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Inflation is an international problem ... and anger at corporate price-gouging is international, too [1]
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Date: 2022-10-26
Another thing you wouldn’t know from headlines about inflation in the U.S. is that inflation is not just a U.S. problem. Germany has experienced a record 10.9% inflation. In the European Union overall, inflation hit nearly 11%, with food prices in particular rising nearly 16%. Inflation in the United Kingdom has been at a 40-year high at 10.1% overall, 14% for food. In both the U.K. and the EU, energy prices rose around 40%. Russia’s invasion of Ukraine has contributed to price increases on both wheat and energy.
Canada has also experience high inflation in 2022, and even as inflation eased in recent months, food prices remained high, prompting the Competition Board of Canada to announce that it would be looking into the issue. Canadian grocery chain Loblaw’s has been accused of "greedflation," as its first-quarter profits were up nearly 40% while prices soared. Loblaw’s announced a three-month freeze on prices of its store brands, but critics pointed out that it was freezing prices that had already risen substantially.
Inflation is an internal political problem for the leaders of every country suffering from it—France has seen major protests over the issue. But it’s very important context for consumers in all those countries to know that they’re not alone and to direct attention to the real causes. Causes like major companies raising prices in order to increase profits rather than solely because, say, the prices they are paying for labor or ingredients are going up by so much. This is quantifiable: Between 1979 and 2019, corporate profits contributed an average 11.4% to price increases in the nonfinancial corporate sector. From the second quarter of 2020 to the end of 2021, corporate profits contributed 53.9% to price increases.
And the report on the German supermarkets makes the point that one thing many of the countries experiencing inflation have in common are the very same multinational corporations. Is Mars, Inc. solely responsible for global inflation? Of course not. But it and other companies with soaring profit rates aren’t just affecting any one country. Profits at Exxon Mobil and Chevron and Conoco were up by more than 100% in the second quarter, so while Vladimir Putin is responsible for high energy costs in Europe especially, he’s not the only one.
Inflation is complicated and we shouldn’t pretend otherwise. But ignoring the role of corporate profits is just irresponsible.
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