You really need to do a deep dive on Singapore. I suspect you don't quite understand how it works.
One of my dearest memories was when the head of the American Enterprise institute was invited to give a talk at the National University of Singapore's Lee Kuan Yew School of Public Policy.
This guy, who was an American, and who had just kind familiarized himself with the vibes of Singapore being a right wing neoliberal place, gave a speech praising its rule of law and laissez faire policy making.
One of the local professors got up and just tore him a new one. Here are the many ways Singapore is very interventionist:
-75% of housing in Singapore is built and owned by the government and only leased to the people.
-Singaporeans have to pay 20% of their income into government mandated savings vehicles. 10% into retirement and 10% into a health savings account.
- ALL Singaporean men have to do National Military Service (or a longer period of Civilian Service) for 2 years
- If you want to buy a car in Singapore, you first have to go and buy a "Certificate of Entitlement" from the government, these are sold by auction and cost about 50,000 Singapore dollars (30-35,000USD) That's just your right to own a car. Then you have to buy the car itself. The car will have to be less than 10 years old to be street legal (There is some small exceptions and rules for classic cars). The TAX on that car will be 100% of the price. This means that if you want to drive a 2023 Honda Accord in Singapore, it will cost you 150,000+ dollars. On the plus side, Singapore's streets have no congestion.
- The government has racial quotas. Things have to happen to keep the ethnic makeup of Singapore consistent (78% Chinese, 12% Malay, 7% Indian, 1-2% everyone else.). Government housing is apportioned in these ratios. New Singapore citizens are naturalized in the same ratios.
-Singapore speech laws are very strict.
- It is NOT ok to be gay legally (Singapore allows it de facto)
Singapore is a very interesting and successful country, but the amount of market interference and government interference is actually very high.
I don't think Noah is advocating that the United States just "become" Singapore, particularly in regard to its tighter social and political spaces. The parts about crimininalising homosexuality, or restricted free speech, or conscription aren't quite relevant in light of the spirit of the post. Unless you are proposing that those elements are causally linked to Singapore's high state capacity alongside its economic model, but I don't think you're saying that.
In fact, I'm even going to go so far as to say Noah probably isn't all that adverse to the government intervening in the economy. The crux of the comparison with Singapore to me reads more like an advocacy for state capacity, as Noah spells it out: the capacity of the government, the state, to be able to get things done in-house. Singapore is a country that has established that it can do this very well, and in doing so it has actually created one of the most investor-friendly countries in its region if not the world. I think that's a more accurate reading of Noah's pointing towards Singapore.
Singapore is great as an example of "State capacity." It is more mixed on being "neoliberal".
When people complain about neoliberalism, they are often complaining about the privatization of public services and the resulting reduction in quality of said services.
Singapore doesn't do this.
I remember we were learning about the Singapore health system from one of the people who helped design it.
Singapore's system has subsidized health insurance run by private companies. The insurance has to cover certain things. Singaporeans can use that mandatory 10% income into their HSA to pay for it.
One thing it has to pay for is the stay in a B class bed in a public hospital. A class rooms cost more, are private, and you get to choose your doctor, B class rooms are shared and doctor choice may or may not be possible, C class rooms are shared between more people, doctors are assigned, but it is very cheap. The Singapore government would prefer people to use B and C class beds as it is cheaper and a more efficient use of limited hospital capacity and medical personnel. Hospitals, however, make much more money off of the A class beds.
Singapore's system has both public and private hospitals. The public hospitals are grouped into clusters. (The amount changes. There were 3 clusters, then 6 clusters, then 4... But the hospitals themselves don't change). The public hospitals are all owned by the government but the clusters are left to run themselves and to compete with each other.
Back in the late 90's early 2000's, someone in the public hospital sector had an idea. They wanted to make much more A class beds. They brought in American consultants. They put a plan to the government for permission. The government said OK.
The hospitals made many more A class beds. The hospitals made more money. A true neoliberal success. Everyone was happy... Except for the people who couldn't get beds because there was insufficient space in B and C class.
The Singapore government said to the hospitals, "This is why you can't have nice things. Your job and the reason you are allowed to exist is to deliver cheap, effective, and universal healthcare to Singaporeans. You said that you could increase the share of A class beds without reducing patient access. You were wrong. We are shutting it down"
The Singapore government went back to mandating how many A,B, and C class beds hospitals had to have.
That would NEVER happen in the American context. The idea that hospitals or insurance companies would be barred from doing something profitable, just because it negatively effected patient care and access... Do you guys even neoliberal?
I mean...I don't see the problem here? The question isn't whether it'd happen in America or not. Noah is proposing that it should happen, not whether or not it will or can happen. Your initial point was about Noah misunderstanding Singapore's model, and now you've shifted to "it can't happen in America."
The healthcare example aside—it's a notoriously inelastic sector, so I don't think it's appropriate to extrapolate arguments and examples from healthcare to the rest of the economy—I think what you illustrated is more or less what Noah has in mind. The degree of state intervention may be higher in his mind, or lower, but at the end of the day, the state has the capability and the will to intervene if it so chooses, as opposed to the utterly atrophied state of the American government (and subnational governments) today.
That's as far as the Singapore example goes. I humbly think that you're thinking too deeply on it, and perhaps even missing the forest for the trees. Singapore is a fairly good example of a state having high state capacity while also fostering a healthy space for the private sector. That's about it.
The point is that the American fear of neoliberalism is based on the idea of it often being sold as "Let's try deregulation and privatization, it might work better" when what really happens is "Let's deregulate and privatize... and it's worse, but, well, screw you, we're keeping it this way."
Noah doesn't seem to want to engage with that part of "neoliberal experience."
There are 30+ wealthy countries that do healthcare better and cheaper than we do. All of them have more government intervention in the sector than we do. (Such Left Wing Socialist stalwarts as Singapore, Israel, and Taiwan included). All of them regulate drug prices much more than we do.
The sarcastic response would be to make a rule that, if the hospital ran out of B and C class beds, they have to give people A class beds at B class prices until a B class bed is available...
There weren't extra A class beds, and that was the problem.
For the space they used to make a few A class rooms holding a few people individually, they could have made B and C class rooms holding dozens of people.
This story took place more than 20 years ago, but I just looked up the room sizes as of today at Singapore General Hospital.
Out of all that stuff you mentioned only the public housing is something that can be called market interference. And even that is arguable if the government is just building housing without preventing the private market from doing the same. The car policy is just a tax and isn't really market interference since it is applied to all cars.
Much of Singapore's success comes from its crucial geographic location -- almost all shipping travelling between East Asia (on the one hand) and Europe, Africa, the Middle East or the Indian Subcontinent (on the other hand) has to pass by it -- and this has caused many especially English-speaking people to think it is far more competently run than it really is.
Its construction costs are among the world's worst, it wastes 2% of its land area on golf courses, it has a water-intensive chemical industry in spite of having to get almost all its water from imports or desalination, its good educational outcomes are the result of its parent's spending the highest % of GDP anywhere in the world on private tuition, and there are 70-year olds cleaning tables because the GIC made bad investment decisions and Lee Hsien Loong believed it was most moral to fill the hole at the expense of the poorest.
Hong Kong (under British rule) was also similarly privileged in that it was for a long time a place where entrepreneurs from southern Mainland China (the Pearl River Delta region that is now the world's factory) could register their firms and operate without much interference from the CCP.
A big part of the reason why so much of the Anglosphere (at least minus the US, which has its own issues) is now incapable of building infrastructure for a reasonable price is because the policy of post-WWII British governments to try to equalize the regions discredited the British state in the eyes of London and the South East (which resented being taxed to subsidize the rest of the UK). This backlash took the form of Thatcherism which sough to privatize the functioning of the state: this included infrastructure planning, where a privately-run "globalized system" developed by the FILTH set ("Failed In London, Try Hongkong") was favoured.
About two decades later, this system subsequently spread to Canada and Australia, where it caused a similar explosion in costs.
And there are social engineering rules about who gets the subsidized housing, right? I was watching some House Hunters International show and a woman who presented as very masculine and who would read as gay in the U.S. was talking about how she had to wait til she was 35 to qualify because she was single, but married couples with children qualify much younger. My American sensibilities were offended, but I am aware I can take my American sensibilities and stuff them.
Yes, priority to get a Housing development board apartment goes to people who are married and who have children.
You can get higher priority by agreeing to get a unit in an older building. You can do it by agreeing to get a unit that is yet to be built. You can choose a less desirable part of the island.
-75% of housing in Singapore is built and owned by the government ..."
