Excuseflation: How Large Companies are Profiting from Inflation at the Expense of Working People
The Covid-19 pandemic has had a significant impact on the global economy, leading to supply chain disruptions and other factors that have contributed to inflation in many countries, including the United States. However, blaming inflation on supply shocks alone is oversimplifying the issue, as large companies and monopolies in the economy are also engaging in price-gouging and profiteering.
Many large companies are using the excuse of inflation to raise prices far in excess of any increase in their costs, leading to windfall profits at the expense of working people. This is a form of price-over-volume strategy, where companies raise prices knowing that they’ll sell fewer goods, but can make up the losses by extracting much larger sums from the professional and managerial class.
Several large American companies, including Pepsi, Home Depot, Walmart, and Dollar Tree, have been singled out as hotspots of price-over-volume strategy. This strategy makes everyone worse off, as low-income people are priced out of the market, and high-income people are ripped off. Only the shareholders benefit.
Excuseflation allows companies to make excuses for raising prices far in excess of their cost increases. Overlapping emergencies, such as the Covid-19 pandemic and bird flu outbreaks, have allowed companies to raise prices and then keep them high, even after the emergencies have ended. This is called “sellers inflation,” and it allows companies to extract more money from consumers, even when wholesale prices have stabilized.
One example of this is Wingstop, whose chicken prices have shot up by 125% in a year, with zero pushback from consumers. Wholesale chicken prices are down 50%, but Wingstop’s prices are still high, and its stock is up 250% from its Covid crisis low.
Another example is Cal-Maine Foods, a monopolist that sells all the eggs in the US. When egg prices shot up due to bird flu outbreaks, Cal-Maine Foods was able to blame it all on the outbreak. However, wholesale prices stabilized, but prices kept going up, and Cal-Maine Foods increased its margins by 110% in a single year. Its share price also climbed by 47%.
In conclusion, blaming inflation on supply shocks alone is oversimplifying the issue. Large companies and monopolies in the economy are engaging in price-gouging and profiteering, using the excuse of inflation to raise prices far in excess of any increase in their costs. This harms working people and makes everyone worse off, as low-income people are priced out of the market, and high-income people are ripped off. Policymakers need to address the problem of monopolies and promote competition in markets to help lower prices and increase consumer choice. This will benefit working people and lead to a healthier and more vibrant economy.
