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“Greedflation” is a nonsense idea

43 points by edward 3y ago

draw_down 3y ago
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DueDilligence 3y ago
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linusg789 3y ago
https://ghostarchive.org/archive/QKk5M https://ghostarchive.org/archive/QKk5M
deleted 3y ago
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lucasyvas 3y ago
I may be wrong, but I don't think everyone blaming corporations necessarily thinks that they are the root cause - what many do agree on is that corporations are taking advantage of the situation to make it worse. Of course, the root cause is poor monetary policy in general. That doesn't mean the actors are innocent. People are being laid off and prices are still going up - who is setting the prices? If you're jacking prices to cover sliding sales, yes, you are the problem.
- hinkley 3y ago
  In wartime it’s called profiteering and in some countries it counts as treason, which is to say it can get you hanged.
  - johngladtj 3y ago
    Being wrong in wartime doesn't make it right in peacetime. No such thing as profiteering.
    - hinkley 3y ago
      Eh, they call it, “what the market will bear” and they’re quite proud of it. It’s a lot easier to do a lot of things when you Other the people you deal with, including exploitation and especially warcrimes. They don’t talk about citizens or people, they talk about “the market”, which is barely anthropomorphic.
      - gottorf 3y ago
        It's a lot easier to criticize "the market" when you live in a system that benefits from it. Life is universally worse in places where "the market" doesn't exist or economic actors aren't allowed to profit.
        hinkley 3y ago
        I think you’re confusing “any benefit” with “net benefit”. The world, the US, and Capitalism would all survive just fine without McDonald’s, Walmart, or Oracle. In fact it would probably be better off without any of them. Global homogeneity is not awesome, it’s dystopian. Companies having less power than the 90th percentile of countries would be good. When you have a regional company you can still afford to think of your customers more or less as humans instead of statistics.
    - deleted 3y ago
      [deleted]
- toyg 3y ago
  > Of course, the root cause is poor monetary policy in general. That doesn't mean the actors are innocent. Particularly when C-level execs continue to award themselves double-digit pay-rises, then publicly cry that wages should be compressed.
- delusional 3y ago
  > the root cause is poor monetary policy in general These two things aren't even separate. Part of monetary policy is taxation and subsidies. The argument for "greedflation" is exactly one of poor monetary policy, in that we have allowed corporations (not necessarily any one person, but the corporation as a whole) to dictate too much of our monetary policy, and they're doing a poor job.
  - Treesrule14 3y ago
    At least in the US the fed has specifically had full employment as one of their goals at least for the last few years so I'm pretty skeptical of "corporations control the fed arguments" Like I agree there's a lot of regulatory capture in the US but I just don't see any reason to think the fed is responding to big business rather than their own preferences.
- Treesrule14 3y ago
  Ye olde Motte and Bailey. There are in fact people who are saying its only corporate inflation. The real reason i'm skeptical of the greed argument is that its just a vibes based guess on whats happening and not based on any data or insight into the situation.
- A4ET8a8uTh0 3y ago
  Yeah, it is a ridiculously bold to outright state it is not a factor of current inflation issues. At best you can argue that corporations 'only' further fuel it ( and take advantage in the process ), but are not primary factors for it rearing its head. Propaganda is strong, but I am starting to wonder if the powers that be learned nothing from Covid pushback to 'commute is your zen time'.
  - pauldenton 3y ago
    It's not ridiculous. Nobody has proved greed goes up and down. It can be a constant like gravity. A gas station doesn't determine its prices based on greed, otherwise we would see stations that decide to charge a hundred bucks a gallon.
- basch 3y ago
  In transportation and logistics, it turned into a bidding war, with the biggest box shops able to outbid anyone else. So rail and trucking and ships made the most profit in the history of existence by pitting everyone else against each other for a limited supply. A bit of greed inflation and a bit of how a market economy works during a shortage. Now as shipping costs have dropped, companies have not dropped their prices accordingly because they have to cover their new massive headcounts and severance.
- somenameforme 3y ago
  The problem I have with these claims are the lack of examples. Which companies would you say have been unfairly exploiting inflation to raise profits? The data is all transparent. The reason I ask is because what I keep seeing is something people reacting to things like "Company ABC's profits increased by 5%, to record breaking levels!" And in many cases that's absolutely true. But if your profits increase by 5%, and inflation increases by 9% - it means you're both (1) showing record breaking profits and (2) getting absolutely economically wrecked.
  - gjulianm 3y ago
    Just a quick example: BP almost doubled their profits in 2022 even when the price oil didn't really double with respect to 2021 prices. https://www.bp.com/en/global/corporate/news-and-insights/press-releases/fourth-quarter-2022-results.html https://www.bp.com/en/global/corporate/news-and-insights/pre... > But if your profits increase by 5%, and inflation increases by 9% One should actually look not at inflation but at the increase in costs of that company. Not all companies are equally exposed to inflation, they will suffer different price increases.
  - Sohcahtoa82 3y ago
    Maybe instead of focusing on profits we should focus on profit margins. If your profit margin is increasing, then inflation means less.
- gottorf 3y ago
  Every seller needs a buyer for a transaction to happen. For some reason, people are still happy to take 84-month notes on $80k cars instead of sticking to their older car or buying a cheaper one; same with expensive beef, which could be substituted by lentils or other cheaper sources of protein. A part, perhaps even a large part, of that "some reason" is likely the increase in money supply as well as fiscal stimulus. But consumers still share a part of the blame, if they willingly take on that transaction for non-essential goods and services. Few businesses have the pricing power to jack up their prices arbitrarily high, though there is a clear trend towards consolidation across many industries in the recent decades, and one could definitely argue that the US hasn't busted enough mergers and trusts.
- pauldenton 3y ago
  The people taking advantage of the situation to make it worse aren't the ones raising prices in the last 3 years. It's the one who pushed Covid restrictions and shutting down the world, who's repercussions we are still living with
mhitza 3y ago
https://archive.is/kuMf0 https://archive.is/kuMf0 > Last year Andrew Bailey, governor of the Bank of England, asked workers to “think and reflect” before asking for pay rises. I literally laughed out loud. Everybody should have been asking for pay raises the last two years for at least enough to cover the inflation rate.
- gdcbe 3y ago
  Makes me glad I live in a country where pay raise to match inflation (at a minimum) each year is mandatory by law. Allows us to ask for actual pay raises on top of that.
  - jsdeveloper 3y ago
    which country is that?
    - cl0ckt0wer 3y ago
      looks like Belgium, Spain, France, Cyprus, Luxembourg, Malta and Slovenia https://www.ecb.europa.eu/pub/pdf/other/mb200805_focus05.en.pdf https://www.ecb.europa.eu/pub/pdf/other/mb200805_focus05.en....
      - peter-m80 3y ago
        Definitely, not Spain
  - sib 3y ago
    That seems like an effective way of creating self-reinforcing inflation.
    - sn0wf1re 3y ago
      Only if productivity stagnates, which it hasn't been in most industries.
    - 3y ago
flangola7 3y ago
I'm sure we can trust the Economist to provide a neutral and unbiased take on this idea. /s
- Kiro 3y ago
  If you need to add /s to a comment you shouldn't post it at all. Sarcastic snark belongs on reddit.
  - flangola7 3y ago
    I will contemplate deeply on this enlightened suggestion. /s
wouldbecouldbe 3y ago
The economist is a nonsense idea. Already been shown that inflation is being abused to raise prices in many places. Now it might not have started this mess, but it's for sure keeping it going. It's the ECB itself, normally Unilever's friend, who argued such: https://www.theguardian.com/business/2023/jun/27/corporate-profits-driving-up-prices-ecb-president-christine-lagarde https://www.theguardian.com/business/2023/jun/27/corporate-p... Now fair enough, the ECB should point the finger at itself for it's monetary policy.
- lukas099 3y ago
