Okay, time for me to spill the beans on what's really going on here. There's one very large culprit behind the higher prices that's not being named. In fact, it may be the biggest culprit. It's the increasing concentration of market power in fewer and fewer big corporations.
If markets were truly competitive, companies would try to keep their prices down in order to maintain customer loyalty and demand. When the prices of their supplies (including labor) rise, they’d cut their profits before they raised prices to their customers -- for fear that otherwise a competitor would grab those customers away. That's the way the market is supposed to work.
But that's not happening. Strange enough in the midst of all this inflation, corporations continue to rake in record profits. U.S. stocks are at record highs, rallying on strong corporate earnings.
More than 80 percent of S&P 500 companies that have reported earnings results this season have topped analysts’ earnings forecasts, according to Refinitiv.
Obviously, then, supply constraints haven't eroded profits. Big corporations don’t worry about competitors grabbing their customers away. They have so much market power they can relax and continue to rake in big money.
In fact, corporations are using the *excuse* of inflation to raise prices even higher and make even fatter profits. The result is a transfer of wealth from consumers (and a major burden on lower-income consumers) to corporate executives and major investors.
This has nothing to do with inflation, folks. It has everything to do with the concentration of market power in a relatively few hands.
For example, in April, Procter & Gamble announced it would start charging higher prices for household staples (from diapers to toilet paper) citing "rising costs for raw materials, such as resin and pulp, and higher expenses to transport goods."
But P&G has been raking in huge profits. In the quarter ending September 30, after some of its price increases went into effect, it reported a whopping 24.7% profit margin. Oh, and it spent $3 billion in the quarter buying its own stock.
How can this be? Because P&G faces almost no competition. According to a report released this month from the Roosevelt Institute, "The lion’s share of the market for diapers,” to take but one example, “is controlled by just two companies (Kimberly-Clark and P&G), limiting competition for cheaper options."
Not coincidentally, Kimberly-Clark announced similar price increases at the same time as P&G.
The fancy term for this is "oligopoly." It means a market controlled by two or three major producers who roughly coordinate prices and production.
Another oligopoly: PepsiCo (the parent company of Frito-Lay, Gatorade, Quaker, Tropicana, and other brands) and Coca Cola.
In April, PepsiCo announced it was increasing prices, blaming "higher costs for some ingredients, freight and labor." Rubbish. The company recorded $3 billion in operating profits and increased its projections for the rest of the year, and expects to send $5.8 billion in dividends to shareholders in 2021.
If PepsiCo faced tough competition it could never have gotten away with this. But it doesn’t. In fact, its chief competitor, Coca-Cola announced price increases at about the same time as PepsiCo, and has increased its profit margins to 28.9%.
And on it goes. Whirlpool increased prices 5 to 12% in 2021, supposedly to "compensate for increased raw material costs, including for steel and plastics." But then, in the 3rd quarter, Whirlpool announced higher profits.
You see a similar pattern in energy prices. Once it became clear that demand was growing, energy producers could have quickly ramped up production to create more supply. But several industry experts say oil and gas companies (and their CEOs and major investors) saw bigger money in letting prices run higher before producing more supply. They can get away with this because big oil and gas producers don’t face much competition.
Again, inflation isn’t driving most of these price increases. Corporate power is driving them. The inflation genie is something of a ruse to justify and disguise these price increases.
Yes! And here’s something scary. I’ve been taking a certain route to physical therapy for two months now, and every time I see TONS of Amazon trucks coming toward me. It’s as if they’re the only vehicles on the road. I suspect they’re coming from a distribution center, but even so, it’s very striking and absolutely terrifying. No one can compete with Amazon. Here’s another anecdote. The VP of engineering where my husband works quit early this year and hasn’t been replaced. Where did he go? Amazon Fashion. Why? Because it pays well and offers security. One way or another we all seem to be capitulating and pretty soon there will be no way out. I am consciously trying to spend my money elsewhere. I urge you all to do likewise.
E-Bay is better, offered the same or better prices and owns Pay Pal and you get free shipping on most items. Same money back guarantee and no Jeff Bosos.
Mostly small and medium sized companies or even individuals will list and sell on E-bay and you will deal directly with them but the transaction goes through E-Bay/Pay Pal with the E-Bay/pay pal transaction guarantee. This is like "Wal Mart" Verses "Mom and Pop" and the funny thing is, Wal Mart . com also lists for smaller companies just like E-Bay on some items.
You have truly knocked me sideways with this, Robert Reich. I spend a lot of time keeping up with the news but I did not see this implied anywhere. My impression has been that due to Covid related issues, which can't be blamed on anyone, supply and distribution has broken down, therefore causing prices to rise dramatically. This is why it is not inflation across the board, but simply a glitch in supply and demand. Now I see much darker forces at work. Greed taking advantage in times of peril. Money really is the root of all evil.
Never underestimate opportunistic profit. Always understand they'll pull anything they can get away with or deregulate. Most importantly of all, never underestimate the power of all the schnooks!
But the question is "why now?" Corporations may indeed be exploiting inflationary supply constraints to jack up profits, but are they CAUSING inflation? We've had oligopolies long before the recent spike in inflation.
I think they know >exactly< what they're doing. With public attention focused on political turmoil in the midst of a pandemic and not on them, there's also the bonus of a disrupted supply chain coupled with the general unwillingness of the labor force wanting to go back to work for the kind of pay and the kind of work environment workers were forced to work in for stagnated wages prior to the pandemic. This measure of chaos, with a lot of directions to point fingers, a lot of possible causes, is the perfect environment in which to pull a quickie.
I mention earlier something about these clowns being in cahoots. Paraphrasing the traditional conservative platform: "A fox in charge of every henhouse!"
Thank you for the analysis. From where I am standing, I noticed the punitive Trump tariffs, which hit small US companies hard and not the Chinese as he claimed. It seemed to me a way of getting rid of the small up and coming players from threatening the pole position of the big guys; small companies can't absorb an instant 20% increase in COGS as many woke up to one day. Also I noticed there was some elaborate "appeal process" that again only the big guys could afford to navigate, so they would have the money back when the dust settled. Feels like a move to clear the decks for his friends so they would have fewer competitors to worry about.
