Greedflation: what if the invisible hand is visible and rigged?
by Luca Guidi
Maybe you noticed that the price of the same loaf of bread you’ve been buying for months or even years has just increased. Then maybe you asked your trusted baker why you paid €2 euros for it last week and now €2.70. Maybe your trusted baker is using a better quality of flour for your loaf of bread. Maybe they added a mix of some nutritious seeds in it. Maybe that loaf is just bigger now. None of the above. Your trusted baker tells you the loaf of bread is exactly the same as always. But now there’s inflation inside the dough.
Inflation is normally defined as a general increase in prices and fall in the purchasing value of money. Countless causes can be behind it and countless consequences follow an increase of inflation. Shocks in the supply chain can cause inflation. Shocks in the demand of goods can cause inflation. Fiscal and monetary policies can cause inflation. What has been noticed lately instead, is an inflation driven by the greed of a few big corporations deliberately deciding to give an extra lift to prices just for the sake of more profit. This is what has been called “greedflation”.
Alberts Edwards, global strategist for the bank Société Générale, warns that we either assist to the end of greedflation or assist to the end of capitalism. Skyrocketing profit margins could drive social unrest to unbearable peaks. Not only because of the cost-of-living crisis. Not only because around half of that crisis is greed driven. But also, because until now, a lot of the fight against inflation has focused on wages and in particular on pointing at pay cuts to solve it. Lowering wages, neoliberals say, will allow companies to lower their production costs and so the price of their products. Some of them even points at some healthy amount of unemployment to solve it. Higher rates of unemployment, stubbornly once again they say, will force people to accept lower wages and so on and so forth.
This is simply a sneaky attempt to manipulate masses. Unite, the biggest Union of the UK, found how the top 350 companies listed on the London Stock Exchange almost doubled their profits compared to pre-pandemic levels. Higher margins are the result of what is called “tacit collusion”. Tacit collusion is a sneaky price increase in hundreds of products by some of the largest corporations operating in many fields: oil and gas producers, food manufacturers, fertilizer producers, shipping companies, giants of intensive animal farming. Hiding behind the already existing inflation caused by the Covid-19 pandemic and the Russian invasion of Ukraine, a bunch of big corporations just decided to double their profits, rising prices and blaming workers for causing inflation with their high wages.
What would be funny, if it didn’t mean millions of people suffering and struggling with making both ends meet or being forced to decide between “heating or eating”, is that we’re constantly brainwashed by the invisible hand and other neoliberal dogmas according to which competition on the market will make prices lower just because companies will always try to propose a lower price than their rivals. In reality, the very opposite is happening. Some companies started to rise their prices disproportionately more than the rise in their costs of production and their rivals did exactly the same. They saw that their rivals were doubling their profits on the shoulders of the working class, they saw central banks and politicians covering their backs answering by the book with rising interest rates and stabilizing wages as they unsuccessfully did for decades, and they copy-pasted it.
Solutions?
Let’s stop lying. Research and reports show how greedflation is accountable for almost half of the general inflation. Making life impossible for the working class and blocking their wages while the cost of living rises is not an option. A rise in interest rates is not going to have any impact if the cause is a handful of companies profiting of global crises to make unjustified extra profits.
When extra profits are made, we must tax them and give the billions back to the millions. Profit is okay. Irrationally disproportionate extra profit made on the shoulders of the working class is not.
It is a taboo and it is sometimes a tricky tool, but price control could be sometimes and at least for some essential products a solution. This idea is gaining more and more popularity. Again, if those prices disproportionately exceed the costs of production, big companies are skyrocketing their profits and people must decide between heating or eating, we can’t go on like this. We need an economy at the service of the people, not the other way around.
If the invisible hand is visible and rigged, we shouldn’t lend it our money.
