by Lent C Carr, II for Hoke County Commissioner 2022– Photos and Digital Images Attributions Credited Emmaus Corp. Digital and Production Co.
Corporate power is playing a role in inflation. As I’ve studied the root causal in depth, we mustn’t forget exactly how heavy such rigged inflations are hitting our Rural Farmers in conjunction with higher fertilizer and feed prices— such cause and effect inevitably affect not only our Farmers (who we must fight for and with now) it is drastically harming every Consumer in Hoke County, and America in as a whole. I’ll get to the reason in a moment, but first I want to be clear about the relationship between corporate power and rising prices.
While most of the price increases now affecting the US and global economy have been the result of global supply chain problems, 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. They don’t need to. Corporate profits are at near record levels. They could easily absorb the cost increases. They’re raising prices because they can. As the White House’s National Economic Council put it in a December report: "Businesses that face meaningful competition can’t do that, because they would lose business to a competitor that did not hike its margins."
Fast food giants like McDonald’s and Chipotle have increased their prices, blaming higher food and labor costs. But McDonald’s revenues hit a five-year high in 2021 and Chipotle’s revenues increased by over a third from two years before. Why didn’t they absorb the cost increases?
Procter & Gamble is charging more for consumer staples, citing “rising costs for raw materials, such as resin and pulp, and higher expenses to transport goods.” But P&G continues to rake in record profits. It’s even been spending billions buying back its own stock. Why didn’t it just absorb the cost increases?
America’s largest and most profitable retailers -- Walmart, Amazon, Kroger, Costco, and Target -- say they must raise their prices because the products they’re selling cost more. But these retailers are so profitable they could absorb much of the cost increases and be profitable with smaller markups. Why didn’t they?
The answer in all these cases: they didn’t absorb the costs — and instead passed them on to customers in the form of higher prices — because they face so little competition. Market power allows them to keep high profit margins even in the face of rising costs. As Chipotle’s chief financial officer admitted, “our ultimate goal…is to fully protect our margins.”
Some economists say corporate power can’t be driving inflation because corporations with the market power to raise prices would already have done so. But they’re raising prices now because their costs are increasing and they’re using their market power to pass on these rising costs to their customers.
That’s not all. Inflation has given some big corporations cover to increase prices above their rising costs
On a recent survey, almost 60 percent of large retailers say inflation has given them the ability to raise prices beyond what’s required to offset higher costs.
Meat prices are soaring because the four giant meat processing corporations that dominate the industry are “using their market power to extract bigger and bigger profit margins for themselves,” according to a recent report from the White House’s National Economic Council (emphasis added).
So why has the White House stopped explaining this to the public?
That report was dated December 10, by the way. Now the White House’s National Economic Council is pulling its punches.
According to yesterday’s Washington Post, when the prepared congressional testimony of a senior administration official was recently circulated inside the White House, it included a passage tying inflation to corporate consolidation and monopoly power. But that language was deleted from the remarks before they were delivered.
Members of the White House Council of Economic Advisers raised objections, according to two people aware of the matter who spoke on the condition of anonymity. It’s hard to know exactly what their objections were. As I’ve said, some economists argue that corporations with market power wouldn’t need to wait until the current inflation to raise prices, but this argument ignores the ease by which powerful corporations can pass on their own cost increases to customers in higher prices or use inflation to disguise even higher price increases.
The Council of Economic Advisers is a thoughtful group, but perhaps they are being unduly influenced by two rather outspoken Democratic economists from a previous administration. According to the Post, former Democratic treasury secretary Larry Summers and Jason Furman, a top economist in the Obama administration, have been critical of the attempts to link corporate market power to inflation. “Business bashing is terrible economics and not very good politics in my view,” Summers said in an interview.
I wouldn’t describe it as “business bashing.” I’d describe it as holding powerful corporations accountable. Something long overdue
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