The limits of socialism and the crazy government supermarket poposals. By Handre.
Boris Yeltsin walked into a Houston Randall’s grocery store in 1989 and went quiet. Not quiet in a polite, diplomatic way. Quiet in the way a man goes quiet when reality collapses on him.
He saw 30,000 products on shelves. He saw ordinary Americans buying chicken, cheese, and fresh bread without a ration card, without a two-hour queue, without bribing anyone. A Soviet man of real power, surrounded by abundance that Soviet central planners had promised for seventy years and never delivered. He reportedly told his aide that if ordinary Soviet citizens saw this store, they would riot.
Central planners destroyed the price system. Without prices, nobody could calculate where to send resources. Hayek proved this theoretically in 1945. The Soviets proved it empirically with empty shelves every single decade they existed.
You grew up in that system, and you got potatoes when the state decided potatoes existed for you. You stood in line for meat that had already rotted. You traded favors to get medicine your doctor prescribed. Bureaucrats in Moscow set production quotas with no feedback mechanism, no profit signal, no way to know what you actually needed.
Yeltsin left that Houston store and reportedly wept in the car. He later said it destroyed his belief in the Soviet system more than any dissident literature ever had.
Socialism grinds people down daily, in a thousand small humiliations, until standing in line for bread feels normal.
Some things the free market does much, much better than socialism. On the other hand, socialism (i.e. government) is naturally better for armies and courts. And it’s usually appropriate for natural monopolies, like water and roads. For money and interest rates? Hmmmm, maybe not, in the long run. But supermarkets? Definitely not.
In New York, Mayor Mamdani, a democratic socialist, has allocated $70m in the city budget to open five grocery stores. He said they will offer produce, meat and seafood for 30% less than typical retail prices.
In Australia, the Green Institute, the research arm of the Australian Greens, is urging federal government to spend $25.1 billion creating a publicly owned supermarket network and forcibly acquiring more than 200 Coles and Woolworths stores. It claims the government-owned stores could cut the cost of essential groceries by 30 per cent and save a family of four more than $3,000 a year.
Why 30% in both cases? Probably because they see these figures for public companies, and think they can run a chain of stores as well and give away all the “profit”:
| Supermarket | Gross margin | Equivalent mark-up |
|---|---|---|
| Woolworths (Australia, FY2025) | 28.6% | 40.1% |
| Coles (FY2026) | 27.8% | 38.5% |
| Kroger (FY2025) | 22.9% | 29.7% |
| Walmart (FY2025) | 24.1% | 31.8% |
| Albertsons (recent quarterly result) | 27.2% | 37.4% |
Source: Annual reports, via ChatGPT.
Technical details (which socialists and politicians tend to skip): Suppose a supermarket buys a product for $7 and sells it for $10.
- Its mark-up is 42.9% (the extra $3 divided by $7).
- Its gross margin is 30% (the extra $3 divided by $10).
- Its net profit is much smaller after wages, rent, electricity, refrigeration, distribution and other expenses. The net profit margins of major Australian and American supermarkets are generally around 1–3% of sales (due to stiff competition), far smaller than their gross margins of approximately 23–29%.
| Supermarket | Net profit margin | Financial year |
|---|---|---|
| Australia | ||
| Coles | ~2.4% | FY2026 |
| Woolworths | 1.4% reported / 2.0% underlying | FY2025 |
| United States | ||
| Kroger | 0.7% reported / 2.2% adjusted | FY2025 |
| Walmart | ~3% | FY2026 |
| Albertsons | ~0.3% reported | FY2025 |
So 30% is way too optimistic without major, major subsidies. Mamdani and the Australian Greens leader will end up quietly weeping in their cars if they go ahead. Yes, they’re that dumb about economics and business.
