Narrative on inflation

Conventional reporting on the current inflation mostly blames the pandemic, both the 2021 stimulus package and barely explained supply chain issues. Plus, the Russian invasion of Ukraine, which led to oil cutoffs, another factor in higher gas prices. However, those prices have been dropping for a month, not that Fox News or Republicans running for office will admit that fact.

Supply chain bottlenecks are largely related to an over reliance on a global network aggravated by pandemic factory shutdowns, notably in tech products like semiconductors. Fewer acknowledge what progressive economist Robert Kuttner calls “the 40-year folly” of excessive outsourcing for cheaper labor overseas, and neoliberal policies of deregulating links in the chain that delay the unloading of goods from ports, and rail and trucking transport that exacerbated Covid disruptions.

The right wing, of course, blames Biden and Democrats for the March 2021 pandemic stimulus package that provided US families critical financial assistance following pandemic income losses, as well as workers and unions demanding wage increases.

The anti-recession stimulus was vital to millions of families, especially those who are low-income, single women and workers of color. Moreover, inflation was hardly confined to the United States, as John Oliver noted this week. Britain and Germany have seen the highest inflation rates in four decades, as well as Eastern Europe, Japan, and other countries also experiencing high inflation.

To dig deeper, always look closely at who controls the US economy, Wall Street and big corporations generally through their profiteering practices and their enormous influence over policy makers in Congress and state governments. Corporate profits, Los Angeles Times columnist Michael Hiltzik points out, “have played a much larger role in fueling inflation than wage increases or the currently low unemployment rate. Wages have crept higher over the last year, but the increases have trailed inflation, which is why so many workers and their families are feeling the sting of higher prices. Corporate profit margins, however, have rocketed into the stratosphere, outpacing the inflation rate and pulling it higher.”

Over the last full fiscal year, 53.9 percent of what corporations are charging for their products have gone to profits while only 7.9 percent went to unit labor costs, according to Economic Policy Institute research.

How did the profits get so high? By corporations exploiting the inflationary cycle to jack up prices to massively swell their profit margins to fatten executive compensation packages and shareholder returns. While the 12-month inflation rate rose 9 percent in July, meats, poultry, fish and eggs prices rose 12 percent, electricity increases hit 14 percent, airline fares soared by 34 percent, and piped gas services exploded by 38 percent.

Overall, “markups and profits skyrocketed in 2021 to their highest recorded level since the 1950s … the fastest annual pace since 1955,” wrote Mike Konczal and Niko Lusiani in a June research article for the liberal Roosevelt Institute.

“Here’s an inflation remedy you’re not hearing much about: Reduce corporate profits,” Hiltzik wrote in late June.

That’s not the remedy demanded by Wall Street and a long list of corporate and right-wing economists, pundits and think tanks, and those typically in charge of administrative economic policies and federal agencies like the Federal Reserve. Their solution to inflation, based on decades of conservative political dogma, is always to punish workers and families by lowering their income through higher interest rates intended to prod companies to slash wages and jobs so workers and their families would have far less to spend, even on the most basic needs, such as food, housing, and healthcare. That’s what they mean by “reducing consumer demand”.

Excerpted: ‘The Corporate Narrative on Inflation Is Bogus’.

Courtesy: Commondreams.org