The surge in inflation over the past few years has been attributed to many things, but a new study says you can put most of the blame on corporate greed.
KNX News spoke with study co-author and strategic advisor with the think tank Groundwork Collaborative, Elizabeth Pancotti, to learn more about their findings.
What exactly did the report find?
"We look at the most recent data on corporate profits, so that's from the 2nd and 3rd quarter of last year, and we find that for the most recent price increases - so we're really just talking about kind of post supply chain snarls post coming out of the pandemic - We find that corporate profits drove more than half of inflation. Whereas prior to the pandemic, corporate profits drove just 11% of price growth for 40 years."
How can you measure corporate greed?
"We use economic data published by the Bureau of Economic Analysis that breaks down for every dollar of goods, where that's coming from that's corporate profits. Then the cost to make those goods - divided into labor (what gets paid out in wages), and non-labor (the stuff you have to buy to make your product) and the percentages of those that are driving those cost increases. We break [it all] down in our new report, and we find that 53% is driven by corporate profits."
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Is inflation now slowing because profits are slowing down as well?
"We find that inflation is slowing in terms of the rate of price increases, but obviously, prices are still significantly higher for many goods and services for families today than prior to the pandemic. We find that while prices for consumers have risen by 3.4% over the past year, input costs for producers have risen by just 1%. And so corporations are not passing their savings on to consumers."
What, if anything, can we do to combat this?
"That's a good question... I really would say it's our policymakers' job and our corporation's job to kind of respect their customers, but I think consumers are in a really bad spot. Our report highlights diapers, for instance, are up $6 a pack on average, about 30% over the course of the pandemic. And I don't know that we would say that parents should go without diapers, but I will say, really try to put your money where your mouth is when you're shopping for those products. There are some companies who are passing those savings on to consumers, but I think at the consumer level, there's not a whole lot to do. We really are looking for corporations to stop taking more than their fair share."
What about interest rates - could the Federal Reserve help by cutting interest rates?
"I think it really depends. We have seen that the Federal Reserve's blunt tool of interest rates really weren't the effective thing that brought down inflation, and as we try to close that last mile, I'm not sure that they really are the most effective. But I will say, for many consumers, their mortgage rates are really high, the cost to transition to clean energy is really high, and finance rates are just really high, and that obviously contributes to some not-great economic outcomes. I think we are absolutely looking at the Fed to adjust their outlook, given recent data about inflation coming down, but on the margins for the average consumer, it's not going to help that much. It really is about the broader macroeconomic picture."
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