Anybody who reads my column regularly already knows that I love a good bargain. I have written extensively about paying less for everything from vacations and Christmas presents to clothing and food.
So, when New York City Mayor and self-described democratic socialist Zohran Mamdani announced last week that he plans to open five city-owned grocery stores that will sell grocery staples, including produce, meat, dairy products, and bread at a guaranteed 30% below market prices, I had to look into the details of his plan.
I would like to say that these savings will be achieved through greater operational efficiency, bulk purchasing power, and reduced profit expectations. But the data says otherwise.
According to the food-industry trade association FMI, the average profit margin for U.S. grocery retailers last year was approximately 2.1%. With many grocery staples carrying even lower margins, it is difficult to see at first glance how these products can be sold at a 30% discount and remain financially solvent. Yet, while speaking at the future site of one of these stores, Mamdani said, “We are not hoping for affordability. We’re guaranteeing affordability.”
A deeper look at Mamdani’s plan reveals that these lower prices he is promising would be achieved largely by having the government absorb much of the expenses related to running a grocery store. In other words, the discount does not represent a true reduction in the cost of the groceries. It is simply a transfer of that expense from shoppers to taxpayers.
In fact, the city has committed $70 million in capital funding to construct and prepare the five stores, along with additional support for the rent, property taxes, and some of the actual cost of the food purchased from wholesalers. Given that New York City is projecting budget shortfalls in the billions beginning next fiscal year, I have serious concerns about the long-term viability of this program.
Beyond the unfair burden this puts on taxpayers, it also places New York’s private grocers at a significant disadvantage. Competition in the grocery industry is already fierce, even on a level playing field. It becomes considerably more difficult when independent businesses are forced to compete against stores backed by the seemingly bottomless resources of the world’s richest city.
The world is littered with examples of government-run grocery systems built on subsidies and price controls. Countries such as Cuba, Venezuela, and the Soviet Union have all attempted similar programs. While initially popular among those able to obtain food at artificially low prices, these systems ultimately resulted in severe waste, shortages, and corruption.
I am all for finding ways to reduce the cost of groceries, but not when the discount at the register simply comes out of taxpayers’ pockets. The best way to make goods and services more affordable is by encouraging competition, productivity, and growth in the private-sector economy, not by having government central planners compete against it using other people’s money.
(Past performance is no guarantee of future results. The advice is general in nature and not intended for specific situations)