How Corporate Power is the Real Driving Force Behind Inflation
by Robert Reich
November 11, 2021
https://www.alternet.org/2021/11/corporate-inflation/
Introduction:
(Alternet) The biggest culprit for rising prices that's not being talked about is the increasing economic concentration of the American economy in the hands of a relative few giant big corporations with the power to raise prices.
If markets were competitive, companies would seek to keep their prices down in order to maintain customer loyalty and demand. When the prices of their supplies rose, they'd cut their profits before they raised prices to their customers, for fear that otherwise a competitor would grab those customers away.
But strange enough, this isn't happening. In fact, even in the face of supply constraints, corporations are raking in record profits. More than 80 percent of big (S&P 500) companies that have reported results this season have topped analysts' earnings forecasts, according to Refinitiv.
Obviously, supply constraints have not eroded these profits. Corporations are simply passing the added costs on to their customers. Many are raising their prices even further, and pocketing even more.
Conclusion:
This structural problem is amenable to only one thing: the aggressive use of antitrust law.
caltrek's comment: This is an important point to note. Many would use the problem of inflation as an argument for more conservative economic policies. Yet, those policies would more often benefit corporate power rather than hold it in check. Thus, actually adding to the problem of inflation.
It is also important in that it highlights another point of confusion perpetuated by others commenting in this forum. That is the notion that a declining rate of profit is somehow a big problem for corporate America. Put simply, the rising concentration of wealth and economic power can clearly offset such problems. Monopolistic corporations, as the article points out, are in a better position to set there own prices and therefore their margin of profit. Also, if my profit is 1% on ten billion dollars of assets, I am still clearly much better off than if my profit is 10% on one hundred million dollars of assets.
Moreover, modern economic relations with government can also offset problems of a tendency for the rate of profit to decline. This can and is done through tax policies in which powerful corporations are given tax breaks and tax related subsidies. There are also government contracts in which a margin of profit is guaranteed. The declining rate of profit as a potential source of crisis and collapse may have been a strong point to make about 19th century capitalists economies. It clearly leaves much to be desired in analyzing the present situation.
Put another way, socialism was the remedy to the declining rate of profit that was put forward by some 19th century economists. That is precisely the remedy that has been put in place for the 21st century. The question now is do we want a socialism for the rich, or a socialism that benefits the poor and working class. This question is what divides left from right, although it is obscured by other arguments and ideological tendencies. Part of this obscuring process is to insist that there is no difference between, say, the left wing of the Democratic party and the Republican party. Clearly, there is such a difference, one that we should better understand.