As I’ve entered the “elder” age group, I’ve become accustomed to my peers (and myself) noting a price in a store display, a newspaper ad, or online, and incredulously asking, “Can you believe how much costs? I remember when it was only .”
But it’s not just us anymore. Today, most groups come away from a grocery store, gas station, pharmacy, even a big-box discount store (or online equivalent) with some form of sticker shock. Prices are through the roof. The inflation rate last year (2021) was 7%, the highest it’s been in nearly 40 years. Even with a rise in hourly wages (4.7%), workers lost an average of 2.4% in spending power. Those on fixed incomes were pushed even further towards the bottom of the barrel by the tiny 1.3% cost-of-living increase for 2021 Social Security benefits
Since solutions seem scarce, it’s natural to search out someone to blame. Republicans point to policies they believe have put too much money into consumers’ hands through COVID unemployment benefits and other pandemic stimulus spending. Nearly every business points to supply-chain problems that have increased their costs; they are also paying higher labor costs to attract and retain workers during a labor shortage. It seems the short-term shock of seeing empty shelves and products out-of-stock has created consumers desperate for “normal” experiences, like shopping, traveling, and eating out, and are willing to pay exorbitant prices for nonessentials in exchange for the comforts of consumption.
In general, we accept inflation’s higher prices: we understand that COVID threw a monkey wrench into the business of business, and that our government hasn’t responded well to COVID or related economic problems. But one group of statistics puts these assumptions into question. Not only are prices through the roof, so are corporate profits. In the last half of 2021, corporate profits were up 37%, the highest growth rate since 1950 (www.bloomberg.com/news/articles/2021-11-30/fattest-profits-since-1950-debunk-inflation-story-spun-by-ceos).
The Wall Street Journal reports that in 2021 about two thirds of the largest U.S. corporations had larger net profit margins (profit as a percentage of all sales minus costs) than in 2019, and more than 100 showed increases of more than 50%. This means that regardless of the troubles caused by COVID and government policies, large corporations are taking advantage of the situation by raising prices higher than necessary for them to retain their previous profitability. That’s called price gouging, or profiteering: jacking up the price of scarce goods, especially during emergencies. Although the laws are hard to enforce, several states define a price increase of 10% or more as illegal.
Today’s inflation includes all types of goods and services. The prices for nonessential products from Coca Cola, Pepsi, Starbucks, and Coach (luxury handbags, etc.) all rose as their corporate profits grew to record levels: Essential foods giants like Tyson (chicken and meats), General Mills, Campbell’s, and Hormel all raised prices as their profits swelled. Drug store suppliers Procter and Gamble and Kimberly Clark followed the same pattern. Car dealerships increased net profits over 120% through most of 2021. Sending a package (UPS), or buying an appliance (Whirlpool) or toys (Hasbro) cost more while increasing profits. Gas prices remain high as oil prices per barrel have dropped.
Legendary investor, and head of a building and building supplies conglomerate, Warren Buffett explained in May that his company and others are raising prices and “it’s being accepted.” As one billionaire investor and CEO, John Catsimatidis, noted on Fox Business, “Why give something away if you don’t have to, and you can have a bigger margin?”
In 2010, the Supreme Court expanded its definition of corporations to give them some rights closer to those of actual citizens. If they are getting citizens’ benefits, do we expect them to contribute more to the public good, instead of taking every chance to reach further and further into our pockets, regardless of the consequences? In a time of rapacious capitalism coupled with national crisis, how do their responsibilities to shareholders stack up against responsibilities to local communities and society as a whole?
We’re all paying inflated prices, but the greatest inflation is seen in corporate profits, taxed at the lowest rates in over 70 years, and billionaire wealth. One estimate suggests 60% of all inflationary price increases go directly into corporate profits. A documented fact shows that America’s billionaires increased their fortunes by 70% during the pandemic. That’s a lot of money funneled directly into private pockets during our national emergency, with little or no benefit to the larger community.
Allen Woods is a freelance writer, author of the Revolutionary-era crime novel “The Sword and Scabbard,” and Greenfield resident. His column appears regularly on a Saturday. Comments are welcome here or at awoods2846@gmail.com.