Democrats would love this. They'd love 100% more, but they take 75%
-Singaporeans have to pay 20% of their income into government mandated savings vehicles. 10% into retirement and 10% into a health savings account.
Democrats would love this. They'd love 100% more, but they take 40%
- ALL Singaporean men have to do National Military Service (or a longer period of Civilian Service) for 2 years
Small country (e.g., Israel) has to do this. I think would be a good idea for US, only not just for males. But I don't see this as a Democrats or Republicans thing.
non-
- This means that if you want to drive a 2023 Honda Accord in Singapore, it will cost you 150,000+ dollars. On the plus side, Singapore's streets have no congestion.
Democrats would REALLY love less. Climate change and all that. And for you folks who live out in the sticks? They need to move to a city, live in a small box, take public transportation. Unless they are white and would upset the racial percentages of a neighborhood.
The government has racial quotas. Things have to happen to keep the ethnic makeup of Singapore consistent (78% Chinese, 12% Malay, 7% Indian, 1-2% everyone else.). Government housing is apportioned in these ratios. New Singapore citizens are naturalized in the same ratios.
Democrats are all in on racial identity uber alles. An individual is nothing more than his or her race/ethnicity.
-Singapore speech laws are very strict.
Democrats would love this. They want European style speech controls. Someone who says that women don't have penises needs to be imprisoned.
- It is NOT ok to be gay legally (Singapore allows it de facto)
Finally one the Democrats are not going to like. Although, the progressive wing of the party idolizes Iran, and it's not OK to be gay in Iran (nor do they allow it de facto).
Exactly right. Yes to everything in this excellent piece. When I was the chairman of the Federal Communications Commission 1993 to 1997 our policies exactly fit the prescription here or at least we intended them to.
I feel like neoliberalism worked really well in terms of making the pie bigger, but it also increases inequality, so we need to do better on the "redistribution" side to make it more attractive for a solid majority of people.
IMHO that would be through more universal benefits, which don't feel as redistributive but register as "we are a rich country so we provide nice things for our citizens."
There’s a worry though. A lot of people find “redistribution” stigmatized or low status. People don’t just want the money: they want to feel they earned it.
Neoliberalism just needs to be evenly applied. We can’t have factory workers facing competition from China and construction workers facing competition from immigrants while doctors, lawyers, professors, teachers and all kinds of nepotistic industry jobs are all protected by a corrupt credentialism system. Neoliberalism will only work if we break the professional class privilege and protectionism. The threat that populism might actually effect these people is why they have all moved on to the new champagne socialism which is little more than a managerial movement that wans to protect the profesional class from competition. Little more than the “capitalism for the poor, socialism for the wealthy” system we already have.
Redistribution will never happen. The professional class will not actually cede enough money to make a difference, they will control where the money goes ensuring they get huge admin administrative fees and that the rest is just for buying loyalty, and the people who get it will just be demoralized and empty.
<I feel like neoliberalism worked really well in terms of making the pie bigger, but it also increases inequality, so we need to do better on the "redistribution" side to make it more attractive for a solid majority of people.>
I doubt it. The growth rate of developed industrialized countries was, on average, lower than it was prior to the adoption of neoliberalism (c. 1980). Neoliberalism was great for developing countries because free capital markets mean foreign investment in domestic sectors, although many countries failed to capitalize on this for a variety of reasons (political instability, bad institutions, etc.). Of course, one could argue that neoliberalism was better than the alternative, which was the slow-growth stagflation of the 1970s, thought this assumes that neoliberalism was the only alternative to stagflation (I'm skeptical, but your mileage may vary).
So, why isn’t Walmart in New York City? Maybe figure that out before putting in city-run grocery stores. Doing obvious stuff the rest of the country benefits from makes a hell of a lot more sense than a utopian socialist dream that never will work.
Even the google AI summary with the prompt "why isn’t Walmart in New York City" had approximately the same answer.
Another point that I haven't seen might be that NYC cannot accommodate the high volume trucking traffic into whatever site Walmart might have in mind, nor can it accommodate the high volume of cars coming to a Walmart.
On the other hand, Target has a good toehold in NYC because it is adapting to smaller stores.
You write: "All of the market power has to work out just right, or the whole story falls apart." And then you back that with the non-sequitur of low profit margins, which are not market power. If the small stores also have low profit margins and higher prices, then it is obvious that wholesalers have the power to charge them higher prices.
Further, your unstated assumption that the grocery market is uniform and not segmented is blatantly false. Without that assumption, you couldn't make such a simplistic argument. Anyone who understands the ecological concept of keystone species would laugh at you.
You write "they’re buying in bulk — which of course is perfectly legal." As if legality proves there is no market power?
And of course you are ignoring economic efficiency issues such as cost shifting to consumers. Do you think it is free to own a car and spend time driving to Walmart, rather than walk 1 minute to the corner store?
The key sign that your article is bullshit supporting neoliberalism is that you do not cite ANY grocery industry economists, unlike much of your other writing. Instead you cite Tabarrok, a neoliberal shill for decades hired through Koch money, who is hardly an expert on the grocery industry.
Stops to small stores might have sales of only a couple hundred dollars or less. Stops to large stores might run into the thousands or more. For a large customer like Walmart they might even be delivering full truck loads.
Moreover, Walmart might have people stocking the shelves and managing the inventory. At a small store the delivery person might be doing so.
In addition, the large store is probably taking full pallets, the small store you might have to break those pallets down.
There are a lot of variables here but the long and short of it is that the volume of sales vs the time and millage per stop variance can be freaken huge. It's possible that the small stop might even take more time and often might be an out of the way area so mean more miles.
So there's going to be a big difference to cover the higher distribution costs.
And of course there's another reason. Big chain buyer has a number of stores, they push a LOT of volume. Other distributors REALLY want that business. So big chain buyer can push really hard to get prices down.
Small independent buyer can't do that. There might not be a lot of competition for his business because his business isn't very profitable. So small buyer again will pay more.
No, you don't seem to know a bit about it. All you've got is microeconomic hand-waving explanations that have no backing in actual industry numbers and research.
On the other hand, you are supporting Teachout's ideas by providing claims of market power and descriptions of how food deserts are created. Look, see what actual industry economists say, rather than BSing us with Econ 101 excuses.
This is literally my job. I work in these industries. I've personally crunched the numbers looking at profitability per stop and chain.
When I tell you that there it's WAY more profitable to deliver a truck load than a couple of cases to a small store you can take that to the bank.
Food deserts are created because either stores governments make it hard for stores to come in, or it's unprofitable to service areas. The lack of profit is either because of lack of demand, or more likely lack of profit because of high crime rates and high amounts of theft (or some combination of the two).
If stores can operate profitability in areas they will. Government needs to stop keeping the big stores out, and provide safe streets with little crime.
You are confusing profit with economy, a basic error.
Yes, it can be more economical to deliver a big load because of scale effects. But delivery can be priced separately than wholesale cost, as you conveniently forget, and you also conveniently ignore that we are talking about combined costs all the way from the producer to the consumer.
The nerdwallet story mentions that egg imports have grown significantly. I wonder if these are imported directly by the big chains rather than via wholesalers? That might give the big chains a price advantage.
Teachout and other no-nothing critics should take a one semester course in financial analysis for dummies. They could then pick up a balance sheet and figure out what the profit margin for the company is rather than spouting blather that is easily disproved.
I don’t know why the NYT keeps publishing her on economics matters since she’s obviously no economist or how she even got a law degree when she can’t do basic logical reasoning as shown by the simultaneous demand the prices of eggs be higher and lower at the same store.
IMO the city-owned grocery store idea is a tempest in a teapot, to which way too much attention has been devoted. However, Teachout's op-ed makes a specific claim about anti-trust law which I notice both Noah and Alex Tabarrok ignore in their haste to debunk her. The claim is that the big chains do not in fact get discounts just for buying in bulk, they get preferential discounts simply by virtue of being powerful, for which wholesalers compensate by charging higher prices to less powerful independents. They can do this, according to Teachout, because the DOJ has stopped enforcing the 1936 Robinson-Patman act, which outlawed discriminatory pricing in grocery wholesaling (the target then was A&P). Stacy Mitchell had a story about this in the Atlantic last December (https://www.theatlantic.com/ideas/archive/2024/12/food-deserts-robinson-patman/680765/).
I have no idea whether this really describes the US grocery industry today, but discriminatory pricing is obviously a legitimate target of anti-trust. This is essentially the method that Rockefeller used to take control of the US oil industry in the late 1800s -- he extracted lower freight costs from the railroads, which then charged his competitors higher rates. Patrick McGee's excellent book Apple in China documents that Apple did the same thing with their Chinese supply chain: they got them to assemble iPhones basically at cost, which the suppliers were willing to do because they could make their margin by charging higher prices to all the other handset designers. This is how Apple wound up with 80% of the profits from global handset sales despite controlling only 20% or so of the volume.
