Zohran Mamdani's socialist agenda could actually spur faster growth in NYC

The results of the Democratic Party primary for New York City’s (NYC’s) mayoral elections have thrown up a surprise winner: Zohran Mamdani, a 33-year-old of mixed ethnicity, a Shia Muslim and a Democratic Socialist. 

Ranked choice voting means the result will not be confirmed until July 1, but Mr Mamdani’s lead makes his victory almost mathematically certain. NYC is a deep-blue city, with over 3.3 million registered Democratic voters compared to 558,000 Republicans. Winning the Primary, therefore, makes Mr Mamdani a shoo-in for mayor of America’s largest city. 

This has caused many shockwaves. Mr Mamdani’s own party is worried. His victory over an established, if tainted politician, former NY Governor Andrew Cuomo, could set a precedent. The progressive elements in the Democratic Party may replicate the model: Identify deep-blue seats across America, and challenge older, more conservative Dem incumbents in primaries. This could shift the ideology of the party to the left. 

Mr Mamdani’s campaign focussed on making NYC an affordable place to live. The Big Apple is the US’ most expensive city. Its 8 million-plus inhabitants contribute $1.3 trillion to US gross domestic product (which is around $29.2 trillion) while the state of NY contributes $2.3 trillion, just behind Texas and California. 

His proposals include a rent freeze on rent-controlled apartments, a 2 per cent hike in income tax for NYC residents with incomes above $1 million (US states levy income tax in addition to the Federal income tax), free public buses, freeze on subway fares, investments in affordable housing, universal childcare for children under five, free education at state colleges, and government-run grocery stores. 

Mr Mamdani hopes to ease the pressure on the average New Yorker’s pocket by taxing the rich to generate revenues, while lowering the cost of commutes and housing, subsidising nanny services, college education, and reducing retail grocery inflation. 

Not surprisingly, Republicans are calling him a communist along with other epithets (and some distasteful slurs). These proposals would indeed be characterised as socialist, even in places such as Western Europe, which are much further to the left than the US. 

The campaign promises may have been partly driven by the desire to win back voters. Mr Mamdani talked to a lot of registered Democrats who had voted for Donald Trump in 2024. NYC swung sharply towards the Republicans in ’24, though it was retained by the Dems. Voters who changed allegiance consistently cited economic stress as a reason for the switch. They may have been foolish to believe that Mr Trump would make their lives economically easier, but their unhappiness about inflation was real. 

However, nothing in Mr Mamdani’s fledgling political career suggests that he is cynical or disingenuous about his policy stances. Mr Mamdani has always said he wants to make life more affordable for the low-to-median-income New Yorker. 

Going beyond ideological labels, a fiscally conservative thinker with a long-term view may find justifications for these policies. What if the investments in social welfare actually generate higher growth and more GDP for NYC in the long run? 

Big cities like NYC (and the greater NYC metropolitan area) are hives of activity because they shove people with multiple skill sets into close proximity. The network effects lead to interesting ideas, and those translate into new opportunities and revenue streams. Those 8 million NYC residents (and the multitudes who commute into the city daily) would be a lot less productive if they lived dispersed across 8,000 villages. 

Urban clusters need armies of low-income workers to provide services like handling garbage, driving buses, running water supply, and repairing roads. If those workers cannot afford to live in the city, services deteriorate. If the quality of services is poor, the talented and highly educated, who generate revenues, may leave. 

But if the services are high-quality and affordable, the city may attract more talent. Young, talented individuals may choose to live in a place with low rents, free transport, free nanny services and free education over places that don’t check those boxes. 

A focus on improving the lives of low-to-median-income residents can, therefore, be justified on utilitarian grounds, if the social welfare expenditure indirectly leads to accelerated growth. I have no idea how many of Mr Mamdani’s proposed policies will be actualised (or indeed, if he will make it to mayor) and how some of this will work in practice. But it’s not impossible that this socialist agenda could actually underpin faster GDP growth for NYC.