  > inflation is being abused to raise prices Inflation is the rising of prices. If prices are rising around you, it makes sense to raise your own prices. Just like it makes sense for workers to look for raises (i.e. raise their prices).
  - wouldbecouldbe 3y ago
    Yeah if you think the stores didn't use the general price hike and took advantage of it you our pretty gullible. According to the ECB itself it was the corporates who were the main driver & cause: theguardian.com/business/2023/jun/27/corporate-profits-driving-up-prices-ecb-president-christine-lagarde
    - lukas099 3y ago
      Is it 'abusing' inflation if I ask my company for a larger raise due to inflation?
      - wouldbecouldbe 3y ago
        Yeah if its more then the inflation itself and you are doing it under the guise of inflation it's manipulative. Lots of products jumped 50% in grocery stores here, main argument was gas prices, then gas prices went down, still prices went up. And record profits as well.
alphanullmeric 3y ago
I guess the Cuban government is the greediest corporation in the world.
pydry 3y ago
This is pretty much exactly the opinion I'd expect the Economist to hold on this issue - that profit margins surging was just a coincidence. It's as unsurprising as RT's opinion on who blew up the Kakhova Dam was.
- BowBun 3y ago
  Expected when the newspaper is owned by some of the richest families on Earth. This is basically the same as a police department investigating themselves for wrongdoing.
CraigJPerry 3y ago
Under developed argument. It gets to the interesting claim: >> Though there may be examples of opportunistic or anti-competitive behaviour, the effects are unlikely to have been material. Then completely fails to substantiate. Wasn’t worth the click.
- cjf101 3y ago
  Yeah, I would have been interested in this alternative hypothesis if it had any evidence behind it. Just a lot of "trust me bro" statements which don't cut it when peoples lives/livelihoods are in the mix.
- lukas099 3y ago
  The claim is that "the alternative to letting the price mechanism bring supply and demand into line is to rely on something worse, such as rationing or queues." The way the system works is we assume a profit-maximization motive by actors, and nothing about that changed before or during the inflation, so it's obvious that something else is going on (i.e. fiscal stimulus during supply chain disruptions).
dtech 3y ago
For a counterpoint, see the Planet Money episode "Inflation and the Profit-Price Spiral" [1], where a researcher has some convincing arguments that yes, corporate decisions and profits are one of the most important drivers of the current inflation. Personally I found it much more convincing than this article. [1] https://www.youtube.com/watch?v=mu0HLfcK5hs https://www.youtube.com/watch?v=mu0HLfcK5hs
- crazygringo 3y ago
  Can you provide a summary? It's quick to skim an article for arguments, but not a video.
  - dtech 3y ago
    From memory: Products prices are determined by costs + profits. Inflation is a rise of that sum. Economists traditionally hyper-focus on costs, primarily wages, as the cause of inflation, while completely ignoring profits. The podcast features a researcher, who has received high pushback from the economics corner although recently more articles support her view somewhat, who says that her research shows corporate profits are the main driver of the 2022+ inflation, and also played a - lesser but under-highlighted - role in the past inflationary periods in the 20th century. One main reason she highlights is companies expect higher costs and raise prices, but those costs don't materialize, leading to higher profits. This also has a compounding effect throughout the supply chain because each intermediary adds an effect, resulting in a high increase at the consumer end.
    - crazygringo 3y ago
      > Products prices are determined by costs + profits. That's already backwards, though. Prices are determined by what the market will bear, according to the demand curve and what competitors are charging (which puts a ceiling on it). Then companies attempt to keep costs as low as possible, and their success or lack thereof determines their profits. (This assumes a lack of collusion over pricing -- but that's the responsibility of the government to prevent, catch, and deter through antitrust.)
hourago 3y ago
> Though there may be examples of opportunistic or anti-competitive behaviour, the effects are unlikely to have been material. So, there is prove that it is anti-competitive behavior. There is prove that all big corporations should be split in pieces. But The Economist decides to ignore that. The Economist is not that bad. At least, it presents the data. Big monopolies are the source of inflation, the lack of competition is the source of inflation. But it always falls short to get to any reasonable conclusion, and decides to ignore its own data. That's a shame.
- kbutler 3y ago
  "the effects are unlikely to have been material" "material" means "having real importance or great consequences". So the Economist is directly stating the opposite of your conclusion: the opportunistic and anti-competitive behavior, if any, is unlikely to have been a significant source of inflation.
- bobthepanda 3y ago
  The Economist makes no bones about having an angle, that’s its whole thing. When I read them I try not to get anything that wades into their very obvious lassiez-faire bias.
  - acjohnson55 3y ago
    Same. I don't read them anymore, but I used to subscribe. Much of what they do is worthwhile, but there's the occasional bad take. But same goes for New York Times, Washington Post, and Wall Street Journal.
deleted 3y ago
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voz_ 3y ago
“Why are you being so mean to us :(“ - the 2 bit useless MBAs sitting around in corporations that sponsored this weak PR piece
ivolimmen 3y ago
Economist saying that Greedflation does not exist is like the NSA saying they don't use encryption.
- dboreham 3y ago
  Some very strong Kool-Aid being consumed over there.
falcolas 3y ago
> In economics, inflation is an increase in the general price level of goods and services in an economy. ~Wikipedia If profit seeking is increasing the general price level of goods (via a “coincidentally” coordinated raising of prices), how is it not causing inflation?
- lukas099 3y ago
  The companies were always seeking maximum profit; obviously something changed since before the inflation hit.
  - falcolas 3y ago
    They discovered that they could get even more profit than they believed possible before; specifically that customers could bear even higher prices, at least in the short term. This was discovered by pandemic price increases caused by increased costs. The new plateaus have just never dropped, even as their costs have dropped.
    - lukas099 3y ago
      > This was discovered by pandemic price increases caused by increased costs. So to be clear, you agree with the article that companies increased prices in response to inflation, and therefore couldn't have been the preliminary cause of it.
      - falcolas 3y ago
        No, they raised prices because they found an opportunity for more profit that they had missed before. No other forces than greed were required.
        lukas099 3y ago
        You said that pandemic price increases were caused by increased costs.
BowBun 3y ago
A reminder that The Economist is owned by oligarchs and part of the very system it is poorly defending in this article. Look up who owns the Newspaper - as always, it's rich families like the Rothschilds, Cadburys, etc. Really stop and think, what would these families and corporations prefer? A bunch of pissed of people in the streets mad at their governments and policies? Or a bunch of people reading a news article that says your concerns are 'nonsense'?
- lukas099 3y ago
  Isn't a large newspaper always going to be owned by the rich, almost by definition? And there are a lot of progressive/liberal rich too.
  - BowBun 3y ago
    Not always, but yes, information brokers tend to consolidate wealth and power. And I made no mention of political orientation, please stop with the tired idea that this is a conservative/liberal issue. I have more in common with a redneck in Alabama than I do with Jeff Bezos. Stop falling for their traps.
    - lukas099 3y ago
      What I meant is that a lot of rich people support more re-distributive economic policies, like high marginal taxes and expansion of welfare.
      - BowBun 3y ago
        Sorry I misunderstood your point. You're right that they tend to support more socialistic policies, though I don't necessarily believe in how much they actually want these policies passed. They all greatly benefit from the status quo. In the cases of these newspapers, it's clear they're used to hold political power and push narratives. The willingness for that billionaire to take on CNN for $1 despite it losing money shows that I think.
  - 3y ago
onlyrealcuzzo 3y ago
If interest rates go down, the value of current profits increases and the value of future profits decreases. This would incentivize companies to be slightly more "greedy" if you define "greedy" by "seeking current profits". In practice, a bunch of data scientists have looked into "greedflation", and I'm not aware of anyone finding anything significant. NPR did an episode on it: https://www.npr.org/2023/06/13/1182019025/is-greedflation-really-the-villain https://www.npr.org/2023/06/13/1182019025/is-greedflation-re... If you start with the world view that companies are evil and the source of all problems, it's easy to see "greedflation" everywhere. Seek and you shall find.