The logic of Teachout's argument (which admittedly she does a bad job of presenting; read Mitchell's article for a better job) is thus:
- Big chains use discriminatory wholesale pricing to undercut independents on price
- The independents eventually go out of business
- You wind up with food deserts because the big chains want to operate a small number of big stores, and these smaller number of big stores tend not to be located in low-income areas.
So a serious response to Teachout needs to address the following questions: a) Is it really true that failure to enforce Robinson-Patman has led to a rise in discriminatory pricing in favor of the big grocery chains and is such discriminatory pricing a cause of food deserts; b) is there a reasonable distinction to be drawn between bulk discounts and discriminatory discounts; and c) if your answer to b is "no", do you accept the corollary that we just have to accept that any amount of market power is fine and we should just give up on anti-trust?
(I'll repeat a comment I made elsewhere that I think address this issue. In short there's are good reasons that big chains get better pricing then little chains that has nothing to do with anti-competitive behavior.
Also if chains can make money in places they will go into those places. The reason they don't is because they can't make money. That's going to be because of lack of demand and/or crime making it unprofitable.
In short food deserts are likely to be caused by blue city governance failure
Finally, I do think there is a role for antitrust. Look for example at store owned diary labels that charge artificially low prices because they can make it up by selling other products. But the consumers aren't being hurt here, just the other dairy manufacturers.
)
This is an area I know a bit about.
Stops to small stores might have sales of only a couple hundred dollars or less. Stops to large stores might run into the thousands or more. For a large customer like Walmart they might even be delivering full truck loads.
Moreover, Walmart might have people stocking the shelves and managing the inventory. At a small store the delivery person might be doing so.
In addition, the large store is probably taking full pallets, the small store you might have to break those pallets down.
There are a lot of variables here but the long and short of it is that the volume of sales vs the time and millage per stop variance can be freaken huge. It's possible that the small stop might even take more time and often might be an out of the way area so mean more miles.
So there's going to be a big difference to cover the higher distribution costs.
And of course there's another reason. Big chain buyer has a number of stores, they push a LOT of volume. Other distributors REALLY want that business. So big chain buyer can push really hard to get prices down.
Small independent buyer can't do that. There might not be a lot of competition for his business because his business isn't very profitable. So small buyer again will pay more.
Loved your piece, UNTIL you got to the "development state." I know you've admired and advocated for an intelligent industrial policy. But at the state of our politics, and you tell me whether anyone sane would trust our political system to allocate resources. Trump has taken it to an extreme, and has the state -- HIM -- directing the economy, as if HE owned the means of production and was the one setting prices, himself. We ought to fully embrace the neoliberal skepticism of industrial policy, except in narrow national security instances, where we need competition in military suppliers, and a full on embrace of the tech community in innovating new warfighting technology instead of being reliant totally on Boeing/Lockheed Martin. The right economic answer is to allow the market to function, have guardrails against externalities, but have government support infrastructure and R&D in a big way. That was a recipe for success in the past, and it can be again, and it can be sold politically, though it will be difficult, because younger generation has lost faith in capitalism, much too eager to embrace whacky statism. My mentor was Charlie Schultze, we need replicas of him on steroids. I am not confident that the current Democratic party is ready for that, but there is still a middle in this country, they would embrace it. Still don't think a third party could ever succeed, entry barriers too high. But a charismatic Obama figure today could sell this agenda
Precisely, Ds and others have short memories, but Clinton years were years of rapid growth, not just in aggregate demand, but productivity growth (fastest since 1948-73), and income growth was broadly shared. REPLICATE THAT.
Most stats show none of the expected productivity growth in white collar work from tech arrived before about 2005. Economists don't forget this, it was a subject of intense study starting in the mid-80s.
The big uplift of the 90s to 2005 was that the Boomers were in their peak earning and spending years, and capital was very abundant.
Capital has gotten a lot scarcer since then due to demographics, with a turning point around 2019, but which was obscured by the pandemic. Hence why capital has gotten so much more expensive.
Very simple reason why I'm right about the time frame.
a. I worked on Jack Welch GE.
b. Not one other CEO drove white collar productivity like Jack in the late 80s to 2000.
c. The underlying and to Jack it was unseen imho, was the RIF of overlapping white collar tasks.
d. Further proof. I walked into Fischer Body at the GM tech center beginning in the late 70s I saw an Indiana Jones Raiders.. cavern of literally 100 x 100 wooden drafting desks. like 3 to 5 draftsman to 1 design engineer. The late 80s to late 90s saw desktop design come to the engineering team. bye bye 10s of thousands of craftsmen.
I think what Teachout may be trying to get at is that the more that big grocers pursue a low-price, 'volume' strategy, the more volume they take from the smaller grocers who are then forced to pursue more of a 'value' strategy - putting the price per unit up in order to make the same revenue from a lower volume of sales. The bigger chains do have significant advantage in terms of purchasing power because when a producer sells to a big chain it enables them to pursue a volume-based sales strategy of their own - more sales at a lower price. The smaller stores don't buy nearly as much so the producers adopt a more value-based strategy with them - higher prices for lower volume. To charge customers the higher prices the smaller stores have to leverage other advantages such as last-minute convenience or appeal to Leisure Class status-seeking. Whether there is evidence that this is in fact what happens, I don't know but that's the marketing strategy logic. Certainly the break-even point is judge, jury and executioner in grocery retail and so competitive are these markets now that very few players are able to get much beyond it (hence the near-zero profits). So I would imagine that prices in the small retailers are fairly sensitive to the prices in the big retailers. Quite where the fact of near-zero profits in the sector fits into the capitalist profit motive model, I'm not sure - it must be down there somewhere at the bottom of all the other motives and types of value which a complex system like retail is based on and generates.
I imagine it is different in America and therefore Teachout is getting deservedly mocked, but many of the issues she raises are actually true in Australia where we have an effective duopoly in the Supermarket space, with Coles and Woolworths getting something like 80% of the supermarket sales between them and they do genuinely use their purchasing power against their suppliers, I saw this myself working for Coca Cola Amatil, the Coca Cola distributor in Australia.
Coke have a weird model where they sell syrup to distributors in regions and those distributors sign contracts that they must sell a certain amount of syrup, the supermarkets knew this so even though Coke is the only product that takes up one side on an entire aisle in most supermarkets, it was the Supermarkets who told Coke what price they would be paying, not the Coke telling the supermarkets what the price was, I used to argue we should call their bluff and dare them not to stock Coca Cola, but this was never considered. Now if their highest selling product from a global behemoth like Coke, with even the distributor being a top 10 company in Australia is getting bullied by the supermarkets, what hope does a small food or drink startup have. We know that our farmers are outraged at the price the supermarkets pay for milk, its a constant issue that occasionally flares up in the news, though I am happy to pay $1.35 for a litre of milk so there is that side to consider, but we do know they do jack up prices above what they need to be profitable on many products, with it widely accepted that Coles and Woolies have a gentlemans agreement not to go too hard against each other on prices. Aldi have started to come into Australia and chip away at the duopoloy and the money I save since starting to shop their is significant, but they don't have the range the Coles and Woolies have so you always need to go to one of them for a top up anyway.
Still I assume this is not the case in America where i am guessing you have more than 2 national supermarket chains and do have real competition but maybe I am wrong about that
Yeah Australia is dominated by duopolies/oligopolies in multiple sectors, not just supermarkets: banking (we have Big 4 banks); telecommunications (Telstra/Optus/Vodafone, but all of them use Telstra infrastructure); insurance (dominated by Medibank/Bupa/IAG), etc.
The big mistake with Telstra was when Harradine made it so Howard could only privatise half of it, instead of giving the government 50% of the shares in till Telstra like Howard did, forcing him to write a blizzard of regulations to ensure fair access to the network for other Telco retailers, he should have split Telstra in 2 with the Govt keeping the infrastructure and privatised Telstra Retail and let it compete on an even playing field with Optus and others, but Howard was too lacking in vision to see that Harradines intransigence had actually given him an opportunity
Well unmissed Lina Khan of the FTC tried to claim that Albertsons (6%) and Kroger (9%) were the only two grocers so denied their merger request. In actuality, as Noah said Walmart has almost 25%, and each of the rest are less than 10% each, but Costco (7%) wasn’t counted in her claim because they are membership based and sell other things, and Walmart wasn’t because they also sell other things. Other groceries have together 40% of the market
Democrats, built in the Nancy Pelosi mold, cannot stop themselves from her basic credo. Win at any cost. The inclination to go low is too great an allure. Currently, they are searching for a counterpart to Trump. The allure is, of course, populism. Appealing to the lowest common denominator.
