This is just a reminder:
It's worth noting that corporate profits spiked in mid-2020 and finished their rise by early 2021. It's not obvious from the chart, but this is before inflation—either in consumer prices or producer inputs—had risen more than barely. Since the start of the pandemic, inflation has gone up about 20 points while corporate profits have soared nearly 100 points. At the same time, average markups over cost have increased from about 11% to 16%.
The increase in corporate profits has never been a big cause of inflation. That was due mostly to supply chain disruptions and government assistance. But it's certainly added a bit to it. Based on the markup data, I'd guess that prices increased 4-5% just thanks to higher markups. That's nearly a quarter of the inflationary surge.
And now that inflation is over and it's obvious that corporations overshot their price increases? They'll lower prices, right? Ha ha.
That was due mostly to supply chain disruptions and government assistance.
Ugh. C'mon Kevin. How much longer are you going to keep pushing this canard that emergency relief payments during Covid contributed to inflation in any meaningful way. They did not. It was virtually all supply chain disruptions and, secondarily -- as you point out -- companies deciding that they liked the windfall profits they were reaping and so keeping those prices high or even raising them further.
The stimulus funds poured enough money into the market to maintain spending at pre-pandemic levels while production was being significantly reduced by the mentioned supply chain disruptions. Some inflation was inevitable, and worth it to avoid the widespread social disruption and poverty that the stimulus funds prevented.
My favorite part of conservative capitalism is when republicans want government to lower prices….
Oh, they don't want the government to regulate prices. That would hurt corporate profits. What they want is people to *think* the government or the president can magically lower prices, but isn't doing so, and so you need to punish him at the polls. Same with the budget deficit. Only a problem when a Democrat is in office.
Everything's just a partisan cudgel, not any real policy position or principle.
Either the economy is competitive, or it is not. If the economy is competitive, relieving supply shortages will put downward pressure on prices. If the economy is not competitive, either the anti-trust people need to get to work or we need to abandon the pretense that our economic system is capitalist and figure out where to go from there.
The step-change in corporate profits is strong evidence that the economy is not competitive. We need better anti-trust enforcement.
There is no such thing as "the" economy. There are industries (possibly in locations) that are competitive and industries that are not. *Some* prices are coming down. The economies that the consumer is exposed to are food and imports, neither of which is amenable to either analysis or intervention according to the economic principles of fifty or a hundred years ago.
Still wrong about this.
Corporate profit-seeking is not the only cause of inflation, but it was certainly a major driver. You can post all the charts you want, but actual real-world economists say your position is wrong:
https://www.npr.org/2023/05/19/1177180972/economists-are-reconsidering-how-much-corporate-profits-drive-inflation
https://www.epi.org/blog/corporate-profits-have-contributed-disproportionately-to-inflation-how-should-policymakers-respond/
https://www.theguardian.com/business/2024/jan/19/us-inflation-caused-by-corporate-profits
All of the actual research says corporate profit-seeking is 50% or more of inflation. So not just A major driver, but THE major driver of inflation.
No surprises here. Every section of the supply chain used covid as cover to raise prices just to increase their profit margin. This was obvious at the time despite all the finger pointing at "disruption."
To repeat: no surprises here. Anyone in business will raise their prices without a second thought if they believe there will be no reduction in sales.
Matt Stoller (look him up) asserts broad increases in profits can be attributed mainly to 1) industry consolidation and 2) temporary scarcity which raised prices which didn't adjust because of #1