Thread by @doctorow

Call me a conspiratorialist, but when CEOs brag on earnings callsabout how covid, war, and #inflation scare-stories them hike prices and rake in never-before-seen margins, I think it's reasonable to blame inflation on greed, not on workers getting a couple of covid checks.

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If you'd like an essay-formatted version of this thread to read or share, here's a link to it on pluralistic.net, my surveillance-free, ad-free, tracker-free blog:

pluralistic.net/2023/05/05/wmd…

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Amazingly, this is controversial! For more than a year, Very Serious People dismissed the #greedflation hypothesis - that CEOs aren't lying when they boast about using pretexts to hike prices - is a conspiracy theory used to dupe people who Just Don't Understand Economics.

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#JeffBezos - whose profits soared during the lockdowns, even as his workers sickened and died in droves - went on a Twitter tear last March to tell us that free gubmint money (for workers, that is) was causing inflation:

levernews.com/citizen-bezos-…

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And Bezos's editorial board at the @washingtonpost told the same story, calling greedflation "foolishness" and a "bizarre theory," demanding the Fed hike interest rates, drive Americans out of work, and "curtail spending power" to fight inflation:

washingtonpost.com/opinions/2022/…

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This was repeated by the Very Serious People's Chorus, from the Chamber of Commerce:

uschamber.com/economy/u-s-ch…

to GOP Senators:

congress.gov/event/117th-co…

to famous #nepobabies, who dismissed greedflation as a theory for conspiracists and "trolls":

washingtonpost.com/opinions/2022/…

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Which was weird, because at the same time, all these eminently guillotineable CEOs were ecstatic about the gains from greedflation:

pluralistic.net/2021/11/20/qui…

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#ColgatePalmolive CEO #NoelWallace told investors, "What we are very good at is pricing. Whether it’s foreign exchange inflation or raw and packing material inflation, we have found ways over time to recover that in our margin line."

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(Whoever came up with "very good at pricing" is also very *bad* at "not saying the quiet part aloud.")

fool.com/earnings/call-…

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#Unilever CEO #GraemePitkethly celebrated his 5% increase in margins, saying "Consumer-facing price is the last lever we normally use to manage inflation. We find that taking several small price increases is more effective than one large price jump."

fool.com/earnings/call-…

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#ProcterAndGamble CFO #AndreSchulten boasted of increasing prices *and* margins, saying "We have not seen any material reaction from consumers, so that makes us feel good about our relative position."

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#Kroger CEO #GaryMillerchip said, "We’ve been very comfortable with our ability to pass on the increases that we’ve seen at this point, and we would expect that to continue to be the case."

wsj.com/articles/u-s-c…

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It's wild: as CEOs boasted about greedflation, the pundits' position was, "Who are you going to believe, Larry Summers or your own lying ears?"

Meanwhile, *two thirds* of US firms saw increased margins during the first two years of the pandemic:

wsj.com/articles/infla…

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While wages *lagged behind* inflation by a wide margin:

rooseveltinstitute.org/wp-content/upl…

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Corporate strategists kept running their mouths, boasting of a #PriceOverVolume strategy, where prices are raised even as sales fall, so long as profits continue to rise as wealthy people absorb the price hikes and everyone else learn to do without:

bloomberg.com/news/articles/…

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The thing is, there *were* and are supply shocks caused by war and disease, but companies used these as pretexts to raise prices and margins.

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Wingstop used a temporary disruption in chicken supplies to hike prices by 125%, and kept them high even as the price of chickens fell by 50%. Their share price climbed to 250% of its pre-covid high.

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The same happened with eggs: a transient bird-flu disruption drove up prices, but even after capacity was restored, the prices stayed high:

pluralistic.net/2023/01/23/can…

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Small wonder: nearly all the eggs you buy at the grocery store come from a single conglomerate, #CalMaine, that owns virtually every major egg brand in America, and whose profits increased by *110%* during the "bird flu shortage":

cnn.com/2023/01/13/bus…

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Monopolists have pricing power. Concentration in every sector, driven by lax antitrust enforcement since Reagan, has produced monopolies, duopolies and oligopolies in most categories of goods, as companies gobbled each other up in an orgy of anti-competitive mergers.

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These mergers were waved through thanks to the economic orthodoxy of Very Serious People, who claimed that monopolies are "efficient" and that markets - not regulators - will punish the "bad" monopolies:

pluralistic.net/2022/02/02/its…

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Greedflation deniers say that the problem isn't greed, it's capacity - supply-chain disruptions left companies unable to bring good to market. Even if demand wasn't stimulated by covid relief checks, if supply dropped off, then prices would go up. No need to blame greed.