We saw this during the election when Kamala Harris also proposed no tax on tips, solely to blunt Trump’s chances in Nevada. I am a bit shocked that the MAGA base isn’t PO’d that a sliver of workers will not have to pay any taxes on their income. There is absolutely nothing special about tipped workers that deserves this treatment.
The allure of populism is strong. What else comes with populism? Bombastic pronouncements, hyperbolic speech, mendacious lies, and all the rest that Trump has employed. So Democrats won’t pick a leader who is measured, speaks to all Americans, and doesn’t engage in hateful words towards the people of their ire. Corporate barrons, corporations, banks, grocery stores, oil companies, and all the rest.
Noah, you are asking retail politicians to be thoughtful, forward-thinking, and have concern for the country when, in fact, the only thing they actually care about is winning their reelection.
Truth. And if we aren't careful, we will follow Venezuela down to economic ruin, until 100 years later somebody like Milie brings back economic common sense
Neoliberalism really ought to be a curse word. Essentially, it is the ideology that unfettered capitalism is all that matters, with the subtext that government is always wrong if it attempts to fix the resulting problems.
This is about as anti-human an ideology as exists, created for the benefit of the extremely rich and their corporations. The rest of humanity is simply something to be exploited.
"Neoliberalism really ought to be a curse word. Essentially, it is the ideology that unfettered capitalism is all that matters"
This is factually incorrect.
Moreover, capitalism is nothing more than free people being able to choose who they buy and sell to and then keep the rewards of their hard work for themselves (ie the profit)
Capitalism (the free market) has raised more people from poverty than literally everything else in the history of the world.
It would be nice if you had a better argument than "nope".
Capitalism is a government project, based on government-sponsored property rights and government regulation of property.
Frequently it is claimed that Capitalism or Free Markets were responsible for alleviating world poverty. Yes, some. But Communism was also successful at alleviating poverty in the Soviet Union and China. Science (mostly publicly funded), public Education and Democracy can also take credit as well. And the nations with the lowest poverty rates are Social Democratic. Attributing it all to capitalism is greedy reductionism.
"Capitalism is a government project, based on government-sponsored property rights and government regulation of property."
I very much doubt we will come to an agreement here, because I suspect that our world views differ GREATLY.
Property rights don't come from the government, property rights are acknowledged by the government (at least the government of a free people). And they should only be infringed on lightly.
"Communism was also successful at alleviating poverty in the Soviet Union and China"
It sounds like we have a very different definition of poverty then and what historically happened. Communism kept hundreds of millions of people in grinding poverty. China didn't start developing economically until they started introducing free markets and property rights.
The welfare states are only possible because of the wealth created by capitalism. The capitalism creates the wealth, not the welfare state.
And if you look really long term economic growth rates, you can see pre 1700 or so, the world grew about 8% in GDP per century. After 1700 it started growing about 350% per century. That massive increase in living standards started centuries before the welfare state. It was unleashed by free markets and property rights (capitalism)
Yes, our world views differ greatly, given that yours are formed by close to a 100 years of capitalist propaganda that ignores the real world.
Property CLAIMS come from people, but they become rights when government enforces them. If you can't get this basic ontology straight, the rest of your ideology is likely also worthless.
The key factor in the economic development of both the Soviet Union, China, Britain, and many other countries has been INDUSTRIALISM, not capitalism. Industrialism develops very well under communist and socialist regimes, as well as the ones you favor.
Welfare states do very well with state-owned enterprises, such as in the Nordic countries. Capitalism is not necessary, and it's quite likely it hobbles welfare states because of opposition by the rich.
And once again, you are confusing correlation with cause. High rates of growth are caused by industrialization, no matter who the owners are, not by capitalism.
For me "state capacity" means the government has to limit itself to doing a few thinks well. In the successful Confucian states transfer payments are ~10% of GDP which is targeted at very unfortunate people. Western welfare states started out that way but later swelled into 20-30% of GDP monsters otherwise known as middle-class welfare. At this point the state is so busy capturing and redirecting income it has limited bandwidth left to do core stuff like stopping crime and picking up garbage. Singapore shows you can make a few big interventions and do them well if you maintain scope discipline over how many domains you want to intervene in.
There are several strategies for selling groceries at competitive prices and staying in business, and I don’t think city run stores can do any of them.
1. Massive volume and market share approaching monopsony where sellers compete to give you their lowest prices. Requires big stores, warehousing and logistics and inventory management. The only company doing this in the US is Walmart.
2. Subscription model with big box stores. Here the company makes profits from membership and so margins are limited since they aren’t as important. Also has purchasing power and competes with suppliers with store branded products. This is Costco, but Walmart with Sam’s Club and Amazon with Amazon Fresh are doing it at a smaller scale.
4. High volume small stores, with small SKUs all picked based on value, margin and shelf space. Also focus heavily on store brands. Small stores saves on rent and labor, and quality product selection brings in customers even though many things aren’t stocked (no deli, meat or fish counters either). Trader Joe’s (and maybe Aldi as a lower price/quality option).
Sorry, but MMT and the Abundance Agenda are cut out of the same cloth. MMT says that if the government spent just its money productively, it wouldn't matter much whether we ran a deficit. The Abundance Agenda says that if the government would just do things right, then we would all live happily ever after. I personally really like the messages behind both of these ideas, but I don't really expect either to become a reality. Both are pipe dreams...but equally so.
Yep. Twice (underlined the second time). I am a complete believer. But I am also a realist. First, let's get a complete change of regime, and then we can assess the situation and see what we can do.
Great, but when will the changes start at the national level, with these Republicans who would LOVE to work with Democrats? I don't think they will emerge from their hiding places until there is a complete change at the top.
You really need to do a deep dive on Singapore. I suspect you don't quite understand how it works.
One of my dearest memories was when the head of the American Enterprise institute was invited to give a talk at the National University of Singapore's Lee Kuan Yew School of Public Policy.
This guy, who was an American, and who had just kind familiarized himself with the vibes of Singapore being a right wing neoliberal place, gave a speech praising its rule of law and laissez faire policy making.
One of the local professors got up and just tore him a new one. Here are the many ways Singapore is very interventionist:
-75% of housing in Singapore is built and owned by the government and only leased to the people.
-Singaporeans have to pay 20% of their income into government mandated savings vehicles. 10% into retirement and 10% into a health savings account.
- ALL Singaporean men have to do National Military Service (or a longer period of Civilian Service) for 2 years
- If you want to buy a car in Singapore, you first have to go and buy a "Certificate of Entitlement" from the government, these are sold by auction and cost about 50,000 Singapore dollars (30-35,000USD) That's just your right to own a car. Then you have to buy the car itself. The car will have to be less than 10 years old to be street legal (There is some small exceptions and rules for classic cars). The TAX on that car will be 100% of the price. This means that if you want to drive a 2023 Honda Accord in Singapore, it will cost you 150,000+ dollars. On the plus side, Singapore's streets have no congestion.
- The government has racial quotas. Things have to happen to keep the ethnic makeup of Singapore consistent (78% Chinese, 12% Malay, 7% Indian, 1-2% everyone else.). Government housing is apportioned in these ratios. New Singapore citizens are naturalized in the same ratios.
-Singapore speech laws are very strict.
- It is NOT ok to be gay legally (Singapore allows it de facto)
Singapore is a very interesting and successful country, but the amount of market interference and government interference is actually very high.
I don't think Noah is advocating that the United States just "become" Singapore, particularly in regard to its tighter social and political spaces. The parts about crimininalising homosexuality, or restricted free speech, or conscription aren't quite relevant in light of the spirit of the post. Unless you are proposing that those elements are causally linked to Singapore's high state capacity alongside its economic model, but I don't think you're saying that.
In fact, I'm even going to go so far as to say Noah probably isn't all that adverse to the government intervening in the economy. The crux of the comparison with Singapore to me reads more like an advocacy for state capacity, as Noah spells it out: the capacity of the government, the state, to be able to get things done in-house. Singapore is a country that has established that it can do this very well, and in doing so it has actually created one of the most investor-friendly countries in its region if not the world. I think that's a more accurate reading of Noah's pointing towards Singapore.
Singapore is great as an example of "State capacity." It is more mixed on being "neoliberal".