scottiebarnes 3y ago
Going to be hard to convince people of this. In an efficient system, maybe we can blame monetary policy. But we don't have an efficient system; most of us live under mono/ologipolistic supermarket "regimes". They don't compete, they collude. And they're taking advantage of price volatility to gain profits.
efsavage 3y ago
It's probably not greed like in a supervillain way, it's more of the following (which I've heard almost verbatim multiple times from business owners): "Our costs have gone up 7%, so we should raise prices" "How much?" "How about 10%?" "Sounds good"
- crazygringo 3y ago
  There's nothing wrong with that because you're expecting costs to continue increasing but you might be locking in the price you charge for the next year. That's the problem with attacking inflation -- it's not about changing current conditions but about changing expectations.
  - SirMaster 3y ago
    >There's nothing wrong with that because you're expecting costs to continue increasing but you might be locking in the price you charge for the next year. Ha, if only. The company I work for has increased their prices about a 10 times in the last 2 years.
    - crazygringo 3y ago
      Then that's fantastic they've got that flexibility. But then it's probably a fair assumption they didn't increase their price by 10% each of those 10 times, unless they're in a very small subset of industries. But other companies sign one-year contracts with customers, for example. There's no need to be snarky about it.
SamPatt 3y ago
Good article. If you're old enough or know history, you've seen how artificially low interest rates cause (or at least greatly contribute to) these problems in the first place, and then somehow everyone except the central economic planners get blamed. Money should have a market price, not be manipulated by a few people in power.
adamwong246 3y ago
"Greedflation" is such an odd word. It implies that, as of late, these companies have "jacked up the prices under the cover of inflation". But since when have any of these corporate entities needed a reason to increase their prices or lower their wages? So strange that we demand a rationale when it appears to me that they are behaving as they are made to behave?
- tiborsaas 3y ago
  I think this was always true, but maybe many companies realized that they were playing it too safe and conservative with price bumps? What changed (besides a good excuse) is big data being and analytics being much easier to obtain and manage. If people can't get the same product category cheaper anywhere else and they keep buying it then of course the will raise more aggressively. I feel the market will eventually correct if "greedflation" is real. Someone must come along and say that they are happy with X% less which is theoretically possible, to capture a market more aggressively and use this narrative as a marketing tool. I know it's easier said than done when there are few players in an industry and the barrier to entry is rather high.
  - adamwong246 3y ago
    My cynical take is that, in this market, "human work" is cheaper than the cost of "human living". There's no real malice, just supply and demand. We've automated all our labor but we expect our workers to be ever more productive. Of course that can't be sustained, eventually the average value produced by a worker exceeds their cost of living. And then... IDK what happens next.
- MattPalmer1086 3y ago
  If one company unilaterally increase their prices in a stable environment they will probably lose market share to their competitors. I guess that when prices are rising sharply anyway, it's easier to raise them and it won't be noticed so much. And their competitors probably make the same calculation. At least, that's what I understand by it.
gjulianm 3y ago
At no point does this article argue the idea that corporate profit increases are a significant driver of inflation. It's just whataboutism: "but governments did X!" "but consumers did Y!" The thesis that "shortages create higher profits" is also not proven at all. Yes, in a shortage prices get higher, but at the same time there's less sales. Not to mention that downstream business also suffer from higher prices. In the end this article comes from a place of treating capitalism as a machine that should be left untouched. Governments, consumers and workers must behave and fall in line, but God forbid questioning who's taking home the money that's mobilized to compensate for certain issues (COVID, war) and what could be done to stop that. Apparently it's never the fault of companies, as if they were some natural phenomenon whose behavior can't be changed.
pdntspa 3y ago
The S&P is at the highest it's been in a long time, and approaching an all-time-high, yet > where corporate profits are falling Bull-fucking-shit
AndrewKemendo 3y ago
How someone can look at that graph and say that greedflation is nonsense is absurd. Look at the growth in margins from 2019-today and tell me that margin growth isn’t egregious. Forget rate changes…look at the base numbers - 15% average profit is usury by most definitions (the US financial system even got a legal carve out for credit cards to be egregiously usurious) This author wants us to ignore the last 5 years of greed fueled inflation - which used debt to drive margins up - coming due now.
- NBJack 3y ago
  https://www.pbs.org/newshour/show/oil-companies-post-massive-profits-as-consumers-feel-squeeze-from-high-gas-prices https://www.pbs.org/newshour/show/oil-companies-post-massive... An example from site itself: https://fortune.com/2022/03/31/us-companies-record-profits-2021-price-hikes-inflation/ https://fortune.com/2022/03/31/us-companies-record-profits-2... It's absurd.
  - gottorf 3y ago
    What's absurd is the notion that profit is evil, or that there is some set amount of profit above which it is evil. Before its blowout result in 2022, Exxon Mobil (the first company the PBS article points a finger at) lost $20b in one quarter back in 2020[0], more than its net income in any single quarter since then. Should companies not be allowed to lose money, either, then? [0]: https://www.macrotrends.net/stocks/charts/XOM/exxon/net-income https://www.macrotrends.net/stocks/charts/XOM/exxon/net-inco...
    - BaseballPhysics 3y ago
      > What's absurd is the notion that profit is evil, or that there is some set amount of profit above which it is evil. The term "price gouging" exists because we collectively agree that, at a certain point, yes, excessive profits are indicative of abuse. This isn't even controversial. The most extreme libertarian economist would agree that, for example, market failures like monopolies can create circumstances where excess profits become egregious. And we know from history that widespread crises can lead to market conditions that result in excess profits. > Should companies not be allowed to lose money, either, then? And this is a silly strawman that isn't worth responding to.
marwatk 3y ago
> Regardless, the fact that companies raise their prices in response to shortages is not only defensible but desirable. Gouging is good. I'm sure they'll be lowered again when supply stabilizes. Any time now.
a-dub 3y ago
kinda hard to square with oil companies pulling record _profits_ in the wake of oil shortages due to turmoil in eastern europe and well, how those high energy prices drove a ton of cpi inflation. you can't blame it on labor or desirable price based rationing when it all ends up in the profit column.
NBJack 3y ago
And whom is responsible by and large for working hard to influence those laws? It's a bit like saying it isn't Intuit's fault for how crazy it is to file taxes in the U.S., as it's all coming from lawmaker policy. The problem is, Intuit has been working hard to influence said laws in their favor for decades; they are very much responsible for why taxes there are still a quagmire of forms and rules. This is a wonderful fluff piece that appears to work hard to redirect blame in a different direction. > Regardless, the fact that companies raise their prices in response to shortages is not only defensible but desirable. It's not necessarily the demand driven increase that pisses people off. It's when that price becomes the new normal afterwards that becomes the problem. Three guesses as to why it stays there.
AbrahamParangi 3y ago
I think stuff like this is a symptom of our current era of hyper-partisanship. With no real debate, the bad ideas of each side fester, unchallenged.
fuoqi 3y ago
I find it really funny how people blame corporation's "greed" for the high inflation. It's literally raison d'être of for-profit organizations to squeeze as much profits as they can in existing market and regulatory conditions. The main reasons why corporations get away with "unfair" margins are: 1) Broken anti-trust regulations. 2) Irresponsible fiscal policy effectively monetized by money printing. 3) Ability of corporations and most wealthiest people to ~bribe~ lobby politicians so 2 would benefit mostly them. To summarize: the root issue is with the government and the political environment which has created it and allowed its short-sighted and irresponsible actions.
