Exhausted from two+ years of a worldwide pandemic, American workers and families now face budget-crushing inflation, the highest in 40 years. Prices are rising fast on the goods and services families most need: food, gas, clothing, appliances, cars, healthcare, and so much more.
Rampaging inflation will surely cost the Biden administration the mid-term elections, and the Federal Reserve response—raising interest rates—could push the economy into recession, an even bigger hit for working people.
Where are the pitchforks?
Here’s where. Politicians, corporations, and the mainstream media cover up corporate price gouging in a word salad of economic bafflegab to keep blame far away from the people doing the gouging.
The con
Corporate executives raise prices, not some mysterious, unalterable economic force. They do it to make more money. But unless you read the business press, you won’t see that stated. Here’s what you’ll be told.
Inflation (rising prices) is a force of nature. It happens when there’s too much demand and limited supply. No one actually decides to increase prices, it just happens automatically in response to consumers demanding too much stuff, especially if they got pandemic relief money from the government. If there isn’t enough of some of the stuff to go around because so many people want it, prices just go up.
Why isn’t there enough of the stuff that people want? The pandemic screwed up the “supply chain.” Workers are off sick, and so companies can’t make more stuff. (The fact that the US has outsourced manufacturing to countries with low labor costs somehow doesn’t get blamed for pandemic-related supply chain problems. Instead, media focuses on ships backed up and unloaded at the Port of Los Angeles, particularly workers not putting in enough hours, not on companies offshoring their manufacturing and buying components from overseas suppliers. Recall New York City nurses suited up in trash bags in the early days of the pandemic because China made all the PPE.)
And then there’s the old standby: workers are demanding higher wages and so prices have to rise. (Wage increases lag price increases, but that’s never stated.) It’s workers’ fault—so greedy!
Only the business press will state the obvious.
“These added costs, at every step from production to sale, lead to price increases for consumers, with some companies SEIZING ON A RARE OPPORUNITY TO RAISE PRICES.” The Wall Street Journal, Nov. 14. 2021.
Restated in all its ugliness: A global pandemic is a rare opportunity to raise prices and make more money! Woot woot!
The Wall Street Journal, Nov. 21, 2021.
The subhead above reads:
“Nearly two out of three of the biggest US publicly traded companies reported fatter profit margins than they did before the pandemic; “A Very Unprecedented Environment.”
Unprecedented indeed.
Here’s another media technique. “Industries have seen their profits rise.” Notice the grammatical construction of that sentence. No one and no company actually RAISES PRICES TO INCREASE PROFITS. Instead, “industries” just observe that their profits [magically] go up.
And more from the same article. “Widespread inflation makes it easier to broach the topic of raising prices with customers…” Wait, what? Did some company broach the topic with you? “Look, Mr. and Ms. Public, we’ve got to raise prices on our used cars. Are you OK with that?”
Mainstream CNN is going to blame someone! Who?
CNN Business, November13, 2021.
“The pandemic.”
Well, of course.
Early on, lockdowns and widespread unemployment did make consumers stop spending and caused companies’ profits to decline.
Then, according to CNN, the government passed a $1.9 trillion stimulus, consumers got some free government money, and they started spending again. But it wasn’t easy starting up global manufacturing after a worldwide shutdown.
Cars, for example, require huge numbers of parts, many manufactured in China and other parts of Asia. Production and shipping couldn’t start up just like that, and so car production stalled for lack of parts. But greedy consumers, now flush with free government money and savings from staying home, demanded cars. And that made car prices go up. It just happened.
Nope. Car dealers made record profits in 2021 because dealers jacked up their prices.
The CNN article goes on to say that inflation may ease up when supply chain problems resolve. If not, the government can increase interest rates to slow inflation (and risk recession, another head blow to workers).
Investopedia at least says that companies raise prices, not some mysterious economic forces.
Consumers “willing to pay” more? Or stuck paying more?
It’s simple: Companies raise prices to jack profits
Corporate executives decide to raise prices, and they decide how much. The goal: make more money. Because when companies make more money (announce record profits), executives and shareholders make out like bandits.
You’ll hear that corporations are merely passing along their own increased costs from their suppliers. True, because execs and down the supply chain make the same price increase decisions with profits in mind.
If corporate profits declined during the early days of the pandemic, as they did, execs will raise prices to cover earlier losses. If corporations have to pay more for components, execs will raise prices to cover that cost as well. If competitors raise prices, execs will raise prices too, particularly in industries with a few huge players (like meat packing). Pepsi raised its prices and Coke immediately followed with its own price increase. Coke rationale: Why leave money on the table? (That’s exactly the phrasing execs use in these discussions—I’ve heard it.) People will buy either Coke or Pepsi, why should Coke lose out on extra profit?
Corporations raise prices whenever they can get away with it
Even so, they don’t want the public to think inflation is corporations’ fault. So corporate execs and PR departments come up with all kinds of semi-plausible/bullshit explanations to avoid pissing off the public—the pandemic, consumers with too much free money, the supply chain, the Fed, wages, mysterious economic forces.
Uh no.
Companies’ pricing decisions cause every inflation.
Even Fed Chair Jerome Powell says corporations are raising prices, well, simply because they can.
Because they want to make more money.
And raising prices is a lot easier than inventing new products, buying robots, building overseas plants, and the like. Once execs calculate the potential profit, raising prices is just a keystroke.
For the win
2021 Year-end corporate reports—stay tuned to see who’s hitting the jackpot
From the article:
“U.S. corporations pulled in more profits in the three months ended in September than ever before. Not just in dollar terms—something that happens frequently—but as a share of the economy.
But there’s a deeper structural reason for inflation, one that appears to be growing worse: the economic concentration of the American economy in the hands of a relative few corporate giants with the power to raise prices.
Top executives have been well aware of their ‘pricing power’ during this inflationary moment, and if you pay close enough attention, they're letting slip how great this time is for profit-making. CEOs and CFOs of companies from PepsiCo to McCormick spices have openly announced likely price increases through the rest of this year, bolstering revenues even as costs increase [i.e., they’re raising prices enough to cover costs AND turbocharge profits to record highs].”
2021 Year-end corporate reports—stay tuned for who hit the jackpot
They’ll be more to come on Mazza’s Take as corporations start reporting full 2021 financial results this month and next. Stay tuned.