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It's true that late-stage capitalism *looooves* long, brittle supply chains. In their drive to "efficiencies," multinationals squeeze every drop of slack out of the system, eliminating buffer stocks, cutting staff to the bone, and pissing away reserves in #StockBuybacks.

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This fragility is magnified by monopoly. When a sector is dominated by just a few companies, they can collude to stay out of each other's way, tacitly or explicitly deciding not to compete.

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When that happens, the companies are no longer disciplined by competition and can #enshittify their services to an ever-greater extent.

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Think of how the telcos and cable companies divided up America like the Pope dividing up the "New World" into non-overlapping, non-competing exclusive territories.

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The less they had to compete with one another, the less they had to spend on their infrastructure. That's how you get companies like #Frontier, who draped their lines over shrubs or let them drag on the ground:

stopthecap.com/2019/01/07/min…

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Global supply chains have the same pathology. Global shipping is controlled by three cartels, and for years, their regulators warned them that making their ships bigger and bigger risked disaster, like, say, a ship getting stuck in the Suez Canal:

pluralistic.net/2021/03/29/eff…

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But bigger ships mean higher margins, and concentrated shipping is unified in its devotion to those margins. Regulators were powerless to halt the super-sizing of ships, because the sector spoke with one voice, as the three cartels converged on a single lobbying position.

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Off-shoring was "efficient": if a corporation's goal was to destroy its union and set up shop in a territory where they didn't have to worry about workplace safety or pollution, the offshoring was a *very* efficient way to accomplish that goal.

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Offshoring works well, but fails badly. With supply chains stretching across continents and oceans, and with production concentrated into a few massive factories, all it takes is one storm, one ransomware attack, one disease outbreak to disrupt whole sectors.

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Some inflation is unarguably due to supply-chains, but we can't fix them by raising interest rates and slowing investment. To make supply-chains resiliient we need to move production closer to home, and replace bottlenecks with robust networks:

pluralistic.net/2022/06/01/fac…

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But the inflation hawks didn't want to talk about any of that. For them, the equation was simple: inflation started when workers gained bargaining power and were able to secure higher wages and favorable political outcomes (that is, relief checks).

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The only solution was to put workers back in their place: hike interest rates to cause mass unemployment and acellerate offshoring, in order to "reduce demand."

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Last year @JosephEStiglitz and #RegmiIra published a thorough analysis of inflation, finding a mix of price-gouging, capacity failure, supply chain problems, higher rents (from work-from-home) and shifts in the goods in demand (hand-santizer, etc):

pluralistic.net/2022/12/14/med…

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None of this can be addressed with #InterestRateHikes, and many of worsen when interest rates go up. But as Stiglitz and Ira write, monetary policy is like bloodletting: if the patient worsens, you need more bloodletting. If the patient recovers, it's thanks to bloodletting.

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This didn't make a dent in the inflation hawks' rhetoric. Instead, they insisted that greedflation was impossible. How, they asked, could supposed monopolists suddenly acquire the ability to raise prices? Did the pandemic increase the amount of greed somehow?

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If only they'd bothered to listen to the greedflationists, they would have had their answer.

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As #KenJarosch, owner of Chicago's #JaroschBakery told investors, "Whether it’s rye flour, or bird flu that impacts eggs, when it makes national news...it’s an opportunity to increase the prices without getting a whole bunch of complaining":

bloomberg.com/news/articles/…

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But who are we going to believe: neoliberal economists, or our own lying ears?

Writing for @LeverNews, @andrewperezdc, @matthewccook5 and @davidsirota count the cost of greedflation denial:

levernews.com/how-pundits-in…

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Before pundits, CEOs and economists started shouting about inflation's origins in greedy, powerful workers, America was on track for profound, long overdue reforms: $2T in climate retrofits and infrastructure, another round of pandemic relief, and a minimum wage increase.

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Also on the table: anti-price-gouging law, taxes on the ultra-rich, and a windfall profits tax targeted at pandemic profiteers. But once the inflation hawks started going on national TV, holding flashlights under their chins and intoning "Inflaaaaaaaation," all that died.

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A year later, even the @WSJ has to admit "Businesses are using a rare opportunity to boost their profit margins":

wsj.com/articles/why-i…

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The *Washington Post* and @business concur, writing, "The idea that corporate profit expansion has been a big driver of inflation was once mostly confined to trade unions and left-wing academics, but it’s now taken seriously":

washingtonpost.com/business/2023/…

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But it's too little, too late. The Fed just hiked interest rates again:

apnews.com/article/federa…

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And they'll keep doing it, too - bleeding the patient until they recover, or die. The bloodletter is never wrong, and meanwhile, there's no end to the fortunes to be made from raising prices and blaming inflation.

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Image:
Mosaic 36 (modified)
flickr.com/photos/mosaic3…

CC BY 2.0
creativecommons.org/licenses/by/2.…

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