- deciplex 3y ago
  Indeed. Perhaps the profit motive has run its course as the primary driver of all economic activity.
- pixelatedindex 3y ago
  Totally natural. In a capitalist society, money is consent. I don’t like it, but that’s how this society is setup.
- quantified 3y ago
  Depends on the system you're in. Many companies could charge more than they do but don't. In the US we have the infamous Supreme Court ruling that the sole purpose of a company is to draw profit. No quibble here with your summary.
- ryandrake 3y ago
  Companies exist and are allowed to operate only because the people (voters who vote for the government, who in turn issue business licenses and corporate charters) allow them to. It's about time that the people wake up and remember they permit companies to operate, and they can and should revoke that permission if the company is serving only itself and it's shareholders.
hyperion2010 3y ago
A third possibility. Prices could also go up if there is lack of competition, implying a lack of proper regulatory oversight.
synetic 3y ago
Couldn’t read the whole article but in the beginning they write: The imf has found that higher profits “account for almost half the increase” in the euro zone’s inflation… It sounds like it’s a legitimate idea. Do they disprove the IMF finding? With the rise of oligopolies it seems to me that pricing power isn’t subject to downward pressures one would normally expect in a market with healthy competition.
__MatrixMan__ 3y ago
> Inflation is high, and the search is on for the culprit. Is it really that hard? Faith in our system's ability to produce desirable results is waning (greed may be among the reasons, poor leadership during the worst parts of the pandemic may also be). That makes money feel more fictional than usual, which means it's worth less. Turns out people don't put as much energy into playing games that they think are meaningless.
mabbo 3y ago
A simpler explanation of 'greedflation' is simply that the lack of actual competition by market leaders in most consumer goods markets has lead to massive profits and higher prices, without increased wages. "Greed, for lack of a better word, is good" - a fantastic quote from a fun movie, but it can in fact be true too. If we use greed as a means to drive competitors in a market, competing against each other, resulting in them creatively undercutting one another, driving down prices so that they can sell the most, then the consumer wins out. But that isn't happening anymore. The largest corporations in each market have gained dominance through mergers, acquisitions, etc. They can reduce their own costs because of their massive scale, more than anyone newcomer can. The result is less and less competition for even basic things like groceries. Here in Canada, there are dozens of different grocery store brands- and they're all owned by 3 companies, giving the illusion of choice. If there were lots of competing retailers for common goods, they'd also be competing for labour, offering better salaries and benefits to their employees, which would help alleviate the cost of living crisis we're in now. But that isn't happening either, again because there's fewer and fewer companies to work for. All the while, the leaders of the world's large corporations are taking hundreds of millions of dollars in salaries, and giving their shareholders billions in profits. "You don't need a formal conspiracy when interests converge. These people went to the same universities and fraternities. They're on the same boards of directors. They go to the same country clubs. They have like interests. They don't need to call a meeting. They know what's good for them." - George Carlin[0] When you have a situation like this, it is, in my view, the role of government to step in and break up these companies. [0]https://www.youtube.com/watch?v=VAFd4FdbJxs https://www.youtube.com/watch?v=VAFd4FdbJxs
- lukas099 3y ago
  The problem with using government to break up companies is regulatory capture (https://en.wikipedia.org/wiki/Regulatory_capture https://en.wikipedia.org/wiki/Regulatory_capture). Companies have the interest and resources to influence the very government agencies that are meant to regulate them. They use these influences to steer the regulatory environment to prevent newcomers in the industry.
- pauldenton 3y ago
  The solutions aren't popular. As a Canadian I do a lot of shopping at Walmart because they have a different supply chain than the Metro, Loblaws No Frills Freshco class of stores. More international brands less local jobs is not a winning politicla slogan
renewiltord 3y ago
If greed is the primary mechanism for increased costs, then why do costs ever go down? It seems unlikely that someone gets less greedy. Is that the posited framework? Frameworks which cannot predict the future well are not very useful. For instance, did we envision Jeff Bezos suddenly found Jesus on this day? https://aws.amazon.com/blogs/aws/amazon-s3-glacier-price-reduction/ https://aws.amazon.com/blogs/aws/amazon-s3-glacier-price-red... The thing that gets me is that this is such an obviously bad model (that market prices vary based on participant greed variation) and I would expect people in tech to want a better explanatory mechanism and yet it is madly popular here. Really makes me question a lot of the other predictions and modeling in this community.
- hollerith 3y ago
  >If greed is the primary mechanism for increased costs, then why do costs ever go down? Greedy people lose their influence and ability to call the shots as a result of popular outrage, which in turn is a result of comments on HN and other forums complaining about greed :)
  - renewiltord 3y ago
    That's actually already a better framework because it now explains price variation not with greed but with political and market dynamics. You posit some greedy people and posit that whether price goes up or down is no longer due to their greed but due to their market power. It is better because it is falsifiable. I think if you took this pattern of modeling and used a modern LLM as a Socratic teacher you would rederive a model of pricing that is more closely aligned with reality. Ultimately, this is all very well-trod ground coming from the tradition of Popper and friends.
    - hollerith 3y ago
      I was being sarcastic.
      - renewiltord 3y ago
reedf1 3y ago
This all makes a lot more sense when you view companies as dumb profit optimisers. "Greed" implies malice aforethought, but these things just make paperclips. They'll charge as much as they can get away with, and hopefully that leads to good outcomes through "market forces" or whatever.
rfwhyte 3y ago
In other news "Face Eating Leopard" magazine says leopards eating people's faces isn't that big a deal after all.
lukas099 3y ago
It's funny; on my Facebook news feed's comments you'd get the impression that The Economist is some kind of far-left progressive newspaper. Here you get the impression that it's some kind of Ronald Reagan-Jeff Bezos love child. I guess this is what happens when you are a centrist publication in 2023.
Geee 3y ago
It's weird that many people (even some economists) think that inflation somehow overrides the free price system [0] or the price mechanism [1]. No it's doesn't. There are no "inflation spirals" or other weird things whatsoever. Spiral (or run-away inflation) would suggest an accelerating curve, while the price mechanism is actually closer to logarithmic, i.e. it starts fast, slows down and converges around the new equilibrium. It's basically a decentralized optimization algorithm. [0] https://en.wikipedia.org/wiki/Free_price_system https://en.wikipedia.org/wiki/Free_price_system [1] https://en.wikipedia.org/wiki/Price_mechanism https://en.wikipedia.org/wiki/Price_mechanism
1letterunixname 3y ago
Sorry Economist propagandists, 60% of recent inflation is a direct result of excessive profits caused by raising prices to soak consumers for no reason other than greed. https://www.forbes.com/sites/errolschweizer/2022/09/12/how-profit-inflation-made-your-groceries-so-damn-expensive/ https://www.forbes.com/sites/errolschweizer/2022/09/12/how-p... https://www.npr.org/2023/05/19/1177180972/economists-are-reconsidering-how-much-corporate-profits-drive-inflation https://www.npr.org/2023/05/19/1177180972/economists-are-rec...
ofcourseyoudo 3y ago
This is like half of an article, because of course, everyone recognizes that companies charge more when supply-chains and other things are screwed up. But many of those costs have dropped, some to pre-pandemic levels or even lower, but the consumer prices have not dropped to match, and profits are growing. https://www.cnbc.com/2022/05/18/wingstop-is-seeing-meaningful-deflation-in-chicken-wings-ceo-says.html https://www.cnbc.com/2022/05/18/wingstop-is-seeing-meaningfu... Wingstop raised prices of wings during lockdown (even switching to being "Thighstop" for a while). Now prices are back down to earth, but they haven't modified their prices to match.

