Last November, while I was having a Thanksgiving meal with my family, a discussion came up about inflation and what the reasons were that it has run wild for months. I have been talking about inflation now for over 18 months and that was long before the Fed or most people gave it a second thought, but last November it was a big topic. My opinion then (as it is now) is that inflation has several causes but that price gouging and corporate greed (profiteering) is a real part of it. I was met with skepticism, denial, and an actual argument over it.
It’s Not a Pretty Thought…
…but corporate greed is now driving inflation way more than you ever dreamed. Perhaps you still doubt it or want to doubt it because you think “hey, this is America and they wouldn’t ever do that” or “gee, we live in a country where business is free to charge whatever they want and make money, right?”
Technically, you may be right. We are free to charge whatever the market will allow. But as far as the part that says that businesses would never do that: think again. They do it now and have always done it. Corporate greed is and always has been a part of our system and now it’s a big part of inflation!
The Inflation Factor Is Killing Some People—Are You Next?
The unemployed, disabled, and seniors in America are hurting more now due to what we are blaming inflation on every day. They suffer because usually their income levels don’t ever increase with rising costs, but you know that.
But more so, now even working people are paying higher prices to purchase just the basic necessities (from gas to groceries to prescription drugs). You are feeling it more than ever. That’s the reason that inflation has become such a big noise. It’s affecting everyone who consumes anything.
How You Doin’, Mr. Corporate Giant?
Meanwhile, corporations are taking advantage of this inflation and the pandemic to jack up prices and rake in record profits. Do you still doubt this fact? If you do, you are in the minority these days. In some polls recently, as many as 80% of all Americans now think that inflation is being driven by corporate greed.
In their press release, accountable.us stated “Big industries—including big oil, meat packing, shipping, retail, clothing, food, trucking, and railroad—have reported massive new profits over the previous year, paid their CEOs huge bonuses, or rewarded shareholders with millions of dollars in new handouts after raising their consumer prices and service rates.”
Supply Chain Issues Exist, But What About Greed?
If you listen casually to the daily news, you hear about the shortages of this and that and why prices and this inflation are here. It is true that ships are still backing up on the docks and that transporting goods around the country has created shortages. It’s also true that prices will go up when demand does because the goods just aren’t there to buy. I’m not saying that isn’t true here. But let’s look at some facts along with that “supply chain” reporting.
An analysis by the Securities and Exchange Commission stated that in filings for 100 U.S. corporations they found “net profits up by a median of 49%, and in one case by as much as 111,000%! Those increases came as companies saddled customers with higher prices and all but ten executed massive stock buyback programs or bumped dividends to enrich their investors”.
Let’s dig a bit deeper. In a new report for the Economic Policy Institute (EPI), a non-profit American think tank based in Washington, D.C., researchers analyzed pricing data to better understand what’s really driving inflation. What they found was absolutely shocking.
“Over half (53.9%) of the increase in consumer prices is attributable to fatter corporate profits. Higher labor costs, on the other hand, explain just 7.9% of recent inflation. This throws out the mainstream economist blame game for inflation.” – Josh Bivens of the EPI
Corporations Are Actually Bragging About Price Gouging Now!
You might think that corporations would shy away from saying that they are proud and pleased to raise prices for no reason except that they simply can, wouldn’t you? But that is what’s happening today. The fact is that they are using the cover of inflation to engage in profiteering.
The Groundwork Collaborative, a group that monitors economic issues here in the U.S., listened in on hundreds of corporate earnings calls between companies and their shareholders and found that executives are openly bragging about their price-gouging strategies. They use the supply chain issue as hype to explain inflation publicly, but they have been raising their prices over what is needed so it’s no wonder that corporate profits are at a 70-year high!
If You Don’t Believe Me, Maybe You’ll Believe the President of the United States!
With inflation numbers at a 41-year high, even Joe Biden has been looking for explanations. What he has said backs up the fact that corporations are driving more of it than ever! He called for investigations into the price of oil and gas for one major source (in fact it is the highest single facet) of inflation and basically said that gouging was real. He stated that “it’s no time for profiteering or price gouging. I want to be clear about what we will not tolerate.”