Also, how is it that the postal system has negotiated extremely cheap shipping for drop shipping direct to American consumers from China? (Buying one small thing as a consumer and it being rush shipped from China at what must be extremely low rates as the product plus shipping can be just a few dollars.) That benefits Chinese companies over American ones. As far as I can tell, an American company doesn't have access to that cheap shipping or direct drop shipping option. We have much more expensive shipping costs to import and the tariffs made it many times worse.
I believe this phenomenon is called "rent seeking" <<Dictionary defintion of rent seeking: the fact or practice of manipulating public policy or economic conditions as a strategy for increasing profits>>
Tariffs only work if you have a robust manufacturing segment that is directly competing against the country you apply the tariffs to. We have very little manufacturing capacity left after Nixon opened China and NAFTA gutted our "in country" manufacturing. Our chip shortage is a direct result of those tariffs, solar panels, renewable energy products are all made in China and it will take years to ramp up anything here in the USA.
We use antitrust laws to prohibit price and production coordination, and levy fines enormous enough to discourage companies from doing this. We also break up the largest concentrations of economic power.
I totally fantasize about HUGE, HUGE fines! I get emails from the Commodity Futures Trading Commission, and it is exciting to read about the fines they slam on thugs. I hope the thugs are actually paying...thank you!
Thank you for this cogent, on-target, explanation. Of course it's the major corporations that have been manipulating the market. It always has been that way, blatantly, since Reaganomics.
Just wonderin' where you were goin' with that. If you see my comments elsewhere, you'll see I suspect he's a Republican shill. Otherwise, I suspect your perception of the Democrats here is >exactly< a result of how they've tried to work in a bi-partisan way with the Republicans, in times past.
That's what you believe. Democrats don't typically advocate deregulation, tax breaks for corporate interests, nor union busting. Republicans, on the other hand . . . (Are we still talking about Manchin?)
It's dawned on me that USians implicitly assume that we live in a command economy and that prices are entirely determined by Them-- sometimes by the president, sometimes by big firms. There remains no sign that we're amid an inflationary process, because the Fed isn't supporting an inflationary process with its interest rate / money supply policy. We are experiencing higher prices due to temporary shortages and important long-pending price corrections.
That said, I don't think the economy is in good shape in ways that don't show up in gas prices. We have been shorting important investments in tangible and intangible infrastructure for over forty years now. The surpluses have been exhausted and the cracks aren't just showing, but spreading.
A lot of the load of every emergency has fallen on labor, which has been increasingly oppressed, so that one of the corrections we're encountering now is in wages, through mass individual withdrawals of labor services, a very painful way to go about it. We need a renaissance of unions whose bread and butter is the interests of labor.
We need to invest in public health. It would help a lot if we stopped thinking of health care as a matter of virtue, to be given as a reward or withheld as a punishment.
We need to invest in educational equity. That we talk so casually about good schools and bad schools is an indictment of our education funding structure.
We need to invest in environmental care on a major scale. Too obviously.
We need to invest in communication equity: resurrect the post office and make sure that robust wifi is available everywhere in the United States.
We need to invest in equitable law enforcement and an equitable justice system. And to stop militarizing police and sheriff's departments both as a thing in itself and to free up resources for health and growth.
We also need to stop devoting such a disproportionate share of national income to the armed forces, another diversion from investment in health and growth.
And all these investments in prospering will pay off for all of us. If we choose them.
I agree, Mary Ann. We have to focus on the *structure* of the economy, and understand that it's not a given. Different societies have structured their economies differently, at different times. We now have an economic structure centered on very large corporations wielding extraordinary economy *and* political power. That political power is being used to alter the tax code, antitrust laws, labor laws, and all the other ways the economy has been structured, in order to further favor those very large corporations. It's a downward cycle, because we don't have enough countervailing power built into the system.
I couldn't agree more if I had a dump truck. In fact, I think that our move toward corporate feudalism is a major reason people don't think of market forces readily-- just as the supply-and-demand model was hard to figure out during adjustment away from classical feudalism.
Thanks for your Amazon trucks example. It's happening with planes too.
( Thanks for the rest too, very thoughtful and thought provoking for me )
Yes, Amazon sees its job as the whole chain, to deliver to you -- without unionized UPS drivers or pilots. I get it. But.
So it's arbitrary in some ways, but this is why Boeing had to divest United Airlines in the 30's . . . somebody drew the line. Amazon out of delivery, which is already served by UPS, FedEx, USPS and others, seems very straightforward.
FB and Google are different. Each seems like what I was taught in Econ 101 is a 'natural monopoly,' like power and water and other utilities. They don't make as much sense 'broken up,' but need to be carefully regulated, in that model.
Can we turn FB and the Goog into regulated sane utilities? We will see -- b.rad
YES! That's exactly what needs to happen to all these 'social media' platforms - they need to fall under the same regulations as TV and news organizations, be held to the same standards and face the same liabilities and penalties as CBS or The New York Times, including the regulations surrounding advertising on these platforms.
Excellent summary of the progressive agenda, even though I don't agree with everything you wrote. Reminds me of FDR's "Second Bill of Rights", before the Democratic party became the corporate party it is today.
FWIW, I'm not "summarizing the progressive agenda." I'm calling out areas of profound underinvestment and decay in areas of need that are beyond crying out and into shrieking.
I don't understand inflation, but I do know I left law school in 2014 with $250K in debt, paid $30K in interest over 6 years, and was $300K in debt with nothing in savings when covid hit. I was also working a job with impossible-to-meet minimum billable hours from which I (and everyone else in my position) could be fired at any time for any or no reason at all. When I was fired for not returning to the office (in June of 2020!) and got a taste of a life outside the late-stage capitalism hellscape that was my career. I don't know how inflation plays into this twisted economic system, but I do know I have money in savings for the first time in my life, AND I didn't have to work unhealthy hours under constant threat of losing my job, health insurance, etc. My parents paid off their debt within 10 years after graduating from a similar school and were able to afford a house and return money to the economy. It can't be great that at 32 years old it took a global pandemic for me to save money for the future. And I think a lot about an article I read explaining how the elites essentially coaxed the professional class into thinking it had any real chance of upward mobility to ensure they didn't "catch on" to the fact that they were just as screwed as everybody else. From my basic, overly simplified understanding of inflation, it would seem to me that it's just one of several reasons the economy stopped functioning. Pre-covid, I was genuinely curious what would happen to the economy in 10 years or so when a good chunk of my generation was unable to buy a house or otherwise contribute to the economy through traditional means (such as having children). I could be greatly overestimating the damage student debt has had on the population at large, but I can't help but feel like the pandemic has merely sped up capitalism's ultimate demise and revealed the "free market" for what it really is.
