Mamdani’s commissars botch their central planning for government-run groceries

Friedrich Hayek, call your office.

My former colleague at Investor’s Business Daily, who now run Issues and Insights, have come up with a marvelous editorial on New York Mayor Zohran Mamdani’s government groceries, and whether any businesses will be foolish enough to serve as them:

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New York Mayor Zohran Mamdani’s socialist dream of government-run grocery stores is off to a bad start. He’s issued confusing statements about whether shoppers will have to show proof of residency to shop there, admitted that he will have private grocery companies — not the city — run the stores, and said the stores won’t all be open until 2029.

But Mamdani is likely to face an even bigger problem if no legitimate grocer wants to get into bed with him.

The “” tacitly admits that his idea of government-run stores was stillborn, since he wants bids from private companies that have extensive experience running grocery stores, that have “existing supply chains,” and will “leverage an in-house merchandising organization.”

The RFP says the city aims at “reducing prices in ways the private market alone cannot.”

They go into describing how every benefit of stepping into Mamdani’s parlor revolves around subsidies, whether of rents or taxes or price supplementation to contain costs.

And what do they get in exchange for these bennies? Total government control over their enterprises. They continue:

According to the RFP, to win a contract, companies must not only be in the grocery business already, but meet requirements such as:

• Have “strong reputations within their communities for delivering on public policy priorities of health, sustainability, community involvement, culturally responsive merchandising, and local and diverse sourcing.”
• Show how they will “engage local suppliers, small businesses and suppliers meeting high sustainability, labor, and health standards.”
• Figure out how to, “in a fair and equitable manner,” prevent customers from emptying the shelves of the “core” goods being sold at 30% below market prices.
• Work only with subcontractors who will “work with NYCEDC (New York City Economic Development Corporation) to establish appropriate [minority and women-owned business] participation goals and make good faith efforts to achieve them.”
• “Collaborate with NYCEDC to finalize the expected wages, benefit packages, labor practices and working conditions.”
• “Demonstrate experience maintaining labor peace.”
• Get approval from the city to open a store in a privately owned site, including “alignment with the Project’s affordability and operational requirements.”
• “Regularly report” to the city about how it’s complying with all the above.

Try fulfilling all of those.

After that, the absurdities follow, and they cited an impressive thread on X by Nick Kokonas, who co-owns Tangled Ranch Vineyards of California, who seems to know what that’s going to lead to, citing deli food requirements without allowing for deli preparation space, economies of scale, without delivering scale, missing information about how many stores to plan for and in what part of town, and other absurdities.

I read that and all I could think of was that this was the same dynamic I found in doing a deep dive into why Venezuela’s recently constructed public housing went down like side-stacked cards in the double-mega-earthquakes in Venezuela last June, while older buildings weathered the temblors just fine.

It came from the Turkish architect and builder SUMMA’s website:

SUMMA contacted us, the architects, and we began working on the project in January 2011 in Venezuela. 

Despite the great and urgent need for housing in the Bolivar Republic of Venezuela, the “Mission Vivienda” does not compromise on its Bolivarian socialist principles and adopts an analytical approach to new settlements and social housing projects. The actors involved in developing the projects are not limited to architects, engineers, clients and investors, but also include the well-commuted neighbourhoods of the Bolivarian socialist regime. Our initial contacts for the project were the Ministry of Housing and the Municipality of Vargas, who brought us together with a neighbourhood council following our first site visits. This was an exceptionally interesting encounter for us as designers. 

Meaning, they were ordered around by Bolivarian political commissars who maintain order in the slums on how to construct the buildings, prioritizing bike path-style features and other goodies intended to win votes, while seismic soundness was completely ignored.

Our meeting with the neighborhood council, and their presentation of a model they had prepared together provided us designers a significant chance in understanding the user profile of the project. Both the neighborhood representatives and the government officials expressed that the project’s social facilities were as important for them as the housing units themselves, and informed us on how they desired the schools, nurseries and hospitals to be designed.

‘As important as,’ they told the architects whose actual area of expertise was building with seismic soundness.

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SUMMA continued with the Chavista design criteria:

Design Criteria was based on:

– Creating an ecological and sustainable environment
– Creating sufficient social facilities and social areas by consulting the inhabitants, in accord with the social understanding.
– Keeping schools and kindergartens within walking distance, especially for little children.
– Providing sufficient sports grounds.
– Creating pedestrian areas free from vehicular traffic.

… and then I commented:

Earthquake standards, which had been on the books in Venezuela since 1984, were not mentioned. Not compromising on ‘socialist standards’ was. It looks like Chavez’s political shock troops who kept order in the slums, the Bolivarian Circles and other Chavista organs of shantytown control had the final word about what the design would be. And obviously, nobody cared about structural soundness. Votes were the idea. 

Which sounds a lot like Friedrich Hayek’s theory of knowledge in the marketplace, which explains why central planning always fails, and why socialism itself always fails. 

Socialism, which is run with central planning, presumably for the good of ‘the people’ can never fathom the millions of decisions made by all the little guys down the supply chain up to the consumer level which keep markets rational and supplies abundant. The great Austrian economist of free market economics wrote about it in his famous essay, The Use of Knowledge in Society,” arguing that central planning would always fail because central planning deals with statistics  and generalities, not particular circumstances. That’s why icy little commissars with red stars on their newsboy caps sitting behind desks in distant capitals commanded distant factories to produce 10,000 left shoes and no right ones, blissfully dismissive of consumers who didn’t want two left shoes. This actually happened in the old centrally planned Soviet Union, and it was but one small example among millions. The problem itself was writ large and eventually caused the Soviet Union to buckle.

David R. Henderson, writing at EconLog in 2010, discusses the problem well with these Hayek passages:

In Section IV, sixth paragraph, Hayek writes:

It follows from this that central planning based on statistical information by its nature cannot take direct account of these circumstances of time and place and that the central planner will have to find some way or other in which the decisions depending on them can be left to the “man on the spot.”

No question on this: Just think about it.

In Section V, first paragraph, Hayek states the dilemma:

We need decentralization because only thus can we insure that the knowledge of the particular circumstances of time and place will be promptly used. But the “man on the spot” cannot decide solely on the basis of his limited but intimate knowledge of the facts of his immediate surroundings. There still remains the problem of communicating to him such further information as he needs to fit his decisions into the whole pattern of changes of the larger economic system.

This, by the way, doesn’t even get into the issue of price, which central planners set not based on supply and demand but on what they think the price should be, never mind market conditions. Prices serve as communication devices, telling what is valued and what is not by consumers. This is of no concern to commissars doing central planning of course and they determine prices at both ends, which in the end always leads to imbalances and shortages, which New York under Mamdani is certain to see.

So now Mamdani is calling on businesses to step into his parlor, where he’s bound to strangle and consume them with his web of controls. Sound like any business will take him up? One hopes none will be foolish enough, because if they do, they won’t like the result. Previous socialist regimes shot their way to power and simply expropriated what they wanted to control the economy. Mamdani’s method of operation to control the economy is to lay traps to foolish businesses enticed into his government grocery schemes.

Lagniappe: This video, by Charles Curran, who did many of the spectacular Spencer Pratt ads, is brilliant, too:

Image: Wikimedia Commons, via Picryl // public domain