The Socialist Riptide

July 11, 2025

Doug Leyendecker

Welcome to This Week’s Leyendecker View

A man on a thousand-mile walk has to forget his ultimate goal and say to himself every morning, “Today, I’m going to cover twenty-five miles and then rest up and sleep.”
–Leo Tolstoy

FAVORITE READS OF THE WEEK

The consulting crash is coming
AI is faster and cheaper.

The death of the public library
They’ve become homeless shelters.

They’re jamming AI down our throats
You don’t matter to big tech.

FAVORITE VIDEO OF THE WEEK

Cloud seeding is real
Shawn Ryan interviews wunderkind Augustus Doricko.

THINKING OUT LOUD

The Socialist Riptide

The New York City mayor’s race has brought to light something surprising. More and more urban voters, particularly the college educated, seem to be embracing socialism. Maybe we want to call it “urban socialism” since historically it’s never gained worthwhile rural support in the US.

New York City is not the first American city to step toward a political system where the state has meaningful control over economic and social policy, with the goal of reducing inequality and meeting the needs of all members of society. San Francisco and Chicago have experimented with this form of government in recent years, with the results being in direct opposition to their purported intentions. Both cities saw rapid decline in their prosperity, safety and vibrancy.

So why has an American version of socialism begun to gain popularity in our urban areas?

Perhaps the driving force in certain voters’ minds is a feeling they’ve been wronged. They feel there’s too much inequality in society—especially in their outcomes. Then along comes a Pied Piper politician who can sell ice to Eskimos, and, boom, here comes socialism and the promise of equal outcomes for all

Urban centers have become fertile ground for socialist ideas because so many people who live there struggle to pay their bills.

Urban inflation, particularly in housing, has outstripped wage growth for some time. Then we have 42.7 million people in the US with college debt, the majority of whom look for jobs in big cities. Remember that Biden’s student debt payment moratorium has now expired. People with college debt now have another monthly bill to pay.

Housing inflation that exceeds wage growth, plus less take home pay, has urban dwellers stretched even thinner. Add in the fear that AI could, likely already is, replacing jobs (mostly urban white-collar jobs) and people feel insecure and fearful of their ability to survive and prosper.

Urban environments are also fertile ground for socialist ideas because their citizens are highly susceptible to herd thinking. There’s that old saying birds of a feather flock together. One could also say birds together become of one feather.

The innate desire to fit in is compounded in densely-populated urban centers. No one wants to think too differently from their neighbor or peers at work. One might not be invited to neighborhood events. One might not get promoted. To survive and prosper in cities, people begin to think similarly.

All of these factors combined made NYC ripe for socialist thinking Pied Piper Zohran Mamdani.

But we all “know” that socialism is not sustainable, and certainly neither is its more ardent cousin, communism. History has shown this again and again. But why do these ideologies always fail?

In a capitalist system, the economic spoils go to innovative and hard-working private sector leaders and workers. In socialist and communist systems, the economic spoils go to those who lead and serve the government. And who in government wants less?

Both socialism and communism share something with our capitalism …

The primary motivation of all forms of government is to beget more government. No one leaves ambition at home when they go to work in a government job.

In the government, ambition looks like efforts to expand government scope and scale. Government workers, and particularly their leaders, are always looking for ways to grow their power over the economy and society. This is why socialism and communism tend to be the first step toward autocracy.

When the government wields control over the economy and society, then government leaders can easily abuse their power. It’s just human nature.

No one leaves ambition at home when they go to work in a government job.

Who among us wants to have less, no matter if we work in the private sector or in the government?

This is why socialist and communist systems are hard to pull down until they reach a “Margaret Thatcher moment”:

“The problem with socialism is that you eventually run out of other people’s money,” Thatcher famously said.

The “other people,” of course, are those in the private sector.

Once the private sector runs out of money, the socialists and communists start restricting goods and services to citizens. In time, all that matters is power serving power; the well-being of their citizens is no longer a consideration. It can’t be. Who is left to fund it? This is what led to the fall of the USSR.

If history—and current socialist and communist projects—prove that neither system can sustain, why would people—particularly the college educated—in urban cities vote for socialism?

Because people do not learn from history. We don’t learn from history because we’re not emotionally connected to history. One only develops “Depression-era values” from living through a depression.

We almost exclusively learn from our own mistakes. When we make a mistake, our emotional memory remembers the pain of our mistake. We know we made the mistake, and it haunts us, it stays with us. Only then are we willing to change our mind and behavior.

San Francisco is a good example of this. The city had become unlivable. The streets had become littered with garbage. People were leaving the city. The socialist-minded “know better” politicians and bureaucrats had run San Francisco into the ground. The tyranny of good intentions had wrought all manner of unintended intolerable consequences. Only after a critical mass of San Franciscans had had enough did they vote in a pragmatic and capitalist mayor who is trying to turn things around.

Every trend expands to the point of diminishing returns. And then the pendulum changes direction. We in the US are extremely fortunate that our Founders brilliantly built checks and balances into our government system. This gives us policy, structural and legal recourse to rebalance circumstances once the pendulum has swung too far and voters say “NO MORE”!

Maybe we should all hope Zohran Mamdani gets elected in New York City. If so, then a whole bunch of New Yorkers, and maybe even the New York Times, will learn a lesson not easily forgotten.

THE RANDOMS

Is China about to lose its Chairman Xi? Why is he not attending the BRICS meeting, an organization central to China’s global influence ambitions?

According to data, we are living in the anti-social century. How long until having a conversation with a real person becomes “old fashioned”?

The first EV tax credits showed up in 2009 during the Obama administration. It has been 16 years since. If the EV industry hasn’t been able to make affordable vehicles by now, what does that tell us?

The simple solution to reducing the amount of carbon that humans put into the air is for everyone to start consuming less. The less we consume, the less carbon we create. Of course, this is at odds with what drives our economy. Consumption accounts for about 70% of our GDP. How’s that for a catch-22?

I like to tell this story…

In Houston we have BBQ, steakhouses, Italian food, French food, Indian food, Chinese food, Thai food, fast food and much more. Mexican and Latin American immigrants cook pretty much all of it.

You think a lot of those folks in restaurant kitchens are illegal? If so, what happens to the restaurant industry when all those illegals are kicked out of the country?

Should we ponder why the mainstream media constantly publishes stories about the best restaurants, best movies, best music and best fashion, but we don’t see stories about the best charities?

Is the acronym era finally over? Let’s hope so.

ECONOMIC NEWS

Economy

Even cheaper gasoline is coming
But AI-induced power inflation is, too
US manufacturing contracted in June
Are insurers gouging us?
The $250K-a-year middle class

Labor

Work-life balance may be out the window
The jobs market is starting to fall apart
Jobs report shows underlying weakness
ADP jobs report a bummer

The Lone Star

Will Texas lead a nuclear renaissance?
Another new LNG facility planned for TX
Texas debuts an Energy Fund loan
Houston’s commercial office space is a mess

BUSINESS

Finance

Stock bulls flash “extreme greed”
Private credit kicks the can down the road
PE fundraising continues to decline
SPACs are back

Real Estate