Stephanie, I'm a great believer that, as the old saying goes, "the truth shall set you free." As more and more people see where real power lies, and how it has been abused in our system in order to siphon more wealth, privilege, and power to the top, they will I think be more open to a new kind of politics -- dedicated to creating an economy and democracy that work for us all rather than for a very few.
When we talk about inflation we always talk about gas prices. Food prices, utilities are some of the other problems. Some of us can afford inflation and some can’t. Just like some can work remotely and some can’t. When you get 5% more but with inflation it works out to less in your pocket. We all know how a capitalist society works. If corporations are paying more to their workers then they raise the rates on goods to pay for it. However, there might be another model to look at. We could be creative and inspirational. Think outside the box. Can we ever be a producer society that takes care of our most vulnerable. I know the build back better plan is starting to confront these inequities. What else can we do? Maybe start eating less meat? Maybe start fixing things instead of throwing things away. Maybe it’s time to protect the people not the corporations. Start having the richest 400 families taxed like the rest of us. It’s time! If inflation is 6.2% and corporations paying 5% more to their employees that just does not work. What to do? Change the tax system? If COVID is not under control it does not matter. Can we wait till we train all these teachers to teach our preschoolers? I have been in the Early Childhood system for 50 years. It’s not going to change overnight. Tax the super wealthy NOW! This will help the rest of us survive. The question is who has the guts to tell the 400 families they have to give back to society. It should happen sooner then later. We need to change!
Yes, tax the super-wealthy now. Encourage workers to unionized. Break up big corporate centers of power. And get big money out of politics. All easy to say, very hard to do, but essential (IMHO).
Americans are woefully un/misinformed with perhaps even less capacity to remember anything that doesn't come in a sound bite. The problems we are facing right now in the economy is directly connected to the mismanagement of the pandemic that devastated this country's health and has long-term disrupted, jobs, salaries, supply chains, and on and on. Biden inherited this, he did NOT CREATE it. Trump did! What is most terrifying about this is the capacity of the American electorate to keep MAGA policies in place to run this country, with our without Trump running. There are plenty of awful Republicans setting themselves up to take this country balls out authoritarian. When that happens maybe someone will have, and care about, a vague memory of what Democracy was like. We're barreling head on into something really awful, Americans are basically insane right now with no knowledge of history.
Claire, I agree with much of what you say, but you may be attributing a bit too much to Trump and his MAGA policies and not quite enough to the American oligarchy -- the biggest corporations and Wall Street banks, and their executives and major investors -- who are raking in extraordinary profits right now, as much of the rest of America pays the price (literally). I don't believe in conspiracies, but I do believe that the oligarchy quietly enabled Trump because his divisiveness suited the aims of the oligarchy -- to divide the rest of America, making us so angry at one another that we don't look up and see where all the money and power went.
Whao, Robert thanks so much for this critical point. I am well aware of this but definitely, erroneously, left it out as a component of my critique. Geez, the big money behind our grotesque politics is the foundation of what we're dealing with. If I may, in this moment, thank you for all the years you have written and been a public face speaking truth to power everywhere. I deeply admire and enjoy your keen intelligence and courage to debate the issues. I've read reams of your work, watched your videos, love your artwork and deeply appreciate what you are doing to educate. I read this daily and enjoy others comments. Thanks for this.
Judd at Popular Information has an article about companies that are using the opportunity to profit take. Their profit margins are still at 20%. For example, " In June, two of the nation's largest supermarket chains, Kroger and Albertsons, said "that they expect to benefit from rising prices." According to retail analyst Burt Flickinger, the stores will "mark up the full rate of inflation plus a little bit more." Kroger CEO Rodney McMullen was quite open about his intention to exploit inflation to increase profits. "A little bit of inflation is always good in our business," McMullen said."
I think this is why Pres. Biden is having conversations with Walmart and other company leaders. He would like them to reduce prices, instead of taking unfair advantage of consumers. I don't know if he'll be successful because it seems corporations want to tank Pres. Biden's approval ratings.
At what point do higher prices become price gouging?
This is >exactly< what I mean when I call out Republican politics as an extortion racket. They serve >exactly< those who can set the prices. They >can< because they're in cahoots in the first place. Along with union busting, what the devil do you think "industry associations" like NAM are all about. (I know. They claim to set standards and look out for an industry's political interest. The question becomes, "exactly how do they look out for said interests?) What would you conclude, or at very least suspect, from a periodical called "Association and Society Management?" "Wouldn't it be a shame if voting against our interests led to layoffs & inflation?"
Of course, the Republicans invariably oppose and repeal any legislative measures taken to regulate and mitigate these practices - thus "green lighting" them to do as they see fit in their own interests. That's not to even mention the issue of taxation!
If what I said matches what you understand "late stage capitalism" to be, then I guess that's what it is. I claim no advanced knowledge of theory. These are my personal observations on behavior and the way things "come down" for over 50 years. It all began in the first oil crisis, when my father - a Republican - told me: "If they deregulate gas prices, you'll have all the gas you could possibly want." I filed that little tidbit away, and of course, that's what eventually came to pass. Connect the dots.
