Episode Details

Inflation! It’s dominating all economic news. It’s the main reason the stock market is going nuts. It’s what Fed officials are discussing in today’s meeting (they’re expected to raise interest rates several times over the next twelve months).

But in all of the inflated verbiage over inflation, there’s been little or no discussion about the role that large, hugely-profitable corporations are playing. Yet inflation is intimately connected to corporate power (as I discussed on this page last month).

Today I turn to the evidence, and then to what I believe should be done about corporate power and inflation.

First, to recap:

While most of the price increases now affecting the US and global economy have been the result of global supply chain problems limiting the availability of parts needed to make consumer goods, this doesn’t explain why big and hugely- profitable corporations are passing these cost increases on to their customers in the form of higher prices.

If corporations were competing vigorously against each other, they’d swallow these cost increases in order to keep their prices as low as possible — especially when they’re making huge profits. Yet corporations have been raising prices even as they rake in record profits. That’s because they face so little competition that they can easily coordinate price increases with the handful of other big companies in their industry. That way, all of them come out ahead — while consumers and workers lose.

As to the evidence, it’s all around us:

1.  Energy

Only a few entities have access to the land and pipelines that control the oil and gas still 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. As Chevron Corp.’s top executive Mike Wirth said in September, “we could afford to invest more” in production but “the equity market is not sending a signal that says they think we ought to be doing that.” Translated: Wall Street says the way to maximize profits is to limit supply and push up prices instead, and we do whatever the Street wants.

2.  Consumer staples

Last April, Procter & Gamble raised prices on consumer 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 percent profit margin. Looking to buy your diapers elsewhere? Well, good luck. The market is dominated by P&G and Kimberly-Clark, which—not coincidentally—raised its prices at the same time. 

Another example: Last spring, PepsiCo raised its 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? Simple. 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 percent from the previous year.

3.  Food

Food prices are soaring. Half of those price increases are from meat. According to the latest data from the Bureau of Labor Statistics, meat prices were up 16 percent in November compared with the same month last year.

Why? Because the