When people complain about neoliberalism, they are often complaining about the privatization of public services and the resulting reduction in quality of said services.
Singapore doesn't do this.
I remember we were learning about the Singapore health system from one of the people who helped design it.
Singapore's system has subsidized health insurance run by private companies. The insurance has to cover certain things. Singaporeans can use that mandatory 10% income into their HSA to pay for it.
One thing it has to pay for is the stay in a B class bed in a public hospital. A class rooms cost more, are private, and you get to choose your doctor, B class rooms are shared and doctor choice may or may not be possible, C class rooms are shared between more people, doctors are assigned, but it is very cheap. The Singapore government would prefer people to use B and C class beds as it is cheaper and a more efficient use of limited hospital capacity and medical personnel. Hospitals, however, make much more money off of the A class beds.
Singapore's system has both public and private hospitals. The public hospitals are grouped into clusters. (The amount changes. There were 3 clusters, then 6 clusters, then 4... But the hospitals themselves don't change). The public hospitals are all owned by the government but the clusters are left to run themselves and to compete with each other.
Back in the late 90's early 2000's, someone in the public hospital sector had an idea. They wanted to make much more A class beds. They brought in American consultants. They put a plan to the government for permission. The government said OK.
The hospitals made many more A class beds. The hospitals made more money. A true neoliberal success. Everyone was happy... Except for the people who couldn't get beds because there was insufficient space in B and C class.
The Singapore government said to the hospitals, "This is why you can't have nice things. Your job and the reason you are allowed to exist is to deliver cheap, effective, and universal healthcare to Singaporeans. You said that you could increase the share of A class beds without reducing patient access. You were wrong. We are shutting it down"
The Singapore government went back to mandating how many A,B, and C class beds hospitals had to have.
That would NEVER happen in the American context. The idea that hospitals or insurance companies would be barred from doing something profitable, just because it negatively effected patient care and access... Do you guys even neoliberal?
I mean...I don't see the problem here? The question isn't whether it'd happen in America or not. Noah is proposing that it should happen, not whether or not it will or can happen. Your initial point was about Noah misunderstanding Singapore's model, and now you've shifted to "it can't happen in America."
The healthcare example aside—it's a notoriously inelastic sector, so I don't think it's appropriate to extrapolate arguments and examples from healthcare to the rest of the economy—I think what you illustrated is more or less what Noah has in mind. The degree of state intervention may be higher in his mind, or lower, but at the end of the day, the state has the capability and the will to intervene if it so chooses, as opposed to the utterly atrophied state of the American government (and subnational governments) today.
That's as far as the Singapore example goes. I humbly think that you're thinking too deeply on it, and perhaps even missing the forest for the trees. Singapore is a fairly good example of a state having high state capacity while also fostering a healthy space for the private sector. That's about it.
The point is that the American fear of neoliberalism is based on the idea of it often being sold as "Let's try deregulation and privatization, it might work better" when what really happens is "Let's deregulate and privatize... and it's worse, but, well, screw you, we're keeping it this way."
Noah doesn't seem to want to engage with that part of "neoliberal experience."
There are 30+ wealthy countries that do healthcare better and cheaper than we do. All of them have more government intervention in the sector than we do. (Such Left Wing Socialist stalwarts as Singapore, Israel, and Taiwan included). All of them regulate drug prices much more than we do.
The sarcastic response would be to make a rule that, if the hospital ran out of B and C class beds, they have to give people A class beds at B class prices until a B class bed is available...
(Assuming that there are extra A class beds.)
There weren't extra A class beds, and that was the problem.
For the space they used to make a few A class rooms holding a few people individually, they could have made B and C class rooms holding dozens of people.
This story took place more than 20 years ago, but I just looked up the room sizes as of today at Singapore General Hospital.
(There was a thing with B1 vs. B2 class but it wasn't relevant to the point so I was making so I left it off) (https://www.sgh.com.sg/ward-stay/preparing-for-admission/types-of-wards)
720.60$SGD per day
A class - Single room
-attached bath room and toilet
-toiletries
-television
-telephone
-fully automated electric bed
-choice of meals
-sleeper unit for accompanying adult
358.72$SGD per day
Standard Ward Type B1 -Up to 5 beds in a room
-attached bath room and toilet
-television
-semi-automated electric bed
-choice of meals.
62.70$SGD a day
Standard Ward Type B2-Up to 6 beds in a room
-semi-automated electric bed
44.70$SGD a day
Standard Ward Type C - Up to 8 beds in a room
Out of all that stuff you mentioned only the public housing is something that can be called market interference. And even that is arguable if the government is just building housing without preventing the private market from doing the same. The car policy is just a tax and isn't really market interference since it is applied to all cars.
I think you're missing an essential part of the car policy; there's a cap on the number of permits sold.
And of course government housing prevents the private market, considering the limited amount of space available in Singapore.
They've recognized that space is limited and that therefore planning is required to come to the most effective use of that space.
Much of Singapore's success comes from its crucial geographic location -- almost all shipping travelling between East Asia (on the one hand) and Europe, Africa, the Middle East or the Indian Subcontinent (on the other hand) has to pass by it -- and this has caused many especially English-speaking people to think it is far more competently run than it really is.
Its construction costs are among the world's worst, it wastes 2% of its land area on golf courses, it has a water-intensive chemical industry in spite of having to get almost all its water from imports or desalination, its good educational outcomes are the result of its parent's spending the highest % of GDP anywhere in the world on private tuition, and there are 70-year olds cleaning tables because the GIC made bad investment decisions and Lee Hsien Loong believed it was most moral to fill the hole at the expense of the poorest.
Hong Kong (under British rule) was also similarly privileged in that it was for a long time a place where entrepreneurs from southern Mainland China (the Pearl River Delta region that is now the world's factory) could register their firms and operate without much interference from the CCP.
A big part of the reason why so much of the Anglosphere (at least minus the US, which has its own issues) is now incapable of building infrastructure for a reasonable price is because the policy of post-WWII British governments to try to equalize the regions discredited the British state in the eyes of London and the South East (which resented being taxed to subsidize the rest of the UK). This backlash took the form of Thatcherism which sough to privatize the functioning of the state: this included infrastructure planning, where a privately-run "globalized system" developed by the FILTH set ("Failed In London, Try Hongkong") was favoured.
About two decades later, this system subsequently spread to Canada and Australia, where it caused a similar explosion in costs.
And there are social engineering rules about who gets the subsidized housing, right? I was watching some House Hunters International show and a woman who presented as very masculine and who would read as gay in the U.S. was talking about how she had to wait til she was 35 to qualify because she was single, but married couples with children qualify much younger. My American sensibilities were offended, but I am aware I can take my American sensibilities and stuff them.
Yes, priority to get a Housing development board apartment goes to people who are married and who have children.
You can get higher priority by agreeing to get a unit in an older building. You can do it by agreeing to get a unit that is yet to be built. You can choose a less desirable part of the island.
In Singapore, it is expected that if you are under 35 and single, you are living with your parents.
-75% of housing in Singapore is built and owned by the government ..."
Democrats would love this. They'd love 100% more, but they take 75%
-Singaporeans have to pay 20% of their income into government mandated savings vehicles. 10% into retirement and 10% into a health savings account.
Democrats would love this. They'd love 100% more, but they take 40%
- ALL Singaporean men have to do National Military Service (or a longer period of Civilian Service) for 2 years
Small country (e.g., Israel) has to do this. I think would be a good idea for US, only not just for males. But I don't see this as a Democrats or Republicans thing.
non-
- This means that if you want to drive a 2023 Honda Accord in Singapore, it will cost you 150,000+ dollars. On the plus side, Singapore's streets have no congestion.
Democrats would REALLY love less. Climate change and all that. And for you folks who live out in the sticks? They need to move to a city, live in a small box, take public transportation. Unless they are white and would upset the racial percentages of a neighborhood.
The government has racial quotas. Things have to happen to keep the ethnic makeup of Singapore consistent (78% Chinese, 12% Malay, 7% Indian, 1-2% everyone else.). Government housing is apportioned in these ratios. New Singapore citizens are naturalized in the same ratios.
Democrats are all in on racial identity uber alles. An individual is nothing more than his or her race/ethnicity.
-Singapore speech laws are very strict.
Democrats would love this. They want European style speech controls. Someone who says that women don't have penises needs to be imprisoned.
- It is NOT ok to be gay legally (Singapore allows it de facto)
Finally one the Democrats are not going to like. Although, the progressive wing of the party idolizes Iran, and it's not OK to be gay in Iran (nor do they allow it de facto).