I’m not sure why people are surprised by inflation. We discussed this for months while talking about increasing wages to help Americans living below the poverty line. The costs of environmental and consumer protections. That’s the costs of protections for Americans, saving the environment and natural resources. Republicans cost cutting methods are great short term, but long term our government ( through our tax dollars) pays the price. We cut Obama’s pandemic team for cost savings. How much did Covid cost the country? People are horrified when consumers are injured by faulty products, but cutting the budget of the people who test and inspect saves on product cost. We need to balance that conversation with the cost savings. Increased pay, should increase consumers spending, income and sales taxes. Less people on government assistance because they can afford to live, saves us money. What is the costs to American taxes for wildfires, flooding, lack of winterizing power supply to save upfront costs(cost us taxpayers, to save Texas money’s). It’s the long game, but we can’t afford the short term savings anymore!!
The economy is generally doing well. Inflation is currently a problem but the Infrastructure and Build Back Better Plans, with their incredible investments and taxation of the super rich, will actually mitigate inflation in a few months.
I thik the recent changes in the economy have already mitigated the inflation, but Reps will certainly play the "inflation" card at election time. Too bad actual education of the populac is not possible. ..... Pay close attention to the "taxation of the super rich" promise. It is dwindling to nothing, and may end up being another tax cut.
Once again, the US public seems tone-deaf to time frames. (Think of the budget spanning 10 years that has people wringing their hands while feigning indignance over the price-tag!) Biden has never made a secret that there will be transient inflation that should normalize once the supply chain returns to normal working order. His projection for that normalization - if memory serves - is some time in the first quarter of '22. I'll start getting concerned if it lingers beyond that. In the meantime, I'll forgo partying, night life, and theater and sports event tickets. (Hey! I do that anyway!) Besides, it seems to be more trouble than any of it's worth, not to mention increasingly dangerous to trifle with that stuff, anyway.
I think what people mean by "the economy" is how comfortable they're feeling with their own day to day challenge of having enough money. If we had affordable healthcare, childcare, elderly care, and an education system that truly prepared people for good paying jobs without putting them into massive debt, the outlook would be much better.
Agree! Most people don't think of the economy as separate from everything else -- their own jobs, wages, security (or lack thereof), health, fuel prices, education, and so on. It's all a big "affecting me." Which is why it's so important to bring our safety nets and public investments at least up to par with other rich nations.
How do we get up to par with other rich nations when the other side throws out the "socialism" or "nanny state" argument? What can be done to counter that?
Stop being afraid of the silly labels when you go to the voting booth! Pay attention to what the candidates say and who is paying their way in the campaign. Pay attention to what they have actually DONE. Vote in your own best interest for the candidate who will deliver the best outcomes for you and your community.
I was watching the opening monologue of the television series 'The Newsroom' the other day. The last line Will says is the most important "we didn't scare so easy." America used to be brave and kind and generous. Try to find that again when you look at your fellow citizens.
Yes. The passing of the infrastructure bill is exciting in that it helps bridge the digital divide! This will help with education and hopefully jobs! I don't know what the bill includes in regards engineering on the job education....I should look in to this.
Ms Psaki should have the Sec. of transportation at the news conference every week or two to report the # of containerships parked off of each coast plus a coastal port report of container clearance . Corporate America eliminated warehousing , so now they have the means to control prices indefinitely for political reasons . Deliberate shipping backlogs must become a political scandal . Also , report about what the Longshoremen and Teamsters comment about improving efficiency .
Lower gas prices have been a significant contributor to global warming, dependence on foreign oil, predatory foreign policy including the military presence in the mid-east, and on and on. We've needed higher gas prices for decades, but as long as the U S govt works for big-oil, it won't happen.
It’s all optics, isn’t it? People see gas prices go down and Biden’s approval percentage will go up by 10 points. We already don’t pay the true cost of gas. American fuel prices are kept down artificially by low gas taxes. Maybe if gas prices stay where they are or continue to go up by increasing gas taxes, more USaians would actually start supporting alternative fuel sources.
A President is very limited as to what s/he can do to affect gas prices. Even dipping into gas reserves will only fractionally reduce pricing, if at all.
Democrats must take back the word socialism, which has been conceded as to the Republicans for over a century as a scare tactic.
Some ad ideas/themes.
1) Convey what socialism is--public or collective ownership of factories and businesses.
2) Democrats oppose socialism
3) Explaining that the following is not socialism: Child care, Health care for all, paid parental leave, negotiating drug prices, strong consumer protection laws, CFPB, etc
4) Note which of the above are available in other nations and that having such in the US will make America as great as other nations
5) Have real people from other countries appear in ads extol the non-socialist items above.
I love your weekly "office hours" idea, but it conflicts with an important weekly Zoom call for Verified Voting -- an excellent group I've been volunteering with since 2004.
Is there any chance you could record your office hours and make them available to people who'd like to watch when they're able to do so?
For the sake of those struggling to get by, we need to worry. I'm lucky to have Medicare, but my Part D (drug) premium will double in January. Price negotiation, anyone?
It's insane and scandalous that Big Pharma has bribed Republicans and enough Democrats to scuttle this reform -- which is supported by over 75 percent of the public.
I think it is scandalous that we can so casually sit here and say that politicians are being bought to make decisions that their benefactors want. What do you call that? Bribery? It seems to me that there is something illegal about it.
I believe that the economy (not the stock market) has been in a general decline since the late 1970’s as manufacturing and our infrastructure has been continuously eroding. Also, before the pandemic hit, I wasn’t convinced that we had fully recovered from the 2008 meltdown either. No idea what’s causing the recent price increases but I don’t believe that we will ever recover until we start investing in our country again. The infrastructure bill will help but we also need to build clean energy systems and invest in our workers. Passing the rest of President Biden’s would be a good start.
Okay, time for me to spill the beans on what's really going on here. There's one very large culprit behind the higher prices that's not being named. In fact, it may be the biggest culprit. It's the increasing concentration of market power in fewer and fewer big corporations.
If markets were truly competitive, companies would try to keep their prices down in order to maintain customer loyalty and demand. When the prices of their supplies (including labor) rise, they’d cut their profits before they raised prices to their customers -- for fear that otherwise a competitor would grab those customers away. That's the way the market is supposed to work.
But that's not happening. Strange enough in the midst of all this inflation, corporations continue to rake in record profits. U.S. stocks are at record highs, rallying on strong corporate earnings.
More than 80 percent of S&P 500 companies that have reported earnings results this season have topped analysts’ earnings forecasts, according to Refinitiv.
