On a hot September day in Texas 35 years ago, a spontaneous visit to a Randall’s grocery store near Houston changed the course of history. In a now famous photo, a tall, white-haired man marveled at pudding pops and Kool-Aid popsicles in a freezer case. It was Boris Yeltsin, then the Communist party boss of Moscow.
Yeltsin, a committed Communist, saw the truth in that freezer, and it affected him profoundly. The American capitalist system had outperformed the Soviet socialist system in achieving good living standards across the broad economic spectrum, and it wasn’t close. This wasn’t Erewhon or some other expensive outing place for the rich and famous; it was Randall’s, a Texas grocer selling food at affordable prices to the everyman. And it was the picture of abundance. In the hours after the visit, “the last vestige of Bolshevism collapsed” in Yeltsin, an aide would later say. Another quoted Yeltsin lamenting “…our country so rich, so talented and so exhausted by incessant experiments.”
In less than two year’s time, on Christmas Day 1991, the Union of Soviet Socialist Republics was dissolved. Yeltsin became President of the new Russian Federation. The first and largest bastion of Bolshevism on Earth was dismantled with the help of one particular Bolshevik, whose disillusionment came in an American freezer aisle.
But where Yeltsin saw abundance — an earthly miracle produced by the free market that nearly a century of socialist “experiments” couldn’t replicate — some people see “price gouging” that they can personally solve by fixing prices.
The Soviet Union died, but the dream of central planning and the suspicion of capitalism did not.
Enter Kamala Harris and Joe Biden, who each made fighting “price gouging” central to their economic message and agenda. The number one target? Grocers.
How grocers of all industries ended up as the scapegoat is fascinating. These are businesses operating on profit margins of 1% or less. What about universities? Government contractors? The government itself? With $35 trillion in debt, I’m feeling rather price-gouged!
But that, of course, is the point: it is the policy of massive government overspending that led to 40-year highs in inflation, not “corporate greed.” The price-gouging rhetoric is cover for that, and grocers are the main scapegoat.
It’s a tale as old as time. It wasn’t our policy that led to lower grain yields… it was those greedy kulaks! Stop the kulaks from price gouging the glorious proletariat!
Bragging about the decline in the inflation rate earlier this year before dropping out, President Biden said, “There are still too many corporations in America ripping people off: price gouging, junk fees, greedflation, shrinkflation,”
Last fall, Biden made a bizarre demand that companies lower prices because the national inflation rate had gone down, saying, “Let me be clear to any corporation that hasn’t brought their prices back down even as inflation has come down: It’s time to stop the price gouging. Give American consumers a break.”
The inflation rate, of course, is the rate at which prices are increasing. Because that rate had declined from a 40-year high to a moderate level, Biden demanded that companies decrease prices. We’re debasing the currency by a bit less compared to last year, so you need to sell products at a loss!
Senator Bob Casey, facing a tough reelection campaign in Pennsylvania, introduced the “Price Gouging Prevention Act” alongside Sen. Elizabeth Warren, which would empower the Federal Trade Commission to investigate alleged price-gougers, and would create a presumption of price-gouging for large grocers!
“People must always come before profits,” said the bill’s House sponsor, Rep. Jan Schakowsky. What exactly does it mean to put “people before profits” in the grocery business? Selling food at a loss to make people feel good! They don’t believe that grocers should be allowed to operate at a profit, even a very modest 1% profit margin. And that is a pretty brazen form of demagoguery.
These politicians have such a low opinion of the electorate that they think they can rile people up against the neighborhood grocer to distract from the fact that they’re lighting trillions of dollars on fire every year.
Mother Nature: the Original Price Gouger
September is the cheapest month for grapes in the United States. Table grapes grow in California from May to January, with the harvest peaking in August. Then, from January to June, production remains near zero while the vines are dormant. During that time, we get grapes from elsewhere. A lot of them! 60% of grapes in the US are imported — mostly from Chile and Peru, whose growing seasons in the Southern Hemisphere are opposite to ours.
Every year, Peruvian imports pick up by December, overtaking US supply, and Chile comes a bit later, peaking in April, by which time the grapevines are waking in California. Laid out on a graph, the cycle shows how effectively the grocery industry in the US provides a steady supply of grapes year-round.
The California summer grape haul sends prices cratering, with the lowest point typically in September, and typically at around $2.00/lb. Then, the peak average price in January can climb to over $3.50/lb — nearly double the late-summer price.
In the middle of a Minnesota winter, with polar winds battering the Walmart parking lot, one can still buy the sweetest and largest grapes ever grown, straight from Chile, for just about double the summer price. It’s a luxury that would make medieval kings weep, available to over three hundred million Americans for a few dollars a pound. It’s… a miracle!
Oh wait. It’s price gouging. Corporate greed. Greedflation. It’s putting profits before people. Grocery stores and fruit suppliers are taking advantage of the rotation of the Earth, the changing of seasons, Mother Nature herself, to charge families more for grapes flown on planes from another hemisphere. We have to hold these price gougers accountable!
The free market system solved the grape supply problem so well that now, California companies producing “designer” grapes can innovate more expensive products costing $5 or $6 per pound — grapes that have been bred to taste like cotton candy, or grape soda, or be elongated like these “Moon Drops.” More price-gouging!
In 1993, my parents were living in the Slovak Republic, a new country that had been created on New Years Day when Communist Czechoslovakia dissolved peacefully. They were teaching economics in the small town of Banská Štiavnica. For young people in a post-Communist state, economics was an important subject.
Banská Štiavnica, a small town in a country that had only just begun to liberalize, had just one grocery store, which had been run by the state. There was no competition on pricing. The students were amazed to learn about groceries in the American Midwest, where at different stores, products came in multiple brands, and the shelves were full. But today in Banská Štiavnica there are many, including Tesco and Lidl, British and German brands respectively.
A free market produces an amazing variety of grocery options with different pricing structures and strategies. In America, as Yeltsin saw 35 years ago, we have the most diverse grocery market in the world.
Trader Joe’s keeps about 4,000 stock-keeping units (SKUs), and nearly all of them are private-label. Fruits are priced individually, not by weight. Kroger, meanwhile, has 50,000 SKUs, and its private label is cheaper than name-brand products. Walmart has millions of SKUs. At Aldi, they don’t unpack the boxes or crates, lowering labor costs. At Whole Foods Market, you can pay with your palm if you let Amazon scan it.
At Costco, if you pay your annual membership fee, you can get a rotisserie chicken for $5.00, and a hotdog-soda combo for $1.50 after all these years. At Sam’s Club, the minimum quantity of ketchup is half a gallon. They’ll sell you a bedframe, a crate of prime brisket, five pounds of jelly beans, and a pallet of bottled water in the same warehouse. No shrinkflation at the wholesale clubs, and they’re doing better than ever — Costco is a $400 billion company with capped product margins! Is anyone curious how that model works?
We have employee-owned groceries. Organic groceries. Valet-parking-only groceries. Independent groceries. Bodegas. Family owned groceries. Member-only groceries. Publicly-traded groceries. Wholesale groceries. Member-only publicly-traded wholesale groceries!
But unlike the old Soviet Union or Czechoslovakia, we don’t have government-run groceries (though the City of Chicago wants to give it a shot!). So when you’re cooking out with your family, remember to be thankful that the politicians who did so well with the monetary and fiscal system don’t also run the grocery stores. Someone already tried that, and one look at the popsicle case ended it.
Happy Labor Day, America.