Additionally, many elected officials such as Senator Elizabeth Warren (D-MA) have commented. Warren said: “Corporate executives are happy to help drive inflation and fatten their profit margins by price gouging Americans,” last January.
Warren’s argument, echoed by Senators Bernie Sanders (I-VT), and Sherrod Brown (D-OH), is that wealthy corporations are taking advantage of the underlying causes of inflation to raise their prices far beyond what would be needed to offset their increased costs.
Profits Are Up Because of Higher Prices
Just yesterday, I was watching CNBC (I’m bored sometimes) and I was hearing about the company that makes Oreos and Trident gum (Mondelez International) and their quarterly profit after closing hour report saying that there was “no consumer price resistance”. I guess people don’t notice when a pack of gum goes from $0.99 to $1.39 a pack overnight (a 40% increase).
For 2022, the company now expects more than 8% in net revenue growth, reflecting “the strength of its first half and higher pricing” it said. It had expected a 5% net revenue growth when it reported first-quarter earnings in April.
As another example, Chipotle reported weaker-than-expected sales for its second quarter, although higher prices drove stronger profit growth. These stories are being repeated over and over again.
Chevron’s profit has more than quadrupled in the first quarter of 2022 reporting $6.3 billion in earnings during the period up from $1.37 billion during the same quarter in 2021.
In Q1 of this year, Kellogg’s reported a profit of $424 million or $1.23 a share. During their earnings call, Chairman of the Board and CEO Steven Cahillane said: “We grew our net sales faster than we had anticipated, and we delivered more operating profit than we had projected.”
Land O’Lakes is one of the many companies accused of profiting off of the pandemic and blaming it on inflation. At the close of Q1, Land O’Lakes, Inc. reported net sales totaling $5 billion with net earnings of $179 million for the first quarter ending March 31, 2022.
And the beat goes on.
So What Can You Do About It?
You want to combat corporate greed so that prices return to the pre-pandemic era, don’t you? Well, you can kiss that baby goodbye as they say at the old ballpark! Prices never return to old levels after they go up this much. But there are things you can do to slow down the pace of inflation and cause some businesses to lower prices at least a little. What are they?
1. Become a smarter shopper
If you shop smart as a habit, eventually it will cause the stores and the manufacturers to make changes too.
- Use cheaper stores—change to discount supermarkets
- Change what you eat—eating less meat is good for your health, good for the planet, and can also cost less
- Always make a shopping list and stick to it to avoid wasteful impulse buying
- Dump expensive brands—often the branded items are made at the same factory as the non-branded goods, so breaking this buying habit could save you money with little real pain
- Buy in bulk, sign up for wholesalers when it makes sense for your situation (like Costco)
- Make use of loyalty cards and coupons
If you are one of those consumers that sneer at loyalty cards, vouchers, and sale promotions and coupons, change that! Today there are plenty of sites that will enable you to find the best promo deals and vouchers on anything from restaurants to cosmetics.
Look out for deals and make the most of sales. Why buy stuff in the run up to Christmas when you can get the same items often much cheaper at sales during the year?
2. Check Your Budget
It’s always wise to audit your budget periodically, as your goals and spending habits change over time. And when drastic price increases from corporate greed squeeze your budget tighter, evaluating your spending and building saving into your budget becomes all the more critical.
If you’re already tracking your spending in a budgeting app or spreadsheet, look over how you are spending and see if that measures up against your goals. If you’ve set limits for certain categories, are you sticking to your budget? Re-adjust your spending goals to ensure you’re allocating enough to each category, or commit to reducing spending if you find you’re living beyond your means. If you aren’t already using a budget, you should start one now.
The chief reason corporations feel so emboldened about raising prices and bragging about increasing the prices is because of us. If and when we start to resist them and find alternate ways to buy and shop, they will change their greedy strategies. Are you up to the challenge?
As long as you don’t pressure business to stop overcharging you, they simply never will. Energy surcharges? Changing a contract because the business costs went up and now they want to charge you more? If that happens, never agree to it. A contract is a contract.
Where are you on price gouging these days? Do you see the corporate greed? Do you wonder about it? Are you oblivious to it? What are you going to do to get a better grip on inflation now?