Obviously, then, supply constraints haven't eroded profits. Big corporations don’t worry about competitors grabbing their customers away. They have so much market power they can relax and continue to rake in big money.
In fact, corporations are using the *excuse* of inflation to raise prices even higher and make even fatter profits. The result is a transfer of wealth from consumers (and a major burden on lower-income consumers) to corporate executives and major investors.
This has nothing to do with inflation, folks. It has everything to do with the concentration of market power in a relatively few hands.
For example, in April, Procter & Gamble announced it would start charging higher prices for household staples (from diapers to toilet paper) citing "rising costs for raw materials, such as resin and pulp, and higher expenses to transport goods."
But P&G has been raking in huge profits. In the quarter ending September 30, after some of its price increases went into effect, it reported a whopping 24.7% profit margin. Oh, and it spent $3 billion in the quarter buying its own stock.
How can this be? Because P&G faces almost no competition. According to a report released this month from the Roosevelt Institute, "The lion’s share of the market for diapers,” to take but one example, “is controlled by just two companies (Kimberly-Clark and P&G), limiting competition for cheaper options."
Not coincidentally, Kimberly-Clark announced similar price increases at the same time as P&G.
The fancy term for this is "oligopoly." It means a market controlled by two or three major producers who roughly coordinate prices and production.
Another oligopoly: PepsiCo (the parent company of Frito-Lay, Gatorade, Quaker, Tropicana, and other brands) and Coca Cola.
In April, PepsiCo announced it was increasing prices, blaming "higher costs for some ingredients, freight and labor." Rubbish. The company recorded $3 billion in operating profits and increased its projections for the rest of the year, and expects to send $5.8 billion in dividends to shareholders in 2021.
If PepsiCo faced tough competition it could never have gotten away with this. But it doesn’t. In fact, its chief competitor, Coca-Cola announced price increases at about the same time as PepsiCo, and has increased its profit margins to 28.9%.
And on it goes. Whirlpool increased prices 5 to 12% in 2021, supposedly to "compensate for increased raw material costs, including for steel and plastics." But then, in the 3rd quarter, Whirlpool announced higher profits.
You see a similar pattern in energy prices. Once it became clear that demand was growing, energy producers could have quickly ramped up production to create more supply. But several industry experts say oil and gas companies (and their CEOs and major investors) saw bigger money in letting prices run higher before producing more supply. They can get away with this because big oil and gas producers don’t face much competition.
Again, inflation isn’t driving most of these price increases. Corporate power is driving them. The inflation genie is something of a ruse to justify and disguise these price increases.
More analysis of this can be found in Judd Legum's useful newsletter, Popular Information.
Yes! And here’s something scary. I’ve been taking a certain route to physical therapy for two months now, and every time I see TONS of Amazon trucks coming toward me. It’s as if they’re the only vehicles on the road. I suspect they’re coming from a distribution center, but even so, it’s very striking and absolutely terrifying. No one can compete with Amazon. Here’s another anecdote. The VP of engineering where my husband works quit early this year and hasn’t been replaced. Where did he go? Amazon Fashion. Why? Because it pays well and offers security. One way or another we all seem to be capitulating and pretty soon there will be no way out. I am consciously trying to spend my money elsewhere. I urge you all to do likewise.
I already avoid Walmart!
Yes, it is impossible to compete with Amazon.
E-Bay is better, offered the same or better prices and owns Pay Pal and you get free shipping on most items. Same money back guarantee and no Jeff Bosos.
This is interesting! I didn't know they bought PayPal. Does Ebay have massive warehouses like Amazon?
Mostly small and medium sized companies or even individuals will list and sell on E-bay and you will deal directly with them but the transaction goes through E-Bay/Pay Pal with the E-Bay/pay pal transaction guarantee. This is like "Wal Mart" Verses "Mom and Pop" and the funny thing is, Wal Mart . com also lists for smaller companies just like E-Bay on some items.
You have truly knocked me sideways with this, Robert Reich. I spend a lot of time keeping up with the news but I did not see this implied anywhere. My impression has been that due to Covid related issues, which can't be blamed on anyone, supply and distribution has broken down, therefore causing prices to rise dramatically. This is why it is not inflation across the board, but simply a glitch in supply and demand. Now I see much darker forces at work. Greed taking advantage in times of peril. Money really is the root of all evil.
Never underestimate opportunistic profit. Always understand they'll pull anything they can get away with or deregulate. Most importantly of all, never underestimate the power of all the schnooks!
But the question is "why now?" Corporations may indeed be exploiting inflationary supply constraints to jack up profits, but are they CAUSING inflation? We've had oligopolies long before the recent spike in inflation.
I think they know >exactly< what they're doing. With public attention focused on political turmoil in the midst of a pandemic and not on them, there's also the bonus of a disrupted supply chain coupled with the general unwillingness of the labor force wanting to go back to work for the kind of pay and the kind of work environment workers were forced to work in for stagnated wages prior to the pandemic. This measure of chaos, with a lot of directions to point fingers, a lot of possible causes, is the perfect environment in which to pull a quickie.
I mention earlier something about these clowns being in cahoots. Paraphrasing the traditional conservative platform: "A fox in charge of every henhouse!"
Thank you for the analysis. From where I am standing, I noticed the punitive Trump tariffs, which hit small US companies hard and not the Chinese as he claimed. It seemed to me a way of getting rid of the small up and coming players from threatening the pole position of the big guys; small companies can't absorb an instant 20% increase in COGS as many woke up to one day. Also I noticed there was some elaborate "appeal process" that again only the big guys could afford to navigate, so they would have the money back when the dust settled. Feels like a move to clear the decks for his friends so they would have fewer competitors to worry about.
Also, how is it that the postal system has negotiated extremely cheap shipping for drop shipping direct to American consumers from China? (Buying one small thing as a consumer and it being rush shipped from China at what must be extremely low rates as the product plus shipping can be just a few dollars.) That benefits Chinese companies over American ones. As far as I can tell, an American company doesn't have access to that cheap shipping or direct drop shipping option. We have much more expensive shipping costs to import and the tariffs made it many times worse.
