Tag: corporations

Blame Corporations, Not Consumers: Why Inflation Persists

The Federal Reserve keeps upping the interest rate in a concerted effort to reduce inflation. This risks inducing a recession, meaning fewer jobs and economic misery just in time for the 2024 election and Trump, either even or ahead of Biden, in current polling surveys.

Do you really like paying an extra thousand monthly on your anticipated new mortgage than a year ago or paying 84 months on your new vehicle?

Sadly, the Federal Reserve is operating on a false premise, pummeling consumers. The truth is that the major responsibility for inflation lies with corporate greed, using the cover of inflation to raise prices and augment profits.

According to the Economic Policy Institute (2023), corporate profits normally contribute 13% to prices. Currently, that figure has risen to twice that amount.

Plain evidence stares you in the face with every trip you make to your grocery store or opt for dining out and witness markups twice or more the rate of current inflation. Tyson Foods, our largest meat supplier, reported a doubling of profits from first quarter 2021 to first quarter 2022.

Chipotle Mexican Grill, has just announced it expects to increase its menu prices 15% by the end of 2023, despite reporting $257.1 million in profit in the latest quarter, a nearly 26 percent jump from a year earlier (NYT).

Sometimes, you’ll see wily corporations do the “shrinkflation” gambit: higher price, less content. They think you won’t notice. Gatorade, for example, redesigned its bottles, same height, but fewer ounces, 28 oz. vs. 32 oz, or a 14% content reduction.

Albertsons bought out Safeway, and now Kroger wants to buy Albertsons. Include Walmart, and you’ve got three firms controlling 72% of the market! (The Guardian).

No, it’s neither consumers nor unions fueling inflation, but corporate conglomerates that lie at the root of stubborn inflation, against which even the Federal Reserve’s raising interest rates have proven inadequate, ironically making it more difficult for consumers.

Lamentably, the corporate sector wields too much influence, lobbying in the Congress, and meddling in our elections. They shouldn’t enjoy the status of persons, as ruled by SCOTUS {2010), free to spend on candidates of their choice.

It’s time to play hardball: Impose a windfall profits tax on corporate profit above a reasonable margin.

Let government be suspicious of proposed mergers, with their inherent layoffs and reduced competition, heating the economy still further.

Break-up corporate monopolies too big for their britches!

—rj

Corporate Gauging and Rising Prices

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.

–rj

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