43 points by edward 3y ago

draw_down 3y ago

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DueDilligence 3y ago

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linusg789 3y ago

https://ghostarchive.org/archive/QKk5M https://ghostarchive.org/archive/QKk5M

deleted 3y ago

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lucasyvas 3y ago

I may be wrong, but I don't think everyone blaming corporations necessarily thinks that they are the root cause - what many do agree on is that corporations are taking advantage of the situation to make it worse. Of course, the root cause is poor monetary policy in general. That doesn't mean the actors are innocent. People are being laid off and prices are still going up - who is setting the prices? If you're jacking prices to cover sliding sales, yes, you are the problem.

hinkley 3y ago
In wartime it’s called profiteering and in some countries it counts as treason, which is to say it can get you hanged.
- johngladtj 3y ago
  Being wrong in wartime doesn't make it right in peacetime. No such thing as profiteering.
  - hinkley 3y ago
    Eh, they call it, “what the market will bear” and they’re quite proud of it. It’s a lot easier to do a lot of things when you Other the people you deal with, including exploitation and especially warcrimes. They don’t talk about citizens or people, they talk about “the market”, which is barely anthropomorphic.
    - gottorf 3y ago
      It's a lot easier to criticize "the market" when you live in a system that benefits from it. Life is universally worse in places where "the market" doesn't exist or economic actors aren't allowed to profit.
      - hinkley 3y ago
        I think you’re confusing “any benefit” with “net benefit”. The world, the US, and Capitalism would all survive just fine without McDonald’s, Walmart, or Oracle. In fact it would probably be better off without any of them. Global homogeneity is not awesome, it’s dystopian. Companies having less power than the 90th percentile of countries would be good. When you have a regional company you can still afford to think of your customers more or less as humans instead of statistics.
  - deleted 3y ago
    [deleted]
toyg 3y ago
> Of course, the root cause is poor monetary policy in general. That doesn't mean the actors are innocent. Particularly when C-level execs continue to award themselves double-digit pay-rises, then publicly cry that wages should be compressed.
delusional 3y ago
> the root cause is poor monetary policy in general These two things aren't even separate. Part of monetary policy is taxation and subsidies. The argument for "greedflation" is exactly one of poor monetary policy, in that we have allowed corporations (not necessarily any one person, but the corporation as a whole) to dictate too much of our monetary policy, and they're doing a poor job.
- Treesrule14 3y ago
  At least in the US the fed has specifically had full employment as one of their goals at least for the last few years so I'm pretty skeptical of "corporations control the fed arguments" Like I agree there's a lot of regulatory capture in the US but I just don't see any reason to think the fed is responding to big business rather than their own preferences.
Treesrule14 3y ago
Ye olde Motte and Bailey. There are in fact people who are saying its only corporate inflation. The real reason i'm skeptical of the greed argument is that its just a vibes based guess on whats happening and not based on any data or insight into the situation.
A4ET8a8uTh0 3y ago
Yeah, it is a ridiculously bold to outright state it is not a factor of current inflation issues. At best you can argue that corporations 'only' further fuel it ( and take advantage in the process ), but are not primary factors for it rearing its head. Propaganda is strong, but I am starting to wonder if the powers that be learned nothing from Covid pushback to 'commute is your zen time'.
- pauldenton 3y ago
  It's not ridiculous. Nobody has proved greed goes up and down. It can be a constant like gravity. A gas station doesn't determine its prices based on greed, otherwise we would see stations that decide to charge a hundred bucks a gallon.
basch 3y ago
In transportation and logistics, it turned into a bidding war, with the biggest box shops able to outbid anyone else. So rail and trucking and ships made the most profit in the history of existence by pitting everyone else against each other for a limited supply. A bit of greed inflation and a bit of how a market economy works during a shortage. Now as shipping costs have dropped, companies have not dropped their prices accordingly because they have to cover their new massive headcounts and severance.
somenameforme 3y ago
The problem I have with these claims are the lack of examples. Which companies would you say have been unfairly exploiting inflation to raise profits? The data is all transparent. The reason I ask is because what I keep seeing is something people reacting to things like "Company ABC's profits increased by 5%, to record breaking levels!" And in many cases that's absolutely true. But if your profits increase by 5%, and inflation increases by 9% - it means you're both (1) showing record breaking profits and (2) getting absolutely economically wrecked.
- gjulianm 3y ago
  Just a quick example: BP almost doubled their profits in 2022 even when the price oil didn't really double with respect to 2021 prices. https://www.bp.com/en/global/corporate/news-and-insights/press-releases/fourth-quarter-2022-results.html https://www.bp.com/en/global/corporate/news-and-insights/pre... > But if your profits increase by 5%, and inflation increases by 9% One should actually look not at inflation but at the increase in costs of that company. Not all companies are equally exposed to inflation, they will suffer different price increases.
- Sohcahtoa82 3y ago
  Maybe instead of focusing on profits we should focus on profit margins. If your profit margin is increasing, then inflation means less.
gottorf 3y ago
Every seller needs a buyer for a transaction to happen. For some reason, people are still happy to take 84-month notes on $80k cars instead of sticking to their older car or buying a cheaper one; same with expensive beef, which could be substituted by lentils or other cheaper sources of protein. A part, perhaps even a large part, of that "some reason" is likely the increase in money supply as well as fiscal stimulus. But consumers still share a part of the blame, if they willingly take on that transaction for non-essential goods and services. Few businesses have the pricing power to jack up their prices arbitrarily high, though there is a clear trend towards consolidation across many industries in the recent decades, and one could definitely argue that the US hasn't busted enough mergers and trusts.
pauldenton 3y ago
The people taking advantage of the situation to make it worse aren't the ones raising prices in the last 3 years. It's the one who pushed Covid restrictions and shutting down the world, who's repercussions we are still living with

mhitza 3y ago

https://archive.is/kuMf0 https://archive.is/kuMf0 > Last year Andrew Bailey, governor of the Bank of England, asked workers to “think and reflect” before asking for pay rises. I literally laughed out loud. Everybody should have been asking for pay raises the last two years for at least enough to cover the inflation rate.

gdcbe 3y ago
Makes me glad I live in a country where pay raise to match inflation (at a minimum) each year is mandatory by law. Allows us to ask for actual pay raises on top of that.
- jsdeveloper 3y ago
  which country is that?
  - cl0ckt0wer 3y ago
    looks like Belgium, Spain, France, Cyprus, Luxembourg, Malta and Slovenia https://www.ecb.europa.eu/pub/pdf/other/mb200805_focus05.en.pdf https://www.ecb.europa.eu/pub/pdf/other/mb200805_focus05.en....
    - peter-m80 3y ago
      Definitely, not Spain
- sib 3y ago
  That seems like an effective way of creating self-reinforcing inflation.
  - sn0wf1re 3y ago
    Only if productivity stagnates, which it hasn't been in most industries.
  - 3y ago

flangola7 3y ago

I'm sure we can trust the Economist to provide a neutral and unbiased take on this idea. /s

Kiro 3y ago
If you need to add /s to a comment you shouldn't post it at all. Sarcastic snark belongs on reddit.
- flangola7 3y ago
  I will contemplate deeply on this enlightened suggestion. /s

wouldbecouldbe 3y ago

The economist is a nonsense idea. Already been shown that inflation is being abused to raise prices in many places. Now it might not have started this mess, but it's for sure keeping it going. It's the ECB itself, normally Unilever's friend, who argued such: https://www.theguardian.com/business/2023/jun/27/corporate-profits-driving-up-prices-ecb-president-christine-lagarde https://www.theguardian.com/business/2023/jun/27/corporate-p... Now fair enough, the ECB should point the finger at itself for it's monetary policy.

