by Erik Dolson
Here’s my theory about inflation.
During the COVID crunch, waitresses and dishwashers and hotel staff and assembly line workers and retail clerks all saw they were dispensable… when the shutdown happened, they had no job.
“Sorry about your rent and kids’ peanut butter and car insurance,” they were told by corporations. This punched a pretty big hole in the concept of “loyalty.”
Yes, companies need to make money or they go out of business. But CEOs were still raking it in, and it’s easy to wonder why some cash had not been set aside to cover a sudden decline in business. (Because our system rewards companies that take on debt, spend it quickly, buy their own stock and grow fast).
Government stepped in and sent out checks to workers and postponed evictions, true enough. This had an impact, and wages did go up when businesses sent word “we’d like you back” to people wondering how in hell they’d ever build a future doing what they’d done before.
But corporations saw those checks, too, and knew that without the constraint of “barely getting by,” Americans would pay more for what they needed. Companies raised prices because this is America, and they could.
Yes, ships were waiting to unload off the Port of L.A., and labor held out for a little more in a paycheck. But a good portion of the price increases were simply because of profiteering.
And there’s proof.
Last week, public corporations (with shareholders owning stock) were required to report financial results. They were staggering.
Here are some thoughts presented by Matt Taibbi, writing on Substack:
“…financial data firm FactSet released an eyebrow-raising report about the Covid-19 economy.
“The firm noted that companies in the S&P 500 were set to post a net 12.9% profit in the third quarter of 2021. They pointed out this was the second-highest result since the firm began tracking the number in 2008… The only better result? The previous quarter, i.e. Q2 2021, when net profits sat at 13.1% overall…
“Corporate profits in the second quarter of 2020 sat at $1.58 trillion. One year later, that number was $2.69 trillion, a roughly 71% increase. How many stories have you read in the last year telling you about how well the top end of the income distribution has been doing, while the rest of the country seemed to be falling apart?
“… billionaire wealth has risen 70% or $2.1 trillion since the pandemic began? How much did you hear about last year’s accelerated payments to defense contractors, who immediately poured the “rescue” cash into a buyback orgy, or about the record underwriting revenues for banks in 2020, or the “embarrassment of profits” for health carriers in the same year, or the huge rises in revenue for pharmaceutical companies like Pfizer and Johnson & Johnson, all during a period of massive net job losses?
“The economic news at the top hasn’t just been good, it’s been record-setting good, during a time of severe cultural crisis…
“… It’s time to start wondering if maybe it’s not a coincidence that politicians and pundits alike are pushing us closer and closer to actual civil war at exactly the moment when corporate wealth extraction is reaching its highest-ever levels of efficiency…
“Keeping the (working man and woman) at each other’s throats instead of pitchforking the aristocrats is an old game, one that’s now gone digital and works better than ever. That might be worth remembering … ahead of whatever other hyper-publicized panic comes down the pipeline next.”
I’m less political than Matt Taibbi, but the numbers are there for anyone to see. Record stock prices. Record profits. It’s not just inflation… it’s profiteering.
But, it’s important to note that there is a potential solution.
Corporate America has a well funded machine for convincing us that even though they just raised the price 10 or 20 percent, we NEED a new phone or pan or specialty knife or car or Ruger or block of cheese…
Do we? What would happen if we bought less stuff. Wasted less?
I think we could postpone one or more of our purchases. Not everything. Maybe not even a lot of things. But we could, perhaps, be more thoughtful about how we shoveled our money in their direction. With more jobs available than people willing to fill them, this wouldn’t directly impact employment.
But it might show corporations that we are not just consumers or “markets,” but are part of the same society that they inhabit, even as they make their next decision on who to lay off next, and when.