Exactly right. Yes to everything in this excellent piece. When I was the chairman of the Federal Communications Commission 1993 to 1997 our policies exactly fit the prescription here or at least we intended them to.
I feel like neoliberalism worked really well in terms of making the pie bigger, but it also increases inequality, so we need to do better on the "redistribution" side to make it more attractive for a solid majority of people.
IMHO that would be through more universal benefits, which don't feel as redistributive but register as "we are a rich country so we provide nice things for our citizens."
There’s a worry though. A lot of people find “redistribution” stigmatized or low status. People don’t just want the money: they want to feel they earned it.
I’m really not sure how to solve this problem.
Tax credits are perfect in that regard. You're just giving less of the money you earned to the government. No giveaway there.
Neoliberalism just needs to be evenly applied. We can’t have factory workers facing competition from China and construction workers facing competition from immigrants while doctors, lawyers, professors, teachers and all kinds of nepotistic industry jobs are all protected by a corrupt credentialism system. Neoliberalism will only work if we break the professional class privilege and protectionism. The threat that populism might actually effect these people is why they have all moved on to the new champagne socialism which is little more than a managerial movement that wans to protect the profesional class from competition. Little more than the “capitalism for the poor, socialism for the wealthy” system we already have.
Redistribution will never happen. The professional class will not actually cede enough money to make a difference, they will control where the money goes ensuring they get huge admin administrative fees and that the rest is just for buying loyalty, and the people who get it will just be demoralized and empty.
<I feel like neoliberalism worked really well in terms of making the pie bigger, but it also increases inequality, so we need to do better on the "redistribution" side to make it more attractive for a solid majority of people.>
I doubt it. The growth rate of developed industrialized countries was, on average, lower than it was prior to the adoption of neoliberalism (c. 1980). Neoliberalism was great for developing countries because free capital markets mean foreign investment in domestic sectors, although many countries failed to capitalize on this for a variety of reasons (political instability, bad institutions, etc.). Of course, one could argue that neoliberalism was better than the alternative, which was the slow-growth stagflation of the 1970s, thought this assumes that neoliberalism was the only alternative to stagflation (I'm skeptical, but your mileage may vary).
Hmmm, it's hard to argue that the 70s and early 80s were bad, whereas the the late 80s and the 90s were pretty damn amazing.
That correlation works well for normal minds like mine.
Inequality is only a problem for the top 10-20% who hate the top 1%. It's a psychological problem, not a real problem.
“I’m not sure who has ‘mocked’ Teachout’s article.”
Not to sound like Hans Moleman, but: I mocked Teachout’s article.
https://substack.com/@bigifftrue/note/c-137802189?r=11j5s1&utm_medium=ios&utm_source=notes-share-action
So, why isn’t Walmart in New York City? Maybe figure that out before putting in city-run grocery stores. Doing obvious stuff the rest of the country benefits from makes a hell of a lot more sense than a utopian socialist dream that never will work.
City won’t give them permitting
https://fordhampoliticalreview.org/why-are-there-no-walmarts-in-new-york-city/#:~:text=Walmart%20has%20been%20at%20the,find%20success%20among%20New%20Yorkers.
Even the google AI summary with the prompt "why isn’t Walmart in New York City" had approximately the same answer.
Another point that I haven't seen might be that NYC cannot accommodate the high volume trucking traffic into whatever site Walmart might have in mind, nor can it accommodate the high volume of cars coming to a Walmart.
On the other hand, Target has a good toehold in NYC because it is adapting to smaller stores.
I think it would work - lease the city land out at cost to Walmart! Beg them to enter the city, offer to rename Rockefeller Center to WalCenter!
Noah, your egg story is about the most confused and fallacious thing I've ever read from you.
Jon (https://www.noahpinion.blog/p/should-democrats-go-back-to-neoliberalism/comment/138407488) has the right of it. But you make so many other bad neoliberal-style assumptions.
You write: "All of the market power has to work out just right, or the whole story falls apart." And then you back that with the non-sequitur of low profit margins, which are not market power. If the small stores also have low profit margins and higher prices, then it is obvious that wholesalers have the power to charge them higher prices.
Further, your unstated assumption that the grocery market is uniform and not segmented is blatantly false. Without that assumption, you couldn't make such a simplistic argument. Anyone who understands the ecological concept of keystone species would laugh at you.
You write "they’re buying in bulk — which of course is perfectly legal." As if legality proves there is no market power?
And of course you are ignoring economic efficiency issues such as cost shifting to consumers. Do you think it is free to own a car and spend time driving to Walmart, rather than walk 1 minute to the corner store?
The key sign that your article is bullshit supporting neoliberalism is that you do not cite ANY grocery industry economists, unlike much of your other writing. Instead you cite Tabarrok, a neoliberal shill for decades hired through Koch money, who is hardly an expert on the grocery industry.
Wasn't the jump price of eggs a result of bird flu? https://www.nerdwallet.com/article/finance/why-are-eggs-so-expensive
Yes, it was. But that doesn't explain why big and little grocers are paying such disparate wholesale prices, including when eggs are scarce.
This is an area I know a bit about.
Stops to small stores might have sales of only a couple hundred dollars or less. Stops to large stores might run into the thousands or more. For a large customer like Walmart they might even be delivering full truck loads.
Moreover, Walmart might have people stocking the shelves and managing the inventory. At a small store the delivery person might be doing so.
In addition, the large store is probably taking full pallets, the small store you might have to break those pallets down.
There are a lot of variables here but the long and short of it is that the volume of sales vs the time and millage per stop variance can be freaken huge. It's possible that the small stop might even take more time and often might be an out of the way area so mean more miles.
So there's going to be a big difference to cover the higher distribution costs.
And of course there's another reason. Big chain buyer has a number of stores, they push a LOT of volume. Other distributors REALLY want that business. So big chain buyer can push really hard to get prices down.
Small independent buyer can't do that. There might not be a lot of competition for his business because his business isn't very profitable. So small buyer again will pay more.
No, you don't seem to know a bit about it. All you've got is microeconomic hand-waving explanations that have no backing in actual industry numbers and research.
On the other hand, you are supporting Teachout's ideas by providing claims of market power and descriptions of how food deserts are created. Look, see what actual industry economists say, rather than BSing us with Econ 101 excuses.
This is literally my job. I work in these industries. I've personally crunched the numbers looking at profitability per stop and chain.
When I tell you that there it's WAY more profitable to deliver a truck load than a couple of cases to a small store you can take that to the bank.
Food deserts are created because either stores governments make it hard for stores to come in, or it's unprofitable to service areas. The lack of profit is either because of lack of demand, or more likely lack of profit because of high crime rates and high amounts of theft (or some combination of the two).
If stores can operate profitability in areas they will. Government needs to stop keeping the big stores out, and provide safe streets with little crime.
You are confusing profit with economy, a basic error.
Yes, it can be more economical to deliver a big load because of scale effects. But delivery can be priced separately than wholesale cost, as you conveniently forget, and you also conveniently ignore that we are talking about combined costs all the way from the producer to the consumer.
Why don't you read the basics of food deserts before you stupidly blather about them. https://en.wikipedia.org/wiki/Food_desert
The nerdwallet story mentions that egg imports have grown significantly. I wonder if these are imported directly by the big chains rather than via wholesalers? That might give the big chains a price advantage.
Teachout and other no-nothing critics should take a one semester course in financial analysis for dummies. They could then pick up a balance sheet and figure out what the profit margin for the company is rather than spouting blather that is easily disproved.
BTW, good post from Noah!!
I don’t know why the NYT keeps publishing her on economics matters since she’s obviously no economist or how she even got a law degree when she can’t do basic logical reasoning as shown by the simultaneous demand the prices of eggs be higher and lower at the same store.
Richard Posner is the only law professor who should ever be writing about economics.
The likes of her keep being the voice of the left is why a lot of people now thinks that the left can not govern.
IMO the city-owned grocery store idea is a tempest in a teapot, to which way too much attention has been devoted. However, Teachout's op-ed makes a specific claim about anti-trust law which I notice both Noah and Alex Tabarrok ignore in their haste to debunk her. The claim is that the big chains do not in fact get discounts just for buying in bulk, they get preferential discounts simply by virtue of being powerful, for which wholesalers compensate by charging higher prices to less powerful independents. They can do this, according to Teachout, because the DOJ has stopped enforcing the 1936 Robinson-Patman act, which outlawed discriminatory pricing in grocery wholesaling (the target then was A&P). Stacy Mitchell had a story about this in the Atlantic last December (https://www.theatlantic.com/ideas/archive/2024/12/food-deserts-robinson-patman/680765/).