lukas099 3y ago
> inflation is being abused to raise prices Inflation is the rising of prices. If prices are rising around you, it makes sense to raise your own prices. Just like it makes sense for workers to look for raises (i.e. raise their prices).
- wouldbecouldbe 3y ago
  Yeah if you think the stores didn't use the general price hike and took advantage of it you our pretty gullible. According to the ECB itself it was the corporates who were the main driver & cause: theguardian.com/business/2023/jun/27/corporate-profits-driving-up-prices-ecb-president-christine-lagarde
  - lukas099 3y ago
    Is it 'abusing' inflation if I ask my company for a larger raise due to inflation?
    - wouldbecouldbe 3y ago
      Yeah if its more then the inflation itself and you are doing it under the guise of inflation it's manipulative. Lots of products jumped 50% in grocery stores here, main argument was gas prices, then gas prices went down, still prices went up. And record profits as well.

alphanullmeric 3y ago

I guess the Cuban government is the greediest corporation in the world.

pydry 3y ago

This is pretty much exactly the opinion I'd expect the Economist to hold on this issue - that profit margins surging was just a coincidence. It's as unsurprising as RT's opinion on who blew up the Kakhova Dam was.

BowBun 3y ago
Expected when the newspaper is owned by some of the richest families on Earth. This is basically the same as a police department investigating themselves for wrongdoing.

CraigJPerry 3y ago

Under developed argument. It gets to the interesting claim: >> Though there may be examples of opportunistic or anti-competitive behaviour, the effects are unlikely to have been material. Then completely fails to substantiate. Wasn’t worth the click.

cjf101 3y ago
Yeah, I would have been interested in this alternative hypothesis if it had any evidence behind it. Just a lot of "trust me bro" statements which don't cut it when peoples lives/livelihoods are in the mix.
lukas099 3y ago
The claim is that "the alternative to letting the price mechanism bring supply and demand into line is to rely on something worse, such as rationing or queues." The way the system works is we assume a profit-maximization motive by actors, and nothing about that changed before or during the inflation, so it's obvious that something else is going on (i.e. fiscal stimulus during supply chain disruptions).

dtech 3y ago

For a counterpoint, see the Planet Money episode "Inflation and the Profit-Price Spiral" [1], where a researcher has some convincing arguments that yes, corporate decisions and profits are one of the most important drivers of the current inflation. Personally I found it much more convincing than this article. [1] https://www.youtube.com/watch?v=mu0HLfcK5hs https://www.youtube.com/watch?v=mu0HLfcK5hs

crazygringo 3y ago
Can you provide a summary? It's quick to skim an article for arguments, but not a video.
- dtech 3y ago
  From memory: Products prices are determined by costs + profits. Inflation is a rise of that sum. Economists traditionally hyper-focus on costs, primarily wages, as the cause of inflation, while completely ignoring profits. The podcast features a researcher, who has received high pushback from the economics corner although recently more articles support her view somewhat, who says that her research shows corporate profits are the main driver of the 2022+ inflation, and also played a - lesser but under-highlighted - role in the past inflationary periods in the 20th century. One main reason she highlights is companies expect higher costs and raise prices, but those costs don't materialize, leading to higher profits. This also has a compounding effect throughout the supply chain because each intermediary adds an effect, resulting in a high increase at the consumer end.
  - crazygringo 3y ago
    > Products prices are determined by costs + profits. That's already backwards, though. Prices are determined by what the market will bear, according to the demand curve and what competitors are charging (which puts a ceiling on it). Then companies attempt to keep costs as low as possible, and their success or lack thereof determines their profits. (This assumes a lack of collusion over pricing -- but that's the responsibility of the government to prevent, catch, and deter through antitrust.)

hourago 3y ago

> Though there may be examples of opportunistic or anti-competitive behaviour, the effects are unlikely to have been material. So, there is prove that it is anti-competitive behavior. There is prove that all big corporations should be split in pieces. But The Economist decides to ignore that. The Economist is not that bad. At least, it presents the data. Big monopolies are the source of inflation, the lack of competition is the source of inflation. But it always falls short to get to any reasonable conclusion, and decides to ignore its own data. That's a shame.

kbutler 3y ago
"the effects are unlikely to have been material" "material" means "having real importance or great consequences". So the Economist is directly stating the opposite of your conclusion: the opportunistic and anti-competitive behavior, if any, is unlikely to have been a significant source of inflation.
bobthepanda 3y ago
The Economist makes no bones about having an angle, that’s its whole thing. When I read them I try not to get anything that wades into their very obvious lassiez-faire bias.
- acjohnson55 3y ago
  Same. I don't read them anymore, but I used to subscribe. Much of what they do is worthwhile, but there's the occasional bad take. But same goes for New York Times, Washington Post, and Wall Street Journal.

deleted 3y ago

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voz_ 3y ago

“Why are you being so mean to us :(“ - the 2 bit useless MBAs sitting around in corporations that sponsored this weak PR piece

ivolimmen 3y ago

Economist saying that Greedflation does not exist is like the NSA saying they don't use encryption.

dboreham 3y ago
Some very strong Kool-Aid being consumed over there.

falcolas 3y ago

> In economics, inflation is an increase in the general price level of goods and services in an economy. ~Wikipedia If profit seeking is increasing the general price level of goods (via a “coincidentally” coordinated raising of prices), how is it not causing inflation?

lukas099 3y ago
The companies were always seeking maximum profit; obviously something changed since before the inflation hit.
- falcolas 3y ago
  They discovered that they could get even more profit than they believed possible before; specifically that customers could bear even higher prices, at least in the short term. This was discovered by pandemic price increases caused by increased costs. The new plateaus have just never dropped, even as their costs have dropped.
  - lukas099 3y ago
    > This was discovered by pandemic price increases caused by increased costs. So to be clear, you agree with the article that companies increased prices in response to inflation, and therefore couldn't have been the preliminary cause of it.
    - falcolas 3y ago
      No, they raised prices because they found an opportunity for more profit that they had missed before. No other forces than greed were required.
      - lukas099 3y ago
        You said that pandemic price increases were caused by increased costs.

BowBun 3y ago

A reminder that The Economist is owned by oligarchs and part of the very system it is poorly defending in this article. Look up who owns the Newspaper - as always, it's rich families like the Rothschilds, Cadburys, etc. Really stop and think, what would these families and corporations prefer? A bunch of pissed of people in the streets mad at their governments and policies? Or a bunch of people reading a news article that says your concerns are 'nonsense'?

lukas099 3y ago
Isn't a large newspaper always going to be owned by the rich, almost by definition? And there are a lot of progressive/liberal rich too.
- BowBun 3y ago
  Not always, but yes, information brokers tend to consolidate wealth and power. And I made no mention of political orientation, please stop with the tired idea that this is a conservative/liberal issue. I have more in common with a redneck in Alabama than I do with Jeff Bezos. Stop falling for their traps.
  - lukas099 3y ago
    What I meant is that a lot of rich people support more re-distributive economic policies, like high marginal taxes and expansion of welfare.
    - BowBun 3y ago
      Sorry I misunderstood your point. You're right that they tend to support more socialistic policies, though I don't necessarily believe in how much they actually want these policies passed. They all greatly benefit from the status quo. In the cases of these newspapers, it's clear they're used to hold political power and push narratives. The willingness for that billionaire to take on CNN for $1 despite it losing money shows that I think.
- 3y ago

onlyrealcuzzo 3y ago

If interest rates go down, the value of current profits increases and the value of future profits decreases. This would incentivize companies to be slightly more "greedy" if you define "greedy" by "seeking current profits". In practice, a bunch of data scientists have looked into "greedflation", and I'm not aware of anyone finding anything significant. NPR did an episode on it: https://www.npr.org/2023/06/13/1182019025/is-greedflation-really-the-villain https://www.npr.org/2023/06/13/1182019025/is-greedflation-re... If you start with the world view that companies are evil and the source of all problems, it's easy to see "greedflation" everywhere. Seek and you shall find.