I believe this phenomenon is called "rent seeking" <<Dictionary defintion of rent seeking: the fact or practice of manipulating public policy or economic conditions as a strategy for increasing profits>>
Tariffs only work if you have a robust manufacturing segment that is directly competing against the country you apply the tariffs to. We have very little manufacturing capacity left after Nixon opened China and NAFTA gutted our "in country" manufacturing. Our chip shortage is a direct result of those tariffs, solar panels, renewable energy products are all made in China and it will take years to ramp up anything here in the USA.
So how do we stop oligopolies? What nonprofits are focused on stopping these oligopolies?
We use antitrust laws to prohibit price and production coordination, and levy fines enormous enough to discourage companies from doing this. We also break up the largest concentrations of economic power.
I totally fantasize about HUGE, HUGE fines! I get emails from the Commodity Futures Trading Commission, and it is exciting to read about the fines they slam on thugs. I hope the thugs are actually paying...thank you!
Thank you for this cogent, on-target, explanation. Of course it's the major corporations that have been manipulating the market. It always has been that way, blatantly, since Reaganomics.
So we should all vote Republican. Right?
Just wonderin' where you were goin' with that. If you see my comments elsewhere, you'll see I suspect he's a Republican shill. Otherwise, I suspect your perception of the Democrats here is >exactly< a result of how they've tried to work in a bi-partisan way with the Republicans, in times past.
That's what you believe. Democrats don't typically advocate deregulation, tax breaks for corporate interests, nor union busting. Republicans, on the other hand . . . (Are we still talking about Manchin?)
It's dawned on me that USians implicitly assume that we live in a command economy and that prices are entirely determined by Them-- sometimes by the president, sometimes by big firms. There remains no sign that we're amid an inflationary process, because the Fed isn't supporting an inflationary process with its interest rate / money supply policy. We are experiencing higher prices due to temporary shortages and important long-pending price corrections.
That said, I don't think the economy is in good shape in ways that don't show up in gas prices. We have been shorting important investments in tangible and intangible infrastructure for over forty years now. The surpluses have been exhausted and the cracks aren't just showing, but spreading.
A lot of the load of every emergency has fallen on labor, which has been increasingly oppressed, so that one of the corrections we're encountering now is in wages, through mass individual withdrawals of labor services, a very painful way to go about it. We need a renaissance of unions whose bread and butter is the interests of labor.
We need to invest in public health. It would help a lot if we stopped thinking of health care as a matter of virtue, to be given as a reward or withheld as a punishment.
We need to invest in educational equity. That we talk so casually about good schools and bad schools is an indictment of our education funding structure.
We need to invest in environmental care on a major scale. Too obviously.
We need to invest in communication equity: resurrect the post office and make sure that robust wifi is available everywhere in the United States.
We need to invest in equitable law enforcement and an equitable justice system. And to stop militarizing police and sheriff's departments both as a thing in itself and to free up resources for health and growth.
We also need to stop devoting such a disproportionate share of national income to the armed forces, another diversion from investment in health and growth.
And all these investments in prospering will pay off for all of us. If we choose them.
I agree, Mary Ann. We have to focus on the *structure* of the economy, and understand that it's not a given. Different societies have structured their economies differently, at different times. We now have an economic structure centered on very large corporations wielding extraordinary economy *and* political power. That political power is being used to alter the tax code, antitrust laws, labor laws, and all the other ways the economy has been structured, in order to further favor those very large corporations. It's a downward cycle, because we don't have enough countervailing power built into the system.
I couldn't agree more if I had a dump truck. In fact, I think that our move toward corporate feudalism is a major reason people don't think of market forces readily-- just as the supply-and-demand model was hard to figure out during adjustment away from classical feudalism.
Thanks for your Amazon trucks example. It's happening with planes too.
( Thanks for the rest too, very thoughtful and thought provoking for me )
Yes, Amazon sees its job as the whole chain, to deliver to you -- without unionized UPS drivers or pilots. I get it. But.
So it's arbitrary in some ways, but this is why Boeing had to divest United Airlines in the 30's . . . somebody drew the line. Amazon out of delivery, which is already served by UPS, FedEx, USPS and others, seems very straightforward.
FB and Google are different. Each seems like what I was taught in Econ 101 is a 'natural monopoly,' like power and water and other utilities. They don't make as much sense 'broken up,' but need to be carefully regulated, in that model.
Can we turn FB and the Goog into regulated sane utilities? We will see -- b.rad
YES! That's exactly what needs to happen to all these 'social media' platforms - they need to fall under the same regulations as TV and news organizations, be held to the same standards and face the same liabilities and penalties as CBS or The New York Times, including the regulations surrounding advertising on these platforms.
Excellent summary of the progressive agenda, even though I don't agree with everything you wrote. Reminds me of FDR's "Second Bill of Rights", before the Democratic party became the corporate party it is today.
FWIW, I'm not "summarizing the progressive agenda." I'm calling out areas of profound underinvestment and decay in areas of need that are beyond crying out and into shrieking.
Bravo!
"USians"...I love it! Also love your comments. You get it...why don't they?
Excellent
I don't understand inflation, but I do know I left law school in 2014 with $250K in debt, paid $30K in interest over 6 years, and was $300K in debt with nothing in savings when covid hit. I was also working a job with impossible-to-meet minimum billable hours from which I (and everyone else in my position) could be fired at any time for any or no reason at all. When I was fired for not returning to the office (in June of 2020!) and got a taste of a life outside the late-stage capitalism hellscape that was my career. I don't know how inflation plays into this twisted economic system, but I do know I have money in savings for the first time in my life, AND I didn't have to work unhealthy hours under constant threat of losing my job, health insurance, etc. My parents paid off their debt within 10 years after graduating from a similar school and were able to afford a house and return money to the economy. It can't be great that at 32 years old it took a global pandemic for me to save money for the future. And I think a lot about an article I read explaining how the elites essentially coaxed the professional class into thinking it had any real chance of upward mobility to ensure they didn't "catch on" to the fact that they were just as screwed as everybody else. From my basic, overly simplified understanding of inflation, it would seem to me that it's just one of several reasons the economy stopped functioning. Pre-covid, I was genuinely curious what would happen to the economy in 10 years or so when a good chunk of my generation was unable to buy a house or otherwise contribute to the economy through traditional means (such as having children). I could be greatly overestimating the damage student debt has had on the population at large, but I can't help but feel like the pandemic has merely sped up capitalism's ultimate demise and revealed the "free market" for what it really is.