I have no idea whether this really describes the US grocery industry today, but discriminatory pricing is obviously a legitimate target of anti-trust. This is essentially the method that Rockefeller used to take control of the US oil industry in the late 1800s -- he extracted lower freight costs from the railroads, which then charged his competitors higher rates. Patrick McGee's excellent book Apple in China documents that Apple did the same thing with their Chinese supply chain: they got them to assemble iPhones basically at cost, which the suppliers were willing to do because they could make their margin by charging higher prices to all the other handset designers. This is how Apple wound up with 80% of the profits from global handset sales despite controlling only 20% or so of the volume.
The logic of Teachout's argument (which admittedly she does a bad job of presenting; read Mitchell's article for a better job) is thus:
- Big chains use discriminatory wholesale pricing to undercut independents on price
- The independents eventually go out of business
- You wind up with food deserts because the big chains want to operate a small number of big stores, and these smaller number of big stores tend not to be located in low-income areas.
So a serious response to Teachout needs to address the following questions: a) Is it really true that failure to enforce Robinson-Patman has led to a rise in discriminatory pricing in favor of the big grocery chains and is such discriminatory pricing a cause of food deserts; b) is there a reasonable distinction to be drawn between bulk discounts and discriminatory discounts; and c) if your answer to b is "no", do you accept the corollary that we just have to accept that any amount of market power is fine and we should just give up on anti-trust?
(I'll repeat a comment I made elsewhere that I think address this issue. In short there's are good reasons that big chains get better pricing then little chains that has nothing to do with anti-competitive behavior.
Also if chains can make money in places they will go into those places. The reason they don't is because they can't make money. That's going to be because of lack of demand and/or crime making it unprofitable.
In short food deserts are likely to be caused by blue city governance failure
Finally, I do think there is a role for antitrust. Look for example at store owned diary labels that charge artificially low prices because they can make it up by selling other products. But the consumers aren't being hurt here, just the other dairy manufacturers.
)
This is an area I know a bit about.
Stops to small stores might have sales of only a couple hundred dollars or less. Stops to large stores might run into the thousands or more. For a large customer like Walmart they might even be delivering full truck loads.
Moreover, Walmart might have people stocking the shelves and managing the inventory. At a small store the delivery person might be doing so.
In addition, the large store is probably taking full pallets, the small store you might have to break those pallets down.
There are a lot of variables here but the long and short of it is that the volume of sales vs the time and millage per stop variance can be freaken huge. It's possible that the small stop might even take more time and often might be an out of the way area so mean more miles.
So there's going to be a big difference to cover the higher distribution costs.
And of course there's another reason. Big chain buyer has a number of stores, they push a LOT of volume. Other distributors REALLY want that business. So big chain buyer can push really hard to get prices down.
Small independent buyer can't do that. There might not be a lot of competition for his business because his business isn't very profitable. So small buyer again will pay more.
Loved your piece, UNTIL you got to the "development state." I know you've admired and advocated for an intelligent industrial policy. But at the state of our politics, and you tell me whether anyone sane would trust our political system to allocate resources. Trump has taken it to an extreme, and has the state -- HIM -- directing the economy, as if HE owned the means of production and was the one setting prices, himself. We ought to fully embrace the neoliberal skepticism of industrial policy, except in narrow national security instances, where we need competition in military suppliers, and a full on embrace of the tech community in innovating new warfighting technology instead of being reliant totally on Boeing/Lockheed Martin. The right economic answer is to allow the market to function, have guardrails against externalities, but have government support infrastructure and R&D in a big way. That was a recipe for success in the past, and it can be again, and it can be sold politically, though it will be difficult, because younger generation has lost faith in capitalism, much too eager to embrace whacky statism. My mentor was Charlie Schultze, we need replicas of him on steroids. I am not confident that the current Democratic party is ready for that, but there is still a middle in this country, they would embrace it. Still don't think a third party could ever succeed, entry barriers too high. But a charismatic Obama figure today could sell this agenda
How did the Clinton Administration do all that and balance the budget at the same time?
Precisely, Ds and others have short memories, but Clinton years were years of rapid growth, not just in aggregate demand, but productivity growth (fastest since 1948-73), and income growth was broadly shared. REPLICATE THAT.
People..even economists, forget and under estimate the single greatest productivity driver across all human history.
From 1988 ish, acceleration thru Clinton was ONE BIG THING:
WinTel.
Windows and Intel CPUs - laptops and desktops and Excel, Word, PPT + Internet + Email - allowed massive white collar productivity.
No more secretaries, travel agents, draft men. 2 professional jobs done by 1. Even 3 and 4.
Most stats show none of the expected productivity growth in white collar work from tech arrived before about 2005. Economists don't forget this, it was a subject of intense study starting in the mid-80s.
The big uplift of the 90s to 2005 was that the Boomers were in their peak earning and spending years, and capital was very abundant.
Capital has gotten a lot scarcer since then due to demographics, with a turning point around 2019, but which was obscured by the pandemic. Hence why capital has gotten so much more expensive.
Very simple reason why I'm right about the time frame.
a. I worked on Jack Welch GE.
b. Not one other CEO drove white collar productivity like Jack in the late 80s to 2000.
c. The underlying and to Jack it was unseen imho, was the RIF of overlapping white collar tasks.
d. Further proof. I walked into Fischer Body at the GM tech center beginning in the late 70s I saw an Indiana Jones Raiders.. cavern of literally 100 x 100 wooden drafting desks. like 3 to 5 draftsman to 1 design engineer. The late 80s to late 90s saw desktop design come to the engineering team. bye bye 10s of thousands of craftsmen.
Microeconomics
Because the Republicans forced him to.
I think what Teachout may be trying to get at is that the more that big grocers pursue a low-price, 'volume' strategy, the more volume they take from the smaller grocers who are then forced to pursue more of a 'value' strategy - putting the price per unit up in order to make the same revenue from a lower volume of sales. The bigger chains do have significant advantage in terms of purchasing power because when a producer sells to a big chain it enables them to pursue a volume-based sales strategy of their own - more sales at a lower price. The smaller stores don't buy nearly as much so the producers adopt a more value-based strategy with them - higher prices for lower volume. To charge customers the higher prices the smaller stores have to leverage other advantages such as last-minute convenience or appeal to Leisure Class status-seeking. Whether there is evidence that this is in fact what happens, I don't know but that's the marketing strategy logic. Certainly the break-even point is judge, jury and executioner in grocery retail and so competitive are these markets now that very few players are able to get much beyond it (hence the near-zero profits). So I would imagine that prices in the small retailers are fairly sensitive to the prices in the big retailers. Quite where the fact of near-zero profits in the sector fits into the capitalist profit motive model, I'm not sure - it must be down there somewhere at the bottom of all the other motives and types of value which a complex system like retail is based on and generates.
I imagine it is different in America and therefore Teachout is getting deservedly mocked, but many of the issues she raises are actually true in Australia where we have an effective duopoly in the Supermarket space, with Coles and Woolworths getting something like 80% of the supermarket sales between them and they do genuinely use their purchasing power against their suppliers, I saw this myself working for Coca Cola Amatil, the Coca Cola distributor in Australia.
Coke have a weird model where they sell syrup to distributors in regions and those distributors sign contracts that they must sell a certain amount of syrup, the supermarkets knew this so even though Coke is the only product that takes up one side on an entire aisle in most supermarkets, it was the Supermarkets who told Coke what price they would be paying, not the Coke telling the supermarkets what the price was, I used to argue we should call their bluff and dare them not to stock Coca Cola, but this was never considered. Now if their highest selling product from a global behemoth like Coke, with even the distributor being a top 10 company in Australia is getting bullied by the supermarkets, what hope does a small food or drink startup have. We know that our farmers are outraged at the price the supermarkets pay for milk, its a constant issue that occasionally flares up in the news, though I am happy to pay $1.35 for a litre of milk so there is that side to consider, but we do know they do jack up prices above what they need to be profitable on many products, with it widely accepted that Coles and Woolies have a gentlemans agreement not to go too hard against each other on prices. Aldi have started to come into Australia and chip away at the duopoloy and the money I save since starting to shop their is significant, but they don't have the range the Coles and Woolies have so you always need to go to one of them for a top up anyway.
Still I assume this is not the case in America where i am guessing you have more than 2 national supermarket chains and do have real competition but maybe I am wrong about that
The US has lots of regional markets, where each market can have a different number of dominant national or regional players.
Some have as few as 2 players, and in those markets, groceries are quite pricey.
