Republicans Who Support Corporate Concentration – Dakota Free Press


If Kristi Noem really wants to make inflation a campaign issue, maybe she needs to address the root causes. President Joe Biden is not raising prices; companies raise prices. And while we should expect sensible companies to raise prices to cover higher wages and solutions to supply chain challenges, companies seem to be raising prices just to inflate their profits.

BP price hikes are gone far beyond covering the increased costs of doing business:

BP’s profits hit their highest level in eight years in 2021, buoyed by soaring gas and oil prices, as the company boosted share buybacks and accelerated emissions reduction plans with an increase low-carbon energy expenditure.

… In the fourth quarter of 2021, BP’s underlying replacement cost profit, its definition of net profit, reached $4.1 billion, beating analysts’ forecasts of $3.93 billion.

It was BP’s biggest quarterly profit since early 2013.

BP shares rose 0.3% at 1446 GMT, against a 0.1% decline in the broader European energy index (.SXEP).

For the year, BP’s $12.85 billion profit versus a $5.7 billion loss in 2020, when it wrote off $6.5 billion of the value of its oil and gas assets at following a drop in energy demand [Ron Bousso, “Energy Prices Lift BP Profits to 8-Year High,” Reuters, 2022.02.08].

Cereal maker Kellogg has had to deal with rising commodity prices and a major strike it has had to settle with a better salarybut their profits are still rising:

Cereal manufacturer Kellogg Co (KN) forecast full-year earnings growth on Thursday to beat market expectations, helped by higher commodity prices that weathered disruptions from labor strikes and soaring input costs in the fourth quarter .

… Kellogg, however, expects full-year adjusted earnings per share to grow 1% to 2% on a currency-neutral basis on the back of higher prices for its breakfast cereals and its snacks such as Pop-Tarts and Pringles. Analysts on average expected a 0.1% rise, according to data from Refintiv IBES [Mehr Bedi, “Kellogg Annual Profit View Crunches Estimates on Price Hikes,” Reuters, 2022.02.10].

Container shippers, which have played a leading role in the global haulage capacity shortage, have hiked prices to generate record profits. Bloomberg reports that Hapag-Lloyd’s profits in 2021 were more than double their total profits over the past two decades:

Chris Bryant,”Taxpayers are missing out on windfall from pandemic shipping profits», Bloomberg, 2022.02.15.

Businesses and Republicans will tell you the higher prices you’re seeing are due to workers looking to catch up on decades of wage stagnation, but the price data deny this blame:

But while companies may point to rising wages, economic data shows that wages are far from the main driver of inflation. The fastest rising prices today – cars, fuel, housing and furniture – are moving away from wages and toward other explanations, such as shortages of goods or companies inflating their profit margins. More generally, it has long been clear that the relationship between what workers earn and what consumers pay is tenuous at best.

If higher worker compensation were truly the main driver of prices, it follows that the more labor-intensive service sectors of the economy would experience the greatest increase in consumer prices. Yet the inflation chart today shows exactly the opposite: price increases in goods are outpacing services by a factor of three.

“Goods prices are the main driver of inflation,” Julia Pollak, labor economist at ZipRecruiter, told CBS MoneyWatch. “So far, wages have not been the main driver of inflation at all. Inflation was higher in the beginning in low labor intensive industries” [Irina Ivanova, “Rising Fuel Prices and Corporate Profits—Not Wages—Are Chiefly to Blame for Inflation,” CBS News, 2022.02.22].

Labor costs are mitigated by savings from replacing experienced workers with new talent, so profit margins can continue to increase:

Some business leaders have been outspoken about their intention to pass on higher prices from the corporate supply chain to consumers. For example, consumer goods giants Colgate-Palmolive, Procter & Gamble and Unilever were able to raise prices without losing sales. Almost two-thirds of publicly traded companies are reporting higher profit margins than before the pandemic, according to the Wall Street Journal.

Meanwhile, surveys of Salaire.com and the Conference Plank shows that companies are planning wage increases of 3% to 3.9% over the coming year, barely half the current rate of inflation.

“Many companies we spoke to saw their overall payroll barely move,” Pollak of ZipRecruiter said. Because of the pandemic retirements, ‘they lost their most experienced and highest paid people and replaced them with a younger cohort’ [Ivanova, 2022.02.22].

Companies are able to raise prices to boost profits in part because of an issue that Kristi Noem mentioned last year in one of her many rambling headlines but didn’t really follow-up: corporate concentration. We must look to Senator Elizabeth Warren to make the connection between unchecked corporate monopoly power and profit-driven inflation:

Senator Warren: Well, but let me put the question the other way around, then. Because we’re still doing Econ 101 here. If you are a company that has swallowed up most of the competition and cornered the market, is it easier for you to raise your customers’ prices and maximize your profits because you don’t have to worry about lose your business? In other words, it’s…you’ve lost market discipline.

President Powell: In principle, if you have no competition and you are a monopolist, yes, you can raise your prices.

Senator Warren: Agreed. And over the past year, we know that prices have risen due to supply chain issues, unexpected changes in demand for goods, and even higher labor costs.

But if companies just passed on these costs in highly competitive markets, would corporate profit margins have changed significantly?

President Powell: So many things affect–affect these–this calculation. But– in principle, you might be right, but.

Senator Warren: Well, that’s really not what we’re seeing right now. Today, nearly two out of three of the nation’s largest publicly traded companies are reporting higher profit margins than before the pandemic, which doesn’t give the impression that they are just passing on costs. So let me ask you: does this increase in profit margins, combined with greater market concentration across industries, suggest to you that some companies can pass on increased costs and, in same time, charge more and more to fatten their profit margins?

President Powell: Well, that could be true. It could also be, though, that the demand is incredibly strong and, you know, they’re raising the prices because they can.

Senator Warren: Well, that’s the point. They raise prices because they can, and they don’t compete. You know, market concentration has allowed giant corporations to hide behind claims of increased costs to fatten their profit margins. So the consumer pays more both because society faces higher costs and because, as you say, because society can raise prices.

The reason I raise this question is that higher prices have many causes, and we cannot ignore the role that concentrated corporate power has played in creating the conditions for higher prices. [Senator Elizabeth Warren, questioning Federal Reserve Chairman Jerome Powell, nomination hearing before U.S. Senate Banking, Housing, and Urban Affairs Committee, transcribed on and retrieved from Senator Warren’s website, 2022.01.11].

Want the root causes of inflation? Republicans promote corporate tax breaks that help concentrate wealth and power and resist regulation that would curtail that power. This unchecked concentration of wealth and power thus allows companies to outcompete and make you pay more for everything, with price hikes far beyond their actual manufacturing and shipping costs. This inflation is therefore presented by the republicansthat you have the chance to root out this fall.

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