Stephanie, I'm a great believer that, as the old saying goes, "the truth shall set you free." As more and more people see where real power lies, and how it has been abused in our system in order to siphon more wealth, privilege, and power to the top, they will I think be more open to a new kind of politics -- dedicated to creating an economy and democracy that work for us all rather than for a very few.
When we talk about inflation we always talk about gas prices. Food prices, utilities are some of the other problems. Some of us can afford inflation and some can’t. Just like some can work remotely and some can’t. When you get 5% more but with inflation it works out to less in your pocket. We all know how a capitalist society works. If corporations are paying more to their workers then they raise the rates on goods to pay for it. However, there might be another model to look at. We could be creative and inspirational. Think outside the box. Can we ever be a producer society that takes care of our most vulnerable. I know the build back better plan is starting to confront these inequities. What else can we do? Maybe start eating less meat? Maybe start fixing things instead of throwing things away. Maybe it’s time to protect the people not the corporations. Start having the richest 400 families taxed like the rest of us. It’s time! If inflation is 6.2% and corporations paying 5% more to their employees that just does not work. What to do? Change the tax system? If COVID is not under control it does not matter. Can we wait till we train all these teachers to teach our preschoolers? I have been in the Early Childhood system for 50 years. It’s not going to change overnight. Tax the super wealthy NOW! This will help the rest of us survive. The question is who has the guts to tell the 400 families they have to give back to society. It should happen sooner then later. We need to change!
Yes, tax the super-wealthy now. Encourage workers to unionized. Break up big corporate centers of power. And get big money out of politics. All easy to say, very hard to do, but essential (IMHO).
Americans are woefully un/misinformed with perhaps even less capacity to remember anything that doesn't come in a sound bite. The problems we are facing right now in the economy is directly connected to the mismanagement of the pandemic that devastated this country's health and has long-term disrupted, jobs, salaries, supply chains, and on and on. Biden inherited this, he did NOT CREATE it. Trump did! What is most terrifying about this is the capacity of the American electorate to keep MAGA policies in place to run this country, with our without Trump running. There are plenty of awful Republicans setting themselves up to take this country balls out authoritarian. When that happens maybe someone will have, and care about, a vague memory of what Democracy was like. We're barreling head on into something really awful, Americans are basically insane right now with no knowledge of history.
Claire, I agree with much of what you say, but you may be attributing a bit too much to Trump and his MAGA policies and not quite enough to the American oligarchy -- the biggest corporations and Wall Street banks, and their executives and major investors -- who are raking in extraordinary profits right now, as much of the rest of America pays the price (literally). I don't believe in conspiracies, but I do believe that the oligarchy quietly enabled Trump because his divisiveness suited the aims of the oligarchy -- to divide the rest of America, making us so angry at one another that we don't look up and see where all the money and power went.
Whao, Robert thanks so much for this critical point. I am well aware of this but definitely, erroneously, left it out as a component of my critique. Geez, the big money behind our grotesque politics is the foundation of what we're dealing with. If I may, in this moment, thank you for all the years you have written and been a public face speaking truth to power everywhere. I deeply admire and enjoy your keen intelligence and courage to debate the issues. I've read reams of your work, watched your videos, love your artwork and deeply appreciate what you are doing to educate. I read this daily and enjoy others comments. Thanks for this.
Judd at Popular Information has an article about companies that are using the opportunity to profit take. Their profit margins are still at 20%. For example, " In June, two of the nation's largest supermarket chains, Kroger and Albertsons, said "that they expect to benefit from rising prices." According to retail analyst Burt Flickinger, the stores will "mark up the full rate of inflation plus a little bit more." Kroger CEO Rodney McMullen was quite open about his intention to exploit inflation to increase profits. "A little bit of inflation is always good in our business," McMullen said."
I think this is why Pres. Biden is having conversations with Walmart and other company leaders. He would like them to reduce prices, instead of taking unfair advantage of consumers. I don't know if he'll be successful because it seems corporations want to tank Pres. Biden's approval ratings.
At what point do higher prices become price gouging?
This is >exactly< what I mean when I call out Republican politics as an extortion racket. They serve >exactly< those who can set the prices. They >can< because they're in cahoots in the first place. Along with union busting, what the devil do you think "industry associations" like NAM are all about. (I know. They claim to set standards and look out for an industry's political interest. The question becomes, "exactly how do they look out for said interests?) What would you conclude, or at very least suspect, from a periodical called "Association and Society Management?" "Wouldn't it be a shame if voting against our interests led to layoffs & inflation?"
Of course, the Republicans invariably oppose and repeal any legislative measures taken to regulate and mitigate these practices - thus "green lighting" them to do as they see fit in their own interests. That's not to even mention the issue of taxation!
Is this the "late stage capitalism" I've been hearing about?
If what I said matches what you understand "late stage capitalism" to be, then I guess that's what it is. I claim no advanced knowledge of theory. These are my personal observations on behavior and the way things "come down" for over 50 years. It all began in the first oil crisis, when my father - a Republican - told me: "If they deregulate gas prices, you'll have all the gas you could possibly want." I filed that little tidbit away, and of course, that's what eventually came to pass. Connect the dots.
Then everyone is doing it. It is price gouging. No matter who does it. Vulture capitalism variant? Or is it the way capitalism works, period.
Revisit Adam Smith and draw your own conclusions. Pay particular attention to "the usual profit," which goes undefined.
Just because they can doesn't mean they should.
