Greedflation
5 February 2024
This essay discusses how corporate price gouging, not inflation, is driving higher prices for American consumers.
“Greedflation” is defined as excessive price increases by companies to take advantage of an inflationary situation and grow their profits. Forbes
According to a report from the Groundwork Collaborative, Inflation Revelation: How Outsized Corporate Profits Drive Rising Costs, corporate profits drove 53% of inflation between April and September 2023. In contrast, over the 40 years before the pandemic, corporate profits accounted for just 11% of price growth.
“It’s one thing for corporations to pass reasonable increased costs to consumers. It’s another for them to line their coffers by exploiting Americans who are just trying to get by.” - Liz Pancotti, Groundwork Collaborative
Clorox’s chief executive, Linda Rendle, told analysts that it did not plan to reduce prices if its costs fell. The company — which sells Burt’s Bees skin care products and Brita water filters, as well as a slew of cleaning products — increased its prices by 16 percent in its most recent quarter.
“We intend for these price increases to stick,” she said. New York Times.
Home Depot management revealed that, due to lower inflation, some goods are less expensive for corporations to buy -- but that doesn’t mean those savings will be passed onto consumers. Home Depot thinks that retailers will “settle” into the new higher prices. MorePerfectUS
Companies that historically might have kept prices low to pick up profit by gaining additional market share are instead using the cover of inflation to raise prices and increase profits. Consumers are now expecting higher prices at the checkout line, and companies are taking advantage. The poor and those on fixed incomes are hit the hardest.
As Hostess’s C.E.O. told shareholders last quarter, “When all prices go up, it helps.” The head of research for the bank Barclays echoed this. “The longer inflation lasts and the more widespread it is, the more air cover it gives companies to raise prices,” he told Bloomberg. More than half of retailers admitted as much when surveyed.
Executives on their earnings calls crowed to investors about their blockbuster quarterly profits. One credited his company’s “successful pricing strategies.” Another patted his team on the back for a “marvelous job in driving price.” These executives weren’t just passing along their rising costs; they were going for more. Or as one C.F.O. put it, they were “not leaving any pricing on the table.”
The Federal Reserve chair, Jerome Powell, said that sometimes businesses are raising prices just “because they can.” He’s right. Companies have pricing power when consumers don’t have choice. Sometimes this is because demand for consumer staples like toilet paper, toothpaste and hamburger meat is relatively inelastic. If you need a box of diapers, you need a box of diapers. Other times pricing power comes from concentrated market power. In industries like meatpacking and shipping — in which giants have over 80 percent of market share at times — it’s easier to take big markups when there aren’t major competitors to undercut you. New York Times
There is much that we can do, other than complain.
Price shop. I have found that there are major differences in prices for the same products between different stores, and sometimes between similar products in the same store. It takes time but we can save money.
Change your habits, when possible. I stopped buying avocados when they were $2.50 each and substituted other products instead. I look for specials. We need the business community to know that we are paying attention and will avoid their products and services if priced too high.
Support public policy that promotes competition instead of monopolies. The Biden administration is challenging mergers that lead to reduced competition, but this is not a concern for most Republicans.
Support efforts to rein in or tax excessive CEO compensation. Excessive pay for corporate management likely contributes to higher costs. There is no reason that CEOs should be making more than 50 times the average salary of their employees.
There is a lot we can do personally to restrain inflation beyond complaining - pick an activity and get to work!
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