Inflation!
Everybody's talking about it, but ignoring one of its biggest causes: corporate concentration.
Now, prices are undeniably rising.
In response, the Fed is about to slow the economy — even though we’re still at least
4 million jobs short of where we were before the pandemic, and millions of American workers
won’t get the raises they deserve.
Republicans haven’t wasted any time hammering Biden and Democratic lawmakers about inflation.
But don’t fall for their fear mongering.
Everybody’s ignoring the deeper structural reason for price increases:
the concentration of the American economy into the hands of a very few corporate giants with
the power to raise prices.
If the market were actually competitive, corporations would keep their prices as low as possible
as they competed for customers.
Even if some of their costs increased, they would do everything they could to avoid
passing those costs on to consumers in the form of higher prices,
for fear of losing business to competitors.
But that’s the opposite of what we’re seeing.
Corporations are raising prices, even as they rake in record profits.
Corporate profit margins hit record highs last year.
You see, these corporations have so much market power they can raise prices with impunity.
So the underlying problem isn’t inflation per se.
It's lack of competition.
Corporations are using the excuse of inflation to raise prices and make fatter profits.
Take the energy sector.
Only a few entities have access to the land and pipelines that control the oil and gas
powering most of the world.
They took a hit during the pandemic as most people stayed home.
But they are more than making up for it now, limiting supply and ratcheting up prices.
Warren: “Chevron, Exxon have doubled their profits.
This isn’t about inflation.
This is about price gouging.”
Or look at consumer goods.
In April 2021, Procter & Gamble raised prices on staples like diapers and toilet paper,
citing increased costs in raw materials and transportation.
But P&G has been making huge profits.
After some of its price increases went into effect, it reported an almost 25% profit margin.
Looking to buy your diapers elsewhere?
Well, good luck.
The market is dominated by P&G and Kimberly-Clark, which—NOT entirely coincidentally—raised
its prices at the same time.
Another example: in April 2021, PepsiCo raised prices, blaming higher costs for ingredients,
freight, and labor.
It then recorded $3 billion in operating profits through September.
How did it get away with this without losing customers?
Pepsi has only one major competitor, Coca-Cola, which promptly raised its own prices.
Coca-Cola recorded $10 billion in revenues in the third quarter of 2021, up 16% from
the previous year.
Food prices are soaring, but half of that is from meat, which costs 15% more than last year.
There are only four major meat processing companies in America, which are all raising
their prices and enjoying record profits.
Get the picture?
The underlying problem is not inflation.
It’s corporate power.
Since the 1980s, when the U.S. government all but abandoned antitrust enforcement,
all American industries have become more concentrated.
Most are now dominated by a handful of corporations that coordinate prices and production.
This is true of banks, broadband,
pharmaceutical companies, airlines,
meatpackers, and yes, soda.
Corporations in all of these industries and more could easily absorb higher costs — including long
overdue wage increases — without passing them on to consumers in the form of higher prices.
But they aren’t.
Instead, they’re using their massive profits to line the pockets of major investors and
executives — while both consumers and workers get shafted.
How can this structural problem be fixed?
Fighting corporate concentration with more aggressive antitrust enforcement.
Biden has asked the Federal Trade Commission to investigate oil companies, and he’s appointed
experienced antitrust lawyers to both the Federal Trade Commission and the Justice Department.
So don’t fall for Republicans’ fear mongering about inflation.
The real culprit here is corporate power.