I’m not sure why people are surprised by inflation. We discussed this for months while talking about increasing wages to help Americans living below the poverty line. The costs of environmental and consumer protections. That’s the costs of protections for Americans, saving the environment and natural resources. Republicans cost cutting methods are great short term, but long term our government ( through our tax dollars) pays the price. We cut Obama’s pandemic team for cost savings. How much did Covid cost the country? People are horrified when consumers are injured by faulty products, but cutting the budget of the people who test and inspect saves on product cost. We need to balance that conversation with the cost savings. Increased pay, should increase consumers spending, income and sales taxes. Less people on government assistance because they can afford to live, saves us money. What is the costs to American taxes for wildfires, flooding, lack of winterizing power supply to save upfront costs(cost us taxpayers, to save Texas money’s). It’s the long game, but we can’t afford the short term savings anymore!!
The economy is generally doing well. Inflation is currently a problem but the Infrastructure and Build Back Better Plans, with their incredible investments and taxation of the super rich, will actually mitigate inflation in a few months.
I thik the recent changes in the economy have already mitigated the inflation, but Reps will certainly play the "inflation" card at election time. Too bad actual education of the populac is not possible. ..... Pay close attention to the "taxation of the super rich" promise. It is dwindling to nothing, and may end up being another tax cut.
Once again, the US public seems tone-deaf to time frames. (Think of the budget spanning 10 years that has people wringing their hands while feigning indignance over the price-tag!) Biden has never made a secret that there will be transient inflation that should normalize once the supply chain returns to normal working order. His projection for that normalization - if memory serves - is some time in the first quarter of '22. I'll start getting concerned if it lingers beyond that. In the meantime, I'll forgo partying, night life, and theater and sports event tickets. (Hey! I do that anyway!) Besides, it seems to be more trouble than any of it's worth, not to mention increasingly dangerous to trifle with that stuff, anyway.
I think what people mean by "the economy" is how comfortable they're feeling with their own day to day challenge of having enough money. If we had affordable healthcare, childcare, elderly care, and an education system that truly prepared people for good paying jobs without putting them into massive debt, the outlook would be much better.
Agree! Most people don't think of the economy as separate from everything else -- their own jobs, wages, security (or lack thereof), health, fuel prices, education, and so on. It's all a big "affecting me." Which is why it's so important to bring our safety nets and public investments at least up to par with other rich nations.
How do we get up to par with other rich nations when the other side throws out the "socialism" or "nanny state" argument? What can be done to counter that?
Stop being afraid of the silly labels when you go to the voting booth! Pay attention to what the candidates say and who is paying their way in the campaign. Pay attention to what they have actually DONE. Vote in your own best interest for the candidate who will deliver the best outcomes for you and your community.
I was watching the opening monologue of the television series 'The Newsroom' the other day. The last line Will says is the most important "we didn't scare so easy." America used to be brave and kind and generous. Try to find that again when you look at your fellow citizens.
Talk about what 'contributions' are made by the other side. Like NOTHING.
Good point!
Yes. The passing of the infrastructure bill is exciting in that it helps bridge the digital divide! This will help with education and hopefully jobs! I don't know what the bill includes in regards engineering on the job education....I should look in to this.
Ms Psaki should have the Sec. of transportation at the news conference every week or two to report the # of containerships parked off of each coast plus a coastal port report of container clearance . Corporate America eliminated warehousing , so now they have the means to control prices indefinitely for political reasons . Deliberate shipping backlogs must become a political scandal . Also , report about what the Longshoremen and Teamsters comment about improving efficiency .
Americans should make and produce things to use /consume here, like we used to.
The economy is doing well . President Biden should take measures to lower gas prices and that will make him very popular.
Lower gas prices have been a significant contributor to global warming, dependence on foreign oil, predatory foreign policy including the military presence in the mid-east, and on and on. We've needed higher gas prices for decades, but as long as the U S govt works for big-oil, it won't happen.
It’s all optics, isn’t it? People see gas prices go down and Biden’s approval percentage will go up by 10 points. We already don’t pay the true cost of gas. American fuel prices are kept down artificially by low gas taxes. Maybe if gas prices stay where they are or continue to go up by increasing gas taxes, more USaians would actually start supporting alternative fuel sources.
Biden should "take measures to lower gas prices"?...like what, wave his magic wand?
This is an interesting thought. Maybe he will lower the prices around election time.
A President is very limited as to what s/he can do to affect gas prices. Even dipping into gas reserves will only fractionally reduce pricing, if at all.
"Jane East, no one special, just a human being," but you are special...very special. Keep up the good fight!
Democrats must take back the word socialism, which has been conceded as to the Republicans for over a century as a scare tactic.
Some ad ideas/themes.
1) Convey what socialism is--public or collective ownership of factories and businesses.
2) Democrats oppose socialism
3) Explaining that the following is not socialism: Child care, Health care for all, paid parental leave, negotiating drug prices, strong consumer protection laws, CFPB, etc
4) Note which of the above are available in other nations and that having such in the US will make America as great as other nations
5) Have real people from other countries appear in ads extol the non-socialist items above.
??RECORD OFFICE HOURS??
I love your weekly "office hours" idea, but it conflicts with an important weekly Zoom call for Verified Voting -- an excellent group I've been volunteering with since 2004.
Is there any chance you could record your office hours and make them available to people who'd like to watch when they're able to do so?
John (and Tim, below), we're working on various alternatives right now.
Mr. Reich, I second this motion. I cannot participate in "Office Hours", but would like to know what went on when I am able.
For the sake of those struggling to get by, we need to worry. I'm lucky to have Medicare, but my Part D (drug) premium will double in January. Price negotiation, anyone?
It's insane and scandalous that Big Pharma has bribed Republicans and enough Democrats to scuttle this reform -- which is supported by over 75 percent of the public.
I think it is scandalous that we can so casually sit here and say that politicians are being bought to make decisions that their benefactors want. What do you call that? Bribery? It seems to me that there is something illegal about it.
I believe that the economy (not the stock market) has been in a general decline since the late 1970’s as manufacturing and our infrastructure has been continuously eroding. Also, before the pandemic hit, I wasn’t convinced that we had fully recovered from the 2008 meltdown either. No idea what’s causing the recent price increases but I don’t believe that we will ever recover until we start investing in our country again. The infrastructure bill will help but we also need to build clean energy systems and invest in our workers. Passing the rest of President Biden’s would be a good start.