How ‘socialist’ is New York mayoral candidate Zohran Mamdani?

Socialism evolved in large part as a reaction to the capitalist system, and has meant different things at different times. In some cases it refers to the state (or the government) owning the means of production, while in other contexts it could mean the workers owning the means of production while competing in a market economy.

Mamdani’s detractors — including within the Democratic Party — believe his policy prescriptions could spell doom for the city that never sleeps, pushing out businesses while saddling the running of the city with excessive government controls and taxation.

His supporters see his rise as a clear message that the Democratic Party must shift “left” to counter the Donald Trump-led MAGA (Make America Great Again) movement, which is pulling the US further towards the economic and social “right”.

What is the meaning of “democratic socialism”?

In a recent interview, Mamdani was asked if he likes capitalism. He winced and said no, before describing himself as a “democratic socialist”. And to define what it meant, Mamdani quoted American civil rights activist Martin Luther King: “Call democracy or call it democratic socialism, there must be a better distribution of wealth for all of God’s children in this country.”

Mamdani said he was focussed on the rising inequality in the US today, and wants to address the problem of affordability. He is a member of the Democratic Socialists of America (DSA) which explains democratic socialism as follows:

“Capitalism is a system designed by the owning class to exploit the rest of us for their own profit. We must replace it with democratic socialism, a system where ordinary people have a real voice in our workplaces, neighborhoods, and society…”.

“We want a democracy that creates space for us all to flourish, not just survive, and answers the fundamental questions of our lives with the input of all. We want to collectively own the key economic drivers that dominate our lives, such as energy production and transportation. We want the multiracial working class united in solidarity instead of divided by fear. We want to win ‘radical’ reforms like single-payer Medicare for All, defunding the police/refunding communities, the Green New Deal, and more as a transition to a freer, more just life.”

What is the economic state of New York?

According to the Fiscal Policy Institute (FPI) — an independent, nonpartisan, nonprofit think tank that focuses on the state of New York — New York may have already entered a period of stagflation (a deadly combination of low growth and high inflation).

According to the Federal Reserve Bank of New York, in 2022 New York city had a GDP of $1.2 trillion — roughly one-third the size of India’s GDP — with a population of just 8.3 million.

Prior to the pandemic, the city had experienced its strongest economic boom in decades. But the Covid-19 pandemic has dealt a severe blow to the city’s economy and employment, one that still has not recovered from.

Land prices and thus home prices are exceptionally high with median household income in 2022 being $72,000 per annum while the median home price was $724,000.

What are Mamdani’s policy prescriptions?

One of the main reasons why Mamdani has captured the imagination of the voters in the Democratic Party’s internal elections is his laser focus on making the city more affordable for New Yorkers.

During the mayoral debate among democratic contenders, Mamdani boldly unveiled his plan to achieve this goal.

“I will freeze the rent for millions of tenants, make buses fast and free and deliver universal childcare. And before you ask, I’ll pay for it by taxing the rich — the same billionaire who put Donald Trump in the White House, the same ones who are now funding Andrew Cuomo’s [a former governor of New York and his main opponent during the Democratic primary] campaign.”

Apart from freezing the rent — a policy choice that has attracted a lot of attention because nearly 70% households rent their homes — Mamdani has also promised to introduce government-owned grocery stores. He says that nearly 9 in 10 New Yorkers say the cost of groceries is rising faster than their income and as Mayor he will create a network of city-owned grocery stores focused on keeping prices low, not making a profit.

“Without having to pay rent or property taxes, they [such shops] will reduce overhead and pass on savings to shoppers. They will buy and sell at wholesale prices, centralise warehousing and distribution, and partner with local neighborhoods on products and sourcing,” Mamdani’s manifesto states.

Mamdani also wants to raise the minimum wages. “In the world’s richest city, making the minimum wage shouldn’t mean living in poverty,” he says. As Mayor, Mamdani “will champion a new local law bringing the NYC wage floor up to $30/hour by 2030. After that, the minimum wage will automatically increase based on the cost of living and productivity increases. When working people have more money in their pocket, the whole economy thrives,” according to his policy manifesto.

What is the problem with Mamdani’s proposals?

There are three main concerns with Mamdani’s proposals.

One, the belief that governments can solve real issues by fixing prices (or wages) in the economy is viewed with suspicion among mainstream economists. At one level, if it only requires someone in government to fix prices in order to stem price rise, there would never be any inflation or crisis of affordability.

There is a large body of research that shows that while freezing rents appear to help affordability in the short run and for current tenants, in the long-run such a move disincentives more houses being built and decreases affordability, especially for the future tenants.

Higher prices are a signal of mismatch between demand and supply. The more substantive way to solve it is by boosting supply. To be sure, Mamdani recognises the need to build more houses, albeit he proposes to build just 200,000 while some of his opponents are promising to build a million (especially since they want the private sector to build them).

Second, is a concern about the efficiency of government-run enterprises such as grocery stores. Again, there are many examples from the world over that, more often than not, shops or businesses run by the government are inefficient and often plagued with corruption.

Third, is a concern about excessive taxation driving out businesses from NYC, thus robbing it of the economic dynamism that fuels the city’s growth. One of the candidates that Mamdani defeated in the Democratic Primary race is Whitney Tilson, a former hedge fund manager who also helped create Teach For America. During the debate earlier in June, Tilson pointed out that if Mamdani’s taxation plan is implemented “NYC businesses would be paying double the tax rate of New Jersey, triple that of Connecticut, and five-times that of Florida, which would lead to an exodus of businesses and jobs and crash our city.”