Why should we hate Mamdani's idea of publicly owned grocery stores?

Let us count the ways.

I knew, as I’m sure most of our readers do, that Zohran Mamdani’s plan to set up five city-run supermarkets in New York City on an experimental basis is a bad idea. But I didn’t know all of the levels at which the proposal makes no sense.

Scott Lincicome of the CATO institute spells them out persuasively. He begins by arguing that “there is no grocery problem to be solved.”

For starters, new USDA data show that Americans’ spending on groceries (“food at home”) has—after a rough couple of post-pandemic years—resumed its historic decline, while overall food inflation has moderated, too.

Nor are grocery stores gouging their customers:

Grocery stores make very small gross profit margins, typically 1–4 percent, and operate in fierce localized competition with a range of food outlets. Even on a simplistic static basis, then, the scope for price cuts and across-the-board discounts to customers is tiny. A municipal operator could forgo profit, but the room that creates is only one-or-two cents on every dollar of sales.

Moreover, short of selling below cost, the problems of which are discussed below, public grocery stores could not even achieve these meagre one-or-two-cents-on-the-dollar savings:

Public grocery stores would lack the scale, sophistication, and efficiency that Big Grocery deploys to achieve low prices and stay in business, and these weaknesses ruined past government attempts to run grocery stores in rural Florida and Kansas—tiny places that, The Atlantic documents, had literally no other grocery options for miles.

Unlike tiny rural places in Florida and Kansas, New York City is not plagued by “food deserts.”

New York City already has lots of food options—both online delivery services and brick and mortar grocery stores. A recent study, in fact, ranked the Big Apple the No. 1 U.S. metro area in terms of residents’ “equitable access” to a local supermarket, and found that the city would need only two new stores—yes, just two in all of NYC—to achieve an ideal level of grocery store access via a 10-minute walk or less. According to the USDA in 2021, moreover, the New York City area had just 3.5 percent of its low-income population living in supposed “food deserts”—one of the lowest shares in the country.

Nor is there any reason to believe that adding grocery stores would improve public health:

As Matt Yglesias [no conservative] explained for Bloomberg, there’s no good case for adding supermarkets—public or otherwise—to improve public health in New York or anywhere else. Research (“study after study after study”) consistently shows that there’s a weak, if any, linkage between a neighborhood’s access to healthier foods (including at grocery stores) and their eating habits or overall health. One particularly noteworthy study found that opening a government-subsidized supermarket in Philadelphia—part of Pennsylvania’s “Fresh Food Financing Initiative”—had no noticeable effect on locals’ reported fruit and vegetable intake or body mass index.

It’s easy to blame capitalism for the poor habits that are producing the obesity epidemic in America. But apparently the evidence doesn’t back up the theory.

Lincicome goes on to show that establishing government-run grocery stores would make things worse for New York City consumers:

Putting New York City politicians in charge of supermarkets would probably mean higher costs and worse service, not the opposite. Offering food items below cost would also necessitate endless subsidies and—as we know from explicit price caps—risk empty store shelves, long lines, and illicit resale markets, while potentially pressuring private stores to leave the affected area (thus demanding even more city involvement!).

Using city land for unnecessary public grocery stores also imposes opportunity costs, as it means fewer resources and less space available for more productive public purposes like housing, schools, parks, or other essential infrastructure, or else a forgone sale or rental value that could be accessed to give money back to taxpayers. And, of course, New York politicians would have a strong incentive to use these new enterprises for political gain, compounding the risk of cronyism, corruption, and inefficiency—as California politicians’ recent, union-backed crusade to ban self-checkout depressingly demonstrates.

Experience with publicly-run liquor stores shows that the problems Lincicome describes are not hypothetical:

Indeed, we can see many of these exact problems in the seven states in which the government directly owns and operates liquor stores, which some supporters of Mamdani’s idea have (bizarrely) cited to defend it. So-called “ABC stores” in these states are notorious for having subpar choice, operating hours, innovation, and service, while often operating at an inexplicable loss for the states at issue.

These outlets also have repeatedly been found to waste taxpayer funds; to suffer from high operating costs, political favoritism, and outright corruption; and to vigorously resist needed oversight and reform (especially privatization or commercial/​interstate competition). And the stores’ regulated prices predictably breed vibrant black markets, thus necessitating multistate sting operations and armies of “liquor cops” (171 in Pennsylvania!) to crack down on illicit transport and resale of price-controlled hooch.). . . .

The entire state liquor monopoly model, of course, was never intended to deliver low prices, wide selection, high quality, and more convenience—in fact much the opposite. Yet those things are exactly what we want from our supermarkets, and they’re something private players eagerly and successfully provide for a very modest fee. Injecting the state into such a system makes no sense.

None of this is to deny that affordability is an issue in New York City. It was the signature issue of Mamdani’s successful campaign and certainly resonated with those who supported him.

But as I discussed here, Mamdani’s base of support did not include the City’s poor, the class that Mamdani presumably would claim is the primary intended beneficiary of city-run grocery stores. The case for such stores as a means of lowering food costs for hipsters and New York’s professional class does not seem as compelling.

In any event, government-run stores won’t yield lower prices or improve public health. They are a non-solution to what, at least in New York City, is a non-problem.