A person shops in a store in Toronto, where City Council recently voted in favour of a pilot for government-run grocery stores.Carlos Osorio/Reuters
Gus Carlson is a U.S.-based columnist for The Globe and Mail.
Call them the “Delusionals,” the progressive nitwits who despite mountains of evidence to the contrary are still trying to sell the idea that there really is such a thing as a free lunch.
New York has one. He’s the newly elected democratic socialist mayor, Zohran Mamdani.
Now, Canada has a few. There’s the newly minted federal NDP leader, Avi Lewis. Then there’s the majority of Toronto’s city council.
As if by some ideological mind-meld, these leaders have come up with similarly fatuous solutions to affordability issues in urban areas – government-run grocery stores.
Mr. Mamdani wants to create five government-owned and operated grocery stores built on city-owned land in so-called “food deserts.” The new stores will be exempt from the usual taxes, fees and regulatory restrictions levied on private competitors. That includes not only the large grocery chains but also the family-owned and operated bodegas, the lifeblood of many city neighbourhoods.
Mr. Lewis’s delusion is national in scope. He sees a countrywide network of government-owned and operated food stores, offering heavily discounted prices. In announcing his plan, Mr. Lewis said he would opt for “a high-volume, warehouse-style model with subsidized rent and utilities.” His promise: Cutting prices by 30 to 40 per cent.
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In Mr. Mamdani’s case, the stores are all part of his campaign promise to tax rich New Yorkers and the most profitable corporations headquartered in the city to fund giveaways such as free buses. In Mr. Lewis’s case, he already has the support of Toronto City Council, which recently voted 21-3 in favour of a pilot, starting a one-year window for an implementation report.
Like so many ideas on the left, this one comes from the heart, not the head. To be sure, it is well-meaning and compassionate to the plight of those who are struggling to make ends meet in an environment of rising prices.
The problem is this: No matter how heartfelt, its chances of success are slim without someone else paying for it. As in taxpayers. And even then, it is by no means viable.
Let’s talk first about the market dynamics. The grocery business has notoriously low margins – around 3 per cent on a good day. The supply chain is infinitely complex and the costs of managing the choreography, including labour, are backbreaking.
A government-run operation would presumably pay government-style wages, which for front-line staff could translate to salaries that are 25-per-cent higher than private-sector wages. Big private companies also drive down costs by buying goods in volume, something a handful of publicly funded stores would have trouble matching.
One of Mr. Lewis’s solutions is to outsource the operations of a government chain to a private company that’s already in the business on a quasi-white-label basis.
I wouldn’t want to be the grocery chain CEO who goes to his board and investors with this proposal: We’re going to manage this new operation for the government, it will compete with and potentially cannibalize our existing business, it will cut our already razor-thin margins in half and threaten our competitive position in the marketplace. It may even drive down the value of our company to the point where we need to consider cutting jobs and closing locations. But it will make people feel good.
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The dirty secret people like Mr. Mamdani and Mr. Lewis don’t want to share is this: Most experts who have looked at both proposals say the benefit to consumers in terms of lower prices would be minimal – not a 30- to 40-per-cent reduction – and the model is not sustainable.
Adding to the folly is the harsh reality of government-run anything being done at a commercially competent level. Think pot, the post office, the DMV – even health care.
The only reason state provincial liquor and beer stores work is because they have no competition. They can set prices wherever they want and deliver mediocre service. In reality, they are for-profit commercial enterprises masquerading as government public service agencies.
Sadly, a bureaucrat-managed chain of grocery stores does not generate a lot of confidence. These people aren’t smart enough, credentialed enough or experienced enough to succeed.
Yet in a fantasyland run by people like Mr. Mamdani and Mr. Lewis, anything is possible as long as you don’t run out of other people’s money to fund it.
So, taxpayers should beware: If implemented, this low-price option will cost you plenty – and in the end it won’t achieve the outcome the Delusionals seek.