Yeah Australia is dominated by duopolies/oligopolies in multiple sectors, not just supermarkets: banking (we have Big 4 banks); telecommunications (Telstra/Optus/Vodafone, but all of them use Telstra infrastructure); insurance (dominated by Medibank/Bupa/IAG), etc.
Fun fact: a Melburnian activist actually wrote for Jacobin several years ago, proposing to nationalize supermarket chains: https://jacobin.com/2021/07/nationalize-supermarkets-australia-agriculture-food-system-public-sector
I wonder whether Zohran Mamdani has ever read this post before campaigning on government-run grocery stores!
Also, even with high vertical integration/effective duopoly, Coles and Woolworths only have a net profit margin of roughly 3-4%.
The big mistake with Telstra was when Harradine made it so Howard could only privatise half of it, instead of giving the government 50% of the shares in till Telstra like Howard did, forcing him to write a blizzard of regulations to ensure fair access to the network for other Telco retailers, he should have split Telstra in 2 with the Govt keeping the infrastructure and privatised Telstra Retail and let it compete on an even playing field with Optus and others, but Howard was too lacking in vision to see that Harradines intransigence had actually given him an opportunity
Well unmissed Lina Khan of the FTC tried to claim that Albertsons (6%) and Kroger (9%) were the only two grocers so denied their merger request. In actuality, as Noah said Walmart has almost 25%, and each of the rest are less than 10% each, but Costco (7%) wasn’t counted in her claim because they are membership based and sell other things, and Walmart wasn’t because they also sell other things. Other groceries have together 40% of the market
Democrats, built in the Nancy Pelosi mold, cannot stop themselves from her basic credo. Win at any cost. The inclination to go low is too great an allure. Currently, they are searching for a counterpart to Trump. The allure is, of course, populism. Appealing to the lowest common denominator.
We saw this during the election when Kamala Harris also proposed no tax on tips, solely to blunt Trump’s chances in Nevada. I am a bit shocked that the MAGA base isn’t PO’d that a sliver of workers will not have to pay any taxes on their income. There is absolutely nothing special about tipped workers that deserves this treatment.
The allure of populism is strong. What else comes with populism? Bombastic pronouncements, hyperbolic speech, mendacious lies, and all the rest that Trump has employed. So Democrats won’t pick a leader who is measured, speaks to all Americans, and doesn’t engage in hateful words towards the people of their ire. Corporate barrons, corporations, banks, grocery stores, oil companies, and all the rest.
Noah, you are asking retail politicians to be thoughtful, forward-thinking, and have concern for the country when, in fact, the only thing they actually care about is winning their reelection.
"The allure of populism is strong. "
Truth. And if we aren't careful, we will follow Venezuela down to economic ruin, until 100 years later somebody like Milie brings back economic common sense
If America is still here in any form, it's current form. We have selfish morons as our legislators.
Neoliberalism really ought to be a curse word. Essentially, it is the ideology that unfettered capitalism is all that matters, with the subtext that government is always wrong if it attempts to fix the resulting problems.
This is about as anti-human an ideology as exists, created for the benefit of the extremely rich and their corporations. The rest of humanity is simply something to be exploited.
"Neoliberalism really ought to be a curse word. Essentially, it is the ideology that unfettered capitalism is all that matters"
This is factually incorrect.
Moreover, capitalism is nothing more than free people being able to choose who they buy and sell to and then keep the rewards of their hard work for themselves (ie the profit)
Capitalism (the free market) has raised more people from poverty than literally everything else in the history of the world.
Now there's somebody who drank the Kool-Ade.
It would be nice if you had a better argument than "nope".
Capitalism is a government project, based on government-sponsored property rights and government regulation of property.
Frequently it is claimed that Capitalism or Free Markets were responsible for alleviating world poverty. Yes, some. But Communism was also successful at alleviating poverty in the Soviet Union and China. Science (mostly publicly funded), public Education and Democracy can also take credit as well. And the nations with the lowest poverty rates are Social Democratic. Attributing it all to capitalism is greedy reductionism.
Communism was also responsible for mass starvation in China. Socialized agriculture tends to work very poorly.
"Capitalism is a government project, based on government-sponsored property rights and government regulation of property."
I very much doubt we will come to an agreement here, because I suspect that our world views differ GREATLY.
Property rights don't come from the government, property rights are acknowledged by the government (at least the government of a free people). And they should only be infringed on lightly.
"Communism was also successful at alleviating poverty in the Soviet Union and China"
It sounds like we have a very different definition of poverty then and what historically happened. Communism kept hundreds of millions of people in grinding poverty. China didn't start developing economically until they started introducing free markets and property rights.
The welfare states are only possible because of the wealth created by capitalism. The capitalism creates the wealth, not the welfare state.
And if you look really long term economic growth rates, you can see pre 1700 or so, the world grew about 8% in GDP per century. After 1700 it started growing about 350% per century. That massive increase in living standards started centuries before the welfare state. It was unleashed by free markets and property rights (capitalism)
Yes, our world views differ greatly, given that yours are formed by close to a 100 years of capitalist propaganda that ignores the real world.
Property CLAIMS come from people, but they become rights when government enforces them. If you can't get this basic ontology straight, the rest of your ideology is likely also worthless.
Communism in the Soviet Union was a huge success at raising people from poverty: https://en.wikipedia.org/wiki/Economy_of_the_Soviet_Union Likewise you are similarly poorly informed about China: https://en.wikipedia.org/wiki/Economy_of_China
The key factor in the economic development of both the Soviet Union, China, Britain, and many other countries has been INDUSTRIALISM, not capitalism. Industrialism develops very well under communist and socialist regimes, as well as the ones you favor.
Welfare states do very well with state-owned enterprises, such as in the Nordic countries. Capitalism is not necessary, and it's quite likely it hobbles welfare states because of opposition by the rich.
And once again, you are confusing correlation with cause. High rates of growth are caused by industrialization, no matter who the owners are, not by capitalism.
Yeah, because China under Mao had such a great economy. </sarcasm>
For me "state capacity" means the government has to limit itself to doing a few thinks well. In the successful Confucian states transfer payments are ~10% of GDP which is targeted at very unfortunate people. Western welfare states started out that way but later swelled into 20-30% of GDP monsters otherwise known as middle-class welfare. At this point the state is so busy capturing and redirecting income it has limited bandwidth left to do core stuff like stopping crime and picking up garbage. Singapore shows you can make a few big interventions and do them well if you maintain scope discipline over how many domains you want to intervene in.
There are several strategies for selling groceries at competitive prices and staying in business, and I don’t think city run stores can do any of them.
1. Massive volume and market share approaching monopsony where sellers compete to give you their lowest prices. Requires big stores, warehousing and logistics and inventory management. The only company doing this in the US is Walmart.
2. Subscription model with big box stores. Here the company makes profits from membership and so margins are limited since they aren’t as important. Also has purchasing power and competes with suppliers with store branded products. This is Costco, but Walmart with Sam’s Club and Amazon with Amazon Fresh are doing it at a smaller scale.
4. High volume small stores, with small SKUs all picked based on value, margin and shelf space. Also focus heavily on store brands. Small stores saves on rent and labor, and quality product selection brings in customers even though many things aren’t stocked (no deli, meat or fish counters either). Trader Joe’s (and maybe Aldi as a lower price/quality option).
Somebody actually familiar with the space, thanks for the good comment.
Sorry, but MMT and the Abundance Agenda are cut out of the same cloth. MMT says that if the government spent just its money productively, it wouldn't matter much whether we ran a deficit. The Abundance Agenda says that if the government would just do things right, then we would all live happily ever after. I personally really like the messages behind both of these ideas, but I don't really expect either to become a reality. Both are pipe dreams...but equally so.
Did you read "Adbundance"? I think you're really oversimplifying its message.
Yep. Twice (underlined the second time). I am a complete believer. But I am also a realist. First, let's get a complete change of regime, and then we can assess the situation and see what we can do.
Oh nice! And yeah I feel you: it clearly laid problems even a good faith administration would struggle to solve, and that's... more than we have now.
No complete regime change is needed. Blue states and cities (where the problems are the worst) are competently in Democratic hands.
They can change the rules, regulations and fees that are strangling the housing market and preventing economic development all on their own.
At the national level, Republicans would LOVE to work with Democrats to reduce and eliminate burdensome regulation.
Great, but when will the changes start at the national level, with these Republicans who would LOVE to work with Democrats? I don't think they will emerge from their hiding places until there is a complete change at the top.
For example I bet you could get 200+ cosponsors on a bill that removed private rights of action from NEPA
If Democrats put forward real proposals to streamline regulations you would get plenty of Republicans on board.