Unveiling inflation’s true culprit: corporate profits over people

An in-depth investigation reveals how major corporations have exploited economic changes to inflate prices and maximize profits, leaving American households grappling with high costs.

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In the wake of the COVID-19 pandemic, the U.S. economy has experienced significant fluctuations, with inflation becoming a central concern for many American households. Despite an overall easing of inflation and stabilization in supply chains and business costs, consumers continue to face high prices for goods and services. This raises a crucial question: Why haven’t the benefits of a more stable economy translated into lower consumer prices?

Groundwork Collaborative, an economic justice think tank, presents a compelling analysis that challenges the prevailing narrative on inflation. Their research suggests that the high prices linked to the pandemic were not solely due to increased labor and production costs but were significantly influenced by deliberate corporate price gouging. The analysis sheds light on how businesses capitalized on the pandemic, passing on costs to consumers while boosting their profits.

During the economic upheaval caused by the pandemic, many businesses saw an opportunity to increase prices, citing supply chain issues and economic uncertainty. Groundwork Collaborative’s findings indicate that CEOs used these challenges as a cover to justify significant price hikes, thereby enhancing their profits at the expense of consumers. This strategic manipulation of prices reveals a concerning trend of corporate opportunism in times of crisis.

Groundwork’s scrutiny of corporate earnings reports from 2021 onwards highlights a startling trend: a substantial portion of price increases was driven by profit motives rather than rising business costs. This shift marks a departure from the historical norm, where profits contributed far less to price growth. The analysis underscores the extent to which corporate profit-seeking behaviors have influenced recent inflation trends.

The analysis reveals a striking disparity between the modest rise in business costs and the significantly higher increase in consumer prices. For instance, while business expenses in some sectors have even decreased, consumer prices have continued to climb. This discrepancy points to a deliberate strategy by corporations to maintain high prices and expand profit margins, irrespective of actual cost dynamics.

The U.S. diaper industry, dominated by Procter & Gamble and Kimberly-Clark, serves as a case study in Groundwork’s analysis. Despite a 25% drop in the cost of wood pulp, a key component in diapers, these companies have maintained elevated prices. Their earnings calls with shareholders reveal a clear strategy to leverage their market control to sustain high prices and boost profit margins, directly impacting American families.

Executives from various companies have been transparent about their pricing strategies, emphasizing their intent to raise prices beyond rising costs. Statements from CEOs and CFOs of companies like PepsiCo and Kimberly-Clark during earnings calls with shareholders have openly discussed plans to expand margins by maintaining high consumer prices, even as their business costs decrease.

The analysis calls for a critical examination of government policies and their role in addressing corporate concentration and price gouging. With Congress set to consider expiring provisions from the 2017 corporate tax cuts, there is a growing need to reassess the corporate tax code to ensure it supports an equitable economy rather than incentivizing profiteering.

The report by Groundwork Collaborative presents a fundamental choice facing the U.S. economy: Will it continue to allow corporations to exploit crises for profit, or will it implement checks to ensure a more equitable economic landscape? This choice has profound implications for American workers and families, as it determines the direction of economic justice and fairness in the nation.

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