Greedflation Exists: Even the corporate raiders now admit it

Axios recently published an item on inflation over the past four years.  Everyone who wasn’t a rightwingnut and either works for a living or worries about putting food on the table knew that inflation was caused by corporate greed.  If the costs of production went up by one cent, corporations would raise prices five cents, then blame “global pressures”, “COVID-19”, “supply chains”, “war in Ukraine”, or the biggest lie of all, “worker wages”.  Four years after the fact, the corporatists, not just the media, are admitting that “inflation” in recent years was almost entirely due to corporate profiteering, not any external factors.

Once a fringe theory, “greedflation” gets its due

Once dismissed as a fringe theory, the idea that corporate thirst for profits drives up inflation, aka “greedflation,” is now being taken more seriously by economists, policymakers and the business press.

Why it matters: Though inflation is starting to come down, it still remains well above the Fed’s target level of 2%, and understanding what’s causing inflation is key to combatting it — now and the next time.

The idea that profits drove our current bout of inflation surfaced in the last few years among progressive economists and lawmakers but was waved away by more mainstream types as a “conspiracy theory.” That changed earlier this year.

  • In a speech in January, then-Fed vice chair Lael Brainard said wages weren’t the main driver of inflation and pointed to a “price-price spiral,” where companies mark up prices far higher than the increases in their input costs.
  • In March, the chief economist at UBS Global Wealth Management, Paul Donovan, published a note on “profit margin-led inflation,” describing how in late 2022 and into this year, companies — particularly retailers and consumer goods makers — convinced consumers that they needed to raise prices. (They didn’t really.)
  • Most of the time, these companies have “weak pricing power,” meaning they depend on repeat customers and can’t just wildly increase prices because consumers will abandon them, he says.

But businesses both large and small had a convincing story to tell: They really didn’t want to raise prices, but there was “this terrible war or the pandemic or labor shortages or whatever,” Donovan tells Axios. “That’s what’s basically been going on.”

  • With so much in flux, people were more accepting of higher costs for everything, and more convinced companies HAD to raise prices.
  • In earnings conference calls last year especially, executives spoke in corporate lingo about consumers accepting such price increases.

Key point: Most folks aren’t sticking with the “greedflation” label — that got a lot of blowback from those who argued that companies have long been “greedy.”

  • That’s not what’s at play — Donovan’s work describes companies taking advantage of a window of opportunity to raise prices more than normal. Like kids in a candy shop.

A few weeks after Donovan’s paper came out, European Central Bank executive board member Fabio Panetta expressed worries that inflation growth was “due to increasing profits.”

I disagree with Axios on one thing: greedflation was never a “fringe theory”, it was accurate and silenced by those who profited.  Disaster Capitalism became Pandemic Capitalism.

It wasn’t “fringe” to say in 2001 that Saddam didn’t have WMDs.  It wasn’t “fringe” to say in 2014 that Putin had further ambitions and the world was appeasing him.  It wasn’t “fringe” to say in 2016 that rightwing extremists planned violence against Trans people and to use government to control women’s bodies.  It wasn’t “fringe” to say in 2019 rightwing extremists intended to overthrow democracy, etc.

These and other views were always valid, but the corporate media and those in power pretended they weren’t.  A “fringe theory” is one that has no facts to back it up, like “tax breaks for the rich help the economy”.