Record corporate profits from your thinning wallets
By: Robert Reich
S E E D E D C O N T E N T
Why doesn't the mainstream media want to talk about this?
Robert Reich Mar 30, 2024
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The latest economic data shows two big things:
(1) Corporate profits reached a record high in the fourth quarter of last year.
(2) Inflation is still with us. The government reported Friday that the Fed's preferred inflation gauge rose 0.3 percent month-to-month in February, following a January uptick that was the largest in a year. Prices have risen 2.5 percent over the past 12 months — certainly better than inflation readings compared with a year ago but still stubbornly above the Fed's 2 percent target. So-called core inflation, which strips out more volatile food and energy prices and is therefore a more reliable indicator of where prices might be headed, is still coming in more strongly than central bank officials would like to see.
The easiest explanation for both phenomena — record corporate profits and prices remaining elevated — is that corporations have enough monopoly power to keep prices high. (Corporations are also shrinking the size of the products you're buying without lowering their prices — a variant of the same thing.)
This is one of the biggest reasons the American public is not crediting Biden with a great economy. Most people still aren't feeling it.
But the mainstream media doesn't want to talk about this.
Last November, TheNew York Times contacted me about contributing a NYTimes Opinion video. I suggested one on corporate monopolies keeping prices high. After lots of to-ing and fro-ing, the editor wrote: "One of our economists felt that it might be a little late, in that the rate of price increases is slowing ... and so this particular take might not be as timely as I'd hoped."
Not timely?
In 2023, PepsiCo's chief financial officer said that even though inflation was dropping, its prices would not be. Pepsi hiked its prices by double digits and announced plans to keep them high in 2024.
If Pepsi were challenged by tougher competition, consumers would just buy something cheaper. But PepsiCo's only major soda competitor is Coca-Cola, which — surprise, surprise — announced similar price hikes at about the same time as Pepsi and has also kept its prices high.
The CEO of Coca-Cola claimed that the company had "earned the right" to push price hikes because its sodas are popular. Popular? The only thing that's popular these days seems to be corporate price gouging.
We're seeing this pattern across much of the economy — especially with groceries.At the end of 2023, Americans were paying at least 30 percent more for beef, pork, and poultry products than they were in 2020.
Why? Near-monopoly power. Just four companies now control processing of 80 percent of beef, nearly70 percent of pork, and almost 60 percent of poultry. So of course it's easy for them to coordinate price increases.
The problem goes well beyond the grocery store. In 75 percent of U.S. industries, fewer companies now control more of their markets than they did 20 years ago.
So what should be done?
First, antitrust laws must be enforced.
Kudos to the Biden administration for enforcing antitrust more aggressively than any administration in the last 40 years. It's taken action against alleged price fixing in the meat industry — which has been a problem for decades.
It has sued to block the merger of Kroger and Albertsons — two giant grocery chains. Kroger operates 2,750 stores in 35 states and the District of Columbia. The company's 19 brands include Ralphs, Smith's, King Soopers, Fred Meyer, Food 4 Less, Mariano's, Pick 'n Save, and Harris Teeter. Albertsons operates 2,273 stores in 34 states. Its 15 brands include Safeway, Jewel-Osco, Vons, Acme, and Shaw's. Together, Kroger and Albertsons employ around 700,000 people.
It's suing Amazon for using its dominance to artificially jack up prices, in one of the biggest anti-monopoly lawsuits in a generation. It's suing Apple for using its market power to control its apps and prevent other businesses from offering them.
It successfully sued to block the merger of JetBlue and Spirit Airlines, which would have made consolidation in the airline industry even worse.
But given how concentrated American industry has become, there's still a long way to go. Biden should make his antitrust enforcement against corporate power a centerpiece of his campaign.
Second, big corporations must not be allowed to use their power to gouge consumers.
Senator Elizabeth Warren and others recently unveiled the latest version of their Price Gouging Prevention Act.
"Giant corporations are using supply chain shocks as a cover to excessively raise prices and sometimes charging the same price but shrinking how much consumers actually get," Warren charges.
The bill would empower the FTC (which would also get $1 billion in additional funding) and state attorneys general to stop companies from charging "grossly excessive" prices, regardless of where alleged price gouging took place in a supply chain.
(The legislation would also protect small businesses — those earning less than $100 million — from litigation if they had to raise prices in good faith during crises.)
The bill would also require public companies to disclose more about their costs and pricing strategies.
I don't have any illusions that this bill will find its way into law soon. Democrats hold a slim majority in the Senate, and not all Democrats support it. Meanwhile, Republicans and their business backers are dead set against it — and are eager to blame continued high prices on Biden, not on corporations.
But this bill is just as necessary as aggressive antitrust enforcement — and an example of what could and will be done if Democrats sweep the 2024 elections.
The record profits of large corporations are coming out of the paychecks of average Americans, who are still struggling to get by.
Biden and the Democrats must say this loudly and clearly, and tell the public what they are doing — and will do — to stop corporate monopolies and price gouging.
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Antitrust laws, windfall profits tax would be a good place to begin. Americans need to realize corporations are NOT people, they are entities created to generate profit, they have no morals, no ethics and no values. In order for capitalism to function properly, it must be regulated for the good of all citizens and prospective citizens. The banking industry and Wall Street are two areas that require constant vigilance, their activities are the source and beginning all the inequities we as a people suffer. Capitalism is required for a democracy to function, but it must be REGULATED!
We have seen enough of human nature over the past 50,000 years to know that taking advantage of others is an immutable trait.
Yes, capitalism needs to be thoroughly regulated.
Yeah, seems enough is never enough. If charity begins at home, so should common sense. Our "I want it all and I want it NOW" attitude has, with the help of mass marketing, turned us and the world, into corporate "greed" enablers.
"Capitalism without a moral conscience is grounds for revolution." Karl Marx
How many hundreds of millions have suffered famines, gulags, censorship, slave labor and other repressions at the hands of Marxist governments?
His theories are part of the rubbish of history.
Over-regulation creates an uneven playing field, and reduces both consumer and business wellbeing.
More Marxist crap. Blame this on Capitalism. If the article wanted to be honest, it would have included everything that contributed to inflation.
There's probably more, but this illustrates the point. What this article wants to do is convince us that Capitalism is the problem. The way Capitalism is practiced today certainly has its problems, but what this article wants is centralized control over the means of production through less obvious means. They want to control how much profit a company can make and, at the same time, we need to tax them "their fair share".
It's really simple. Think Coke is too expensive? Don't friggin buy it! Do you really need an $80,000 car or truck? No? Don't friggin buy it! Buy something that is more practical. McDonald's is stupidly expensive. I don't buy it unless necessity makes me. Maybe once every couple of months. I want to build a really high end PC, but I don't because the prices for the components are stupidly expensive, especially for GPU's. So I vote by not buying it. I don't actually need the thing. I just want it.
If this article wasn't Marxist in it's goals, it wouldn't say we have to run to the government to solve our problems. It would tell us that we could solve them ourselves by collectively not buying things we don't actually need, but just want, until the prices come down. But that isn't what they want. They want us to rely on the government to do everything for us. Well, if people don't wake up they're going to get what they asked for, but they aren't going to like it when it happens. Just ask the Uighurs in China.