scottiebarnes 3y ago

Going to be hard to convince people of this. In an efficient system, maybe we can blame monetary policy. But we don't have an efficient system; most of us live under mono/ologipolistic supermarket "regimes". They don't compete, they collude. And they're taking advantage of price volatility to gain profits.

efsavage 3y ago

It's probably not greed like in a supervillain way, it's more of the following (which I've heard almost verbatim multiple times from business owners): "Our costs have gone up 7%, so we should raise prices" "How much?" "How about 10%?" "Sounds good"

crazygringo 3y ago
There's nothing wrong with that because you're expecting costs to continue increasing but you might be locking in the price you charge for the next year. That's the problem with attacking inflation -- it's not about changing current conditions but about changing expectations.
- SirMaster 3y ago
  >There's nothing wrong with that because you're expecting costs to continue increasing but you might be locking in the price you charge for the next year. Ha, if only. The company I work for has increased their prices about a 10 times in the last 2 years.
  - crazygringo 3y ago
    Then that's fantastic they've got that flexibility. But then it's probably a fair assumption they didn't increase their price by 10% each of those 10 times, unless they're in a very small subset of industries. But other companies sign one-year contracts with customers, for example. There's no need to be snarky about it.

SamPatt 3y ago

Good article. If you're old enough or know history, you've seen how artificially low interest rates cause (or at least greatly contribute to) these problems in the first place, and then somehow everyone except the central economic planners get blamed. Money should have a market price, not be manipulated by a few people in power.

adamwong246 3y ago

"Greedflation" is such an odd word. It implies that, as of late, these companies have "jacked up the prices under the cover of inflation". But since when have any of these corporate entities needed a reason to increase their prices or lower their wages? So strange that we demand a rationale when it appears to me that they are behaving as they are made to behave?

tiborsaas 3y ago
I think this was always true, but maybe many companies realized that they were playing it too safe and conservative with price bumps? What changed (besides a good excuse) is big data being and analytics being much easier to obtain and manage. If people can't get the same product category cheaper anywhere else and they keep buying it then of course the will raise more aggressively. I feel the market will eventually correct if "greedflation" is real. Someone must come along and say that they are happy with X% less which is theoretically possible, to capture a market more aggressively and use this narrative as a marketing tool. I know it's easier said than done when there are few players in an industry and the barrier to entry is rather high.
- adamwong246 3y ago
  My cynical take is that, in this market, "human work" is cheaper than the cost of "human living". There's no real malice, just supply and demand. We've automated all our labor but we expect our workers to be ever more productive. Of course that can't be sustained, eventually the average value produced by a worker exceeds their cost of living. And then... IDK what happens next.
MattPalmer1086 3y ago
If one company unilaterally increase their prices in a stable environment they will probably lose market share to their competitors. I guess that when prices are rising sharply anyway, it's easier to raise them and it won't be noticed so much. And their competitors probably make the same calculation. At least, that's what I understand by it.

gjulianm 3y ago

At no point does this article argue the idea that corporate profit increases are a significant driver of inflation. It's just whataboutism: "but governments did X!" "but consumers did Y!" The thesis that "shortages create higher profits" is also not proven at all. Yes, in a shortage prices get higher, but at the same time there's less sales. Not to mention that downstream business also suffer from higher prices. In the end this article comes from a place of treating capitalism as a machine that should be left untouched. Governments, consumers and workers must behave and fall in line, but God forbid questioning who's taking home the money that's mobilized to compensate for certain issues (COVID, war) and what could be done to stop that. Apparently it's never the fault of companies, as if they were some natural phenomenon whose behavior can't be changed.

pdntspa 3y ago

The S&P is at the highest it's been in a long time, and approaching an all-time-high, yet > where corporate profits are falling Bull-fucking-shit

AndrewKemendo 3y ago

How someone can look at that graph and say that greedflation is nonsense is absurd. Look at the growth in margins from 2019-today and tell me that margin growth isn’t egregious. Forget rate changes…look at the base numbers - 15% average profit is usury by most definitions (the US financial system even got a legal carve out for credit cards to be egregiously usurious) This author wants us to ignore the last 5 years of greed fueled inflation - which used debt to drive margins up - coming due now.

NBJack 3y ago
https://www.pbs.org/newshour/show/oil-companies-post-massive-profits-as-consumers-feel-squeeze-from-high-gas-prices https://www.pbs.org/newshour/show/oil-companies-post-massive... An example from site itself: https://fortune.com/2022/03/31/us-companies-record-profits-2021-price-hikes-inflation/ https://fortune.com/2022/03/31/us-companies-record-profits-2... It's absurd.
- gottorf 3y ago
  What's absurd is the notion that profit is evil, or that there is some set amount of profit above which it is evil. Before its blowout result in 2022, Exxon Mobil (the first company the PBS article points a finger at) lost $20b in one quarter back in 2020[0], more than its net income in any single quarter since then. Should companies not be allowed to lose money, either, then? [0]: https://www.macrotrends.net/stocks/charts/XOM/exxon/net-income https://www.macrotrends.net/stocks/charts/XOM/exxon/net-inco...
  - BaseballPhysics 3y ago
    > What's absurd is the notion that profit is evil, or that there is some set amount of profit above which it is evil. The term "price gouging" exists because we collectively agree that, at a certain point, yes, excessive profits are indicative of abuse. This isn't even controversial. The most extreme libertarian economist would agree that, for example, market failures like monopolies can create circumstances where excess profits become egregious. And we know from history that widespread crises can lead to market conditions that result in excess profits. > Should companies not be allowed to lose money, either, then? And this is a silly strawman that isn't worth responding to.

marwatk 3y ago

> Regardless, the fact that companies raise their prices in response to shortages is not only defensible but desirable. Gouging is good. I'm sure they'll be lowered again when supply stabilizes. Any time now.

a-dub 3y ago

kinda hard to square with oil companies pulling record _profits_ in the wake of oil shortages due to turmoil in eastern europe and well, how those high energy prices drove a ton of cpi inflation. you can't blame it on labor or desirable price based rationing when it all ends up in the profit column.

NBJack 3y ago

And whom is responsible by and large for working hard to influence those laws? It's a bit like saying it isn't Intuit's fault for how crazy it is to file taxes in the U.S., as it's all coming from lawmaker policy. The problem is, Intuit has been working hard to influence said laws in their favor for decades; they are very much responsible for why taxes there are still a quagmire of forms and rules. This is a wonderful fluff piece that appears to work hard to redirect blame in a different direction. > Regardless, the fact that companies raise their prices in response to shortages is not only defensible but desirable. It's not necessarily the demand driven increase that pisses people off. It's when that price becomes the new normal afterwards that becomes the problem. Three guesses as to why it stays there.

