The U.S. Federal Reserve continues to raise interest rates to slow raging inflation. The root culprit isn’t the consumer, but the greedy corporate sector, which is using inflation as cover to maximize its profit margins. We know this every time we shop and see goods priced double, or more, the rate of inflation. What’s needed immediately is a windfall profit tax.
Meantime, the average worker faces an insufferable erosion in purchasing power, and the plight of those living on fixed incomes exacts the ultimate cruelty.
Three principal parameters to assess market expense are labor costs, nonlabor inputs, and the “mark-up” of profits beyond the first two. Recent measurements (economic policy institute.org) reveal record profit margins over the former two, or plus 53.9% growth in corporate profits, as opposed to 38.3% for non-labor cost, which includes the supply chain crisis induced by the pandemic, and just 7.9% for labor costs.
Certain sectors of the economy have especially profited, averaging above 20% in profit margins such as information technology and fossil fuels. Exxon, for example, has just published a record profit of $17.9 bn for the second quarter (NYT).
Fueling inflation is the accelerating corporate buy outs, lessening competition. You’re aghast at rising meat prices? That happens because just four meat conglomerates now control the market. Since 1990, some 75% of corporations have consolidated and control as much as 80% of the market, reports the Official Monetary and Financial Forum (OMFIF).
And things may likely get worse as a looming recession makes itself felt and corporations cut expenses to stabilize profitability. Amazon has laid off 100,000 workers, even as profits bulge. Others include Twitter, Google, Netflix, Peloton, Best Buy, Tesla, Ford, General Motors and Exxon Mobil.
Corporations aren’t by nature altruistic. They exist to reap maximum profit for their CEOs and investors. They think in numbers, not individuals.