A French economist for one of the world’s leading banks is pointing fingers at corporate greed for increasing inflation.
- Albert Edwards is a global strategist at Société Générale. He wrote in an April 4 note for the new edition of Global Strategy Weekly against “Greedflation.”
- He notes that corporate markups and profit have continued to increase at the same time that global inflation continues to increase the prices of foods and essential goods, using inflation as an “excuse” for price hikes.
- Fortune 500 companies saw record total profits of more than $1.8 trillion in 2022, with the Kansas City Federal Reserve noting that markups are continuing to increase, potentially making it a larger factor in the history of inflation than before, Fortune reports.
- Edwards has gone as far as to claim that price controls are necessary, a practice that historically has resulted in shortages and scarcity, although he notes that his colleagues disagree.
Why It’s Important
Edwards is warning that corporate-induced inflation could be a disaster if it is left unchallenged. “The end of Greedflation must surely come. Otherwise, we may be looking at the end of capitalism. This is a big issue for policymakers that simply cannot be ignored any longer.”
Edwards has joined an existing chorus of progressive critics who have blamed the precipitious growth of inflation on corporate greed, including President Joe Biden, Senator Bernie Sanders (D-VT), Senator Elizabeth Warren (D-MA), and former Daily Show host Jon Stewart. The progressive think tank Center For America Progress has echoed these claims, saying inflation should be addressed at the corporate level.
“Why aren’t we attacking corporate profit in any way? Because that’s been estimated to be 30% of inflation, 40% of inflation?” claims Stewart.
Backing Up A Bit
Senator Warren confronted Fed Chair Jerome Powell in a March Senate panel, arguing that the Fed’s interest-rate hikes are dangerous and that the ongoing inflation crisis is rooted in supply-chain stress, the effects of the ongoing invasion of Ukraine, and corporate greed. Warren warned that unemployment could jump to 4.6% by the end of this year amid a recession, an eventually Powell has admitted likely.
“Greedflation” is not a prognosis held up by all Democrats, most notably Treasury Secretary Janet Yellen. She broke with Democrats and addressed the claim last year and noted that “demand and supply are largely driving inflation” amidst President Biden’s attempts to combat gas companies from “price gouging.” Yellen notes that she trusts the Fed “first and foremost” to address the issue.
On the other side of the aisle, Republican politicians have noted that $1.9 trillion in pandemic stimulus spending has flooded the economy with too much money, devaluing the currency just as demand spiked as post-pandemic consumers rushed back into the market.
As University of Navarra economist Jose Azar tells the Associated Press, there are many causes of inflation, and corporate greed likely is not the sole or primary cause. “There are much more plausible candidates for what’s going on.”
High markups appear to be closing, regardless of claims of “greedflation.” As Axios noted in February, corporate margins have decreased as consumer demand has decreased, reflecting a cooling economy and inflation rates beginning to slow down. Quarterly net margins reported earlier this year reflected a drop to 11.3% in profits, down from 12.7% in 2021. This could reflect the Fed’s policies beginning to take effect.
“While the combination of demand down, cost up is historically rather unusual or at best temporary, it did impact our results negatively,” notes Whirpool CEO Marc Bitzer.