AbrahamParangi 3y ago

I think stuff like this is a symptom of our current era of hyper-partisanship. With no real debate, the bad ideas of each side fester, unchallenged.

fuoqi 3y ago

I find it really funny how people blame corporation's "greed" for the high inflation. It's literally raison d'être of for-profit organizations to squeeze as much profits as they can in existing market and regulatory conditions. The main reasons why corporations get away with "unfair" margins are: 1) Broken anti-trust regulations. 2) Irresponsible fiscal policy effectively monetized by money printing. 3) Ability of corporations and most wealthiest people to ~bribe~ lobby politicians so 2 would benefit mostly them. To summarize: the root issue is with the government and the political environment which has created it and allowed its short-sighted and irresponsible actions.

deciplex 3y ago
Indeed. Perhaps the profit motive has run its course as the primary driver of all economic activity.
pixelatedindex 3y ago
Totally natural. In a capitalist society, money is consent. I don’t like it, but that’s how this society is setup.
quantified 3y ago
Depends on the system you're in. Many companies could charge more than they do but don't. In the US we have the infamous Supreme Court ruling that the sole purpose of a company is to draw profit. No quibble here with your summary.
ryandrake 3y ago
Companies exist and are allowed to operate only because the people (voters who vote for the government, who in turn issue business licenses and corporate charters) allow them to. It's about time that the people wake up and remember they permit companies to operate, and they can and should revoke that permission if the company is serving only itself and it's shareholders.

hyperion2010 3y ago

A third possibility. Prices could also go up if there is lack of competition, implying a lack of proper regulatory oversight.

synetic 3y ago

Couldn’t read the whole article but in the beginning they write: The imf has found that higher profits “account for almost half the increase” in the euro zone’s inflation… It sounds like it’s a legitimate idea. Do they disprove the IMF finding? With the rise of oligopolies it seems to me that pricing power isn’t subject to downward pressures one would normally expect in a market with healthy competition.

__MatrixMan__ 3y ago

> Inflation is high, and the search is on for the culprit. Is it really that hard? Faith in our system's ability to produce desirable results is waning (greed may be among the reasons, poor leadership during the worst parts of the pandemic may also be). That makes money feel more fictional than usual, which means it's worth less. Turns out people don't put as much energy into playing games that they think are meaningless.

mabbo 3y ago

A simpler explanation of 'greedflation' is simply that the lack of actual competition by market leaders in most consumer goods markets has lead to massive profits and higher prices, without increased wages. "Greed, for lack of a better word, is good" - a fantastic quote from a fun movie, but it can in fact be true too. If we use greed as a means to drive competitors in a market, competing against each other, resulting in them creatively undercutting one another, driving down prices so that they can sell the most, then the consumer wins out. But that isn't happening anymore. The largest corporations in each market have gained dominance through mergers, acquisitions, etc. They can reduce their own costs because of their massive scale, more than anyone newcomer can. The result is less and less competition for even basic things like groceries. Here in Canada, there are dozens of different grocery store brands- and they're all owned by 3 companies, giving the illusion of choice. If there were lots of competing retailers for common goods, they'd also be competing for labour, offering better salaries and benefits to their employees, which would help alleviate the cost of living crisis we're in now. But that isn't happening either, again because there's fewer and fewer companies to work for. All the while, the leaders of the world's large corporations are taking hundreds of millions of dollars in salaries, and giving their shareholders billions in profits. "You don't need a formal conspiracy when interests converge. These people went to the same universities and fraternities. They're on the same boards of directors. They go to the same country clubs. They have like interests. They don't need to call a meeting. They know what's good for them." - George Carlin[0] When you have a situation like this, it is, in my view, the role of government to step in and break up these companies. [0]https://www.youtube.com/watch?v=VAFd4FdbJxs https://www.youtube.com/watch?v=VAFd4FdbJxs

lukas099 3y ago
The problem with using government to break up companies is regulatory capture (https://en.wikipedia.org/wiki/Regulatory_capture https://en.wikipedia.org/wiki/Regulatory_capture). Companies have the interest and resources to influence the very government agencies that are meant to regulate them. They use these influences to steer the regulatory environment to prevent newcomers in the industry.
pauldenton 3y ago
The solutions aren't popular. As a Canadian I do a lot of shopping at Walmart because they have a different supply chain than the Metro, Loblaws No Frills Freshco class of stores. More international brands less local jobs is not a winning politicla slogan

renewiltord 3y ago

If greed is the primary mechanism for increased costs, then why do costs ever go down? It seems unlikely that someone gets less greedy. Is that the posited framework? Frameworks which cannot predict the future well are not very useful. For instance, did we envision Jeff Bezos suddenly found Jesus on this day? https://aws.amazon.com/blogs/aws/amazon-s3-glacier-price-reduction/ https://aws.amazon.com/blogs/aws/amazon-s3-glacier-price-red... The thing that gets me is that this is such an obviously bad model (that market prices vary based on participant greed variation) and I would expect people in tech to want a better explanatory mechanism and yet it is madly popular here. Really makes me question a lot of the other predictions and modeling in this community.

hollerith 3y ago
>If greed is the primary mechanism for increased costs, then why do costs ever go down? Greedy people lose their influence and ability to call the shots as a result of popular outrage, which in turn is a result of comments on HN and other forums complaining about greed :)
- renewiltord 3y ago
  That's actually already a better framework because it now explains price variation not with greed but with political and market dynamics. You posit some greedy people and posit that whether price goes up or down is no longer due to their greed but due to their market power. It is better because it is falsifiable. I think if you took this pattern of modeling and used a modern LLM as a Socratic teacher you would rederive a model of pricing that is more closely aligned with reality. Ultimately, this is all very well-trod ground coming from the tradition of Popper and friends.
  - hollerith 3y ago
    I was being sarcastic.
    - renewiltord 3y ago

reedf1 3y ago

This all makes a lot more sense when you view companies as dumb profit optimisers. "Greed" implies malice aforethought, but these things just make paperclips. They'll charge as much as they can get away with, and hopefully that leads to good outcomes through "market forces" or whatever.

rfwhyte 3y ago

In other news "Face Eating Leopard" magazine says leopards eating people's faces isn't that big a deal after all.

lukas099 3y ago

It's funny; on my Facebook news feed's comments you'd get the impression that The Economist is some kind of far-left progressive newspaper. Here you get the impression that it's some kind of Ronald Reagan-Jeff Bezos love child. I guess this is what happens when you are a centrist publication in 2023.

Geee 3y ago

It's weird that many people (even some economists) think that inflation somehow overrides the free price system [0] or the price mechanism [1]. No it's doesn't. There are no "inflation spirals" or other weird things whatsoever. Spiral (or run-away inflation) would suggest an accelerating curve, while the price mechanism is actually closer to logarithmic, i.e. it starts fast, slows down and converges around the new equilibrium. It's basically a decentralized optimization algorithm. [0] https://en.wikipedia.org/wiki/Free_price_system https://en.wikipedia.org/wiki/Free_price_system [1] https://en.wikipedia.org/wiki/Price_mechanism https://en.wikipedia.org/wiki/Price_mechanism

1letterunixname 3y ago

Sorry Economist propagandists, 60% of recent inflation is a direct result of excessive profits caused by raising prices to soak consumers for no reason other than greed. https://www.forbes.com/sites/errolschweizer/2022/09/12/how-profit-inflation-made-your-groceries-so-damn-expensive/ https://www.forbes.com/sites/errolschweizer/2022/09/12/how-p... https://www.npr.org/2023/05/19/1177180972/economists-are-reconsidering-how-much-corporate-profits-drive-inflation https://www.npr.org/2023/05/19/1177180972/economists-are-rec...

ofcourseyoudo 3y ago

This is like half of an article, because of course, everyone recognizes that companies charge more when supply-chains and other things are screwed up. But many of those costs have dropped, some to pre-pandemic levels or even lower, but the consumer prices have not dropped to match, and profits are growing. https://www.cnbc.com/2022/05/18/wingstop-is-seeing-meaningful-deflation-in-chicken-wings-ceo-says.html https://www.cnbc.com/2022/05/18/wingstop-is-seeing-meaningfu... Wingstop raised prices of wings during lockdown (even switching to being "Thighstop" for a while). Now prices are back down to earth, but they haven't modified their prices to match.