politician who campaigns with a plan, however ridiculous, has an almost insurmountable advantage over the politician who tries to explain how the market process solves problems without the need for master planners. When people are ahistorical and economically illiterate, they long for a plan.
What voters do not see is that excessive taxation and regulation undermine the market process. The more disabled the market, the more the government steps in to direct it — and us.
Hayek is clear where this all leads: “Since under modern conditions we are for almost everything dependent on means which our fellow-men provide, economic planning would involve direction of almost the whole of our life.”
Today, operationalizing Mamdani’s plans for government food stores will not yet lead to widespread deprivation and starvation. Why? Mamdani cannot end all private food store alternatives. Those who want the DMV experience while shopping for food can partake in Mamdani’s stores. Depending on how much taxpayer money he wants to waste, Mamdani could undercut traditional stores, especially on visible staples like milk, eggs, and meat. Government stores will put some traditional stores out of business. Most at risk will be the small mom-and-pop bodegas that dot NYC.
Despite Mamdani’s claim of price gouging, the average grocery store operates at an approximately 1.6 percent profit margin. Grocery stores are driven to operate efficiently with a minimum of waste because of vigorous competition. Government bureaucrats know nothing of efficiency, nor do they have the tacit knowledge to operate grocery stores. With honest accounting, Mamdani’s stores will operate at massive losses.
The capitalists Mamdani rails against don’t always behave virtuously. But as John Mueller points out in his book Capitalism, Democracy and Ralph’s Pretty Good Grocery, the market process under capitalism tends “to reward business behavior that is honest, fair, civil, and compassionate, and it inspires a form of risk-taking behavior that can be credibly characterized as heroic.”
In his book, Conscious Capitalism, Whole Foods founder John Mackey observes, “Trust is critical to having a good relationship with customers.”
Market Basket is a beloved New England grocery chain. A few years ago, customers, employees, and vendors went on strike during a hostile takeover, forcing a reversal of the takeover. Market Basket, along with Wegmans, is known for the fierce loyalty of its customers and also its employees. The grocery chain’s CEO believes “Market Basket has a moral obligation to the communities we serve.” He backs his words by delivering low prices for customers and career advancement for employees. Market Basket promotes from within based on merit, not seniority. In contrast, seniority advances government employees, and they are very difficult to fire. In Mamdani’s stores, expect employees to behave like Soviet-era shopkeepers.
Wegmans perennially makes the Fortune list of “100 Best Companies to Work For.” Its former president, Robert Wegman, said of his generous treatment of employees, “I have never given away more than I got back.” In that statement of principle, we hear the belief that business is a win/win, not win/lose enterprise.
People attracted to socialism want to receive before they give. Their heroes, such as Mamdani, believe billionaires shouldn’t be allowed to accumulate that much wealth. If Mamdani is elected, expect wealthy New Yorkers to flee the city.
Today, supermarkets carry up to 60,000 different items. Let’s say Mamdani’s stores operate more like a Trader Joe’s with only 4,000 items. On what basis will Mamdani’s stores decide what to stock? In his book Dismantling Utopia: How Information Ended the Soviet Union, Scott Shane helps us address that question.
Shane was curious why “some of the longest lines in Moscow were for shoes.” Naturally, he “assumed that the inefficient Soviet economy did not produce enough shoes.”
To his surprise, Shane found that for every adult and child, the Soviet Union produced “more than three shoes a year.” How could there be a shortage of shoes?
Shane explained, “The comfort, the fit, the design, and the size mix of Soviet shoes were so out of sync with what people needed and wanted that they were willing to stand in line for hours to buy the occasional pair, usually imported, that they liked.” Soviet planners had selected a consensus shoe, one that met few needs.
In my rural area, you wouldn’t think consumers would pay two to three times the price for certified organic, pasture-raised eggs over “ordinary” eggs. It turns out they are willing to pay the premium, and the buyer for a local supermarket gives considerable shelf space to two different brands of these eggs.
The same kind of decision is being made in every aisle of a grocery store. Pause a moment in the yogurt aisle to look over the incredible array of choices — Greek, Bulgarian, Icelandic, organic, non-organic, whole milk, low-fat, no-fat, sweetened, unsweetened, and an astonishing number of flavors.
Mamdani decries capitalism and profits, but he does not understand the market process. Prices and profits help decision-makers discover the optimal product mix for their customers. Under socialism, decisions are made on the whims of government bureaucrats.
Hayek, in his classic essay “The Use of Knowledge in Society,” wrote:
I am convinced that if it [the price system] were the result of deliberate human design, and if the people guided by the price changes understood that their decisions have significance far beyond their immediate aim, this mechanism would have been acclaimed as one of the greatest triumphs of the human mind.
Mamdani is not impressed with the miraculous market process; he is impressed by the rantings of his own master mind.
I was living in Baltimore when a new wave of Soviet émigrés arrived in the 1980s. Host families, who helped these newcomers adjust to American life, shared stories with me of initial encounters émigrés had with our country’s cornucopia of plenty. They told of émigrés stunned by the abundance in supermarkets. Some stood frozen, overwhelmed by the vast choices. Others frantically filled their carts, fearing the shelves would be bare tomorrow.
They were astonished to learn that no government official dictated supermarket locations or shop hours. No officials dictated what they stocked or who their suppliers were.
Not many years later, in 1989, Boris Yeltsin, then a member of the Soviet Parliament, visited a supermarket in a Houston suburb. Not even the Soviet elites had access to such abundance. Astonished and puzzled, Yeltsin asked, “How much does this cost? Do you need special education to manage a supermarket? Are all American stores like this?” Jon Miltimore points out, “Yeltsin’s experience that day ran contrary to everything he knew.”
Mamdani has experienced the cornucopia generated by the market process; he doesn’t have Yeltsin’s excuse. To advance his socialist agenda, Mamdani intentionally puts on blinders and leads voters to believe they do not need to take responsibility for their economic choices.
Some people dismiss the rise of Mamdani, saying the Democrats’ embrace of such radical candidates is self-destructive to their party. What worries me is the likelihood that a pre-2028 economic crisis could build support for Mamdani-style presidential candidates. If New York City voters don’t soundly defeat Mamdani in November, we may have new case studies in socialist devastation.
This essay was originally published at the American Institute for Economic Freedom.
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The only mystery is how those on the left will spin the failure of Mamdani's policies.
I am so glad and grateful that I was enrolled in your Economics course for my MBA back in 2002. As this is what led me to subscribe here and help me to understand further the forces, or invisible forces at play in the marketplace and politics