The special sauce in McFlation
Fairfield County has been making national news recently as media outlets both large and small have picked up on the now viral outrage over local $18 McDonald's combo meals.
McDonald's menus are often used as national financial indicators, making it easy for lazy reporters to illustrate to their noneconomically savvy audience how they're being hurt or helped by rising or falling prices. It's easy because we all go to the grocery store, we know how much ground beef, cheese and condiments cost. And it's pretty effortless for most folks to look at a Big Mac with fries and a drink and just know instinctively that an $18 price tag is outrageous.
We also have decades of collective memory to reflect on. In 1980 a McDonald's hamburger, with an average meat weight of just short of 4 ounces, cost 40 cents. This at a time when ground beef was selling for somewhere between $1.30-$1.50 per pound. Today, a pound of basic McDonald's grade ground beef sells for $4. Now, do the math. If in 1980 Mickey D's sold burgers for roughly what it cost them in meat, then using that same methodology in 2024, a hamburger today should sell for around $1.00. So how do we get to $18, even if we generous double that dollar for a Big Mac, and add in another buck for fries and a drink that literally costs pennies? Holy cow, the answer is so obvious … it must be Joe Biden and his inflation!
Except it's not, and our outrage is misdirected. We want to blame inflation, which makes it political, or the supply chain or transportation issues, but rarely do we look at rising prices for what it really is. Corporate greed, and trying to get away with price gouging simply because companies know they can. And the last couple of years, big corporations have been able to use the inflation boogeyman, the mysterious supply chain, COVID and Ukraine, as shields to hide behind, knowing we will accept these logical sounding excuses because Americans love simple answers to complex problems.
But here's the thing, COVID greased the skids for American consumers to accept on faith these nebulous logistical or supply challenge excuses whenever your favorite cereal or toilet paper manufacturer had a shortage or price increase. Once we did that, corporate bigwigs saw this acceptance as a unique opportunity for price gouging. So, prices were raised, resulting in record profits designed to reward shareholders and corporate moguls, and narratives were quickly concocted that blamed the prices on inflation, when in reality, the price gouging is what triggered the inflation.
Take it from former Secretary of Labor Robert Reich, who said, “Prices remain sky-high because corporations got hooked on price gouging and won't give it up,” blaming, “corporations with enough monopoly power to raise their prices and fatten their profit.”
Like cereal giant Kellogg's. According to Accountable.US, “Kellogg's CEO found an angle to exploit an industry-driven foodinsecurity crisis to bulk up his company's profits.” For example, the Kellogg's variety pack that sold for $10 in 2020, now costs $29.26 on Amazon. There is no way that can be blamed on supply-chain issues. That's greedflation, which creates inflation.
Kimberly-Clark's CFO told his shareholders, “Pricing has continued to be the big driver behind our top-line growth over the last three quarters.” And remember last year's egg crisis? Shortages and avian flu fears freaked people out, but Cal-Maine, the nations' largest egg producer, saw profits jump 718% as they deliberately reduced output and raised prices significantly. But if their rationale for price hikes were genuinely inflationary, as in the creep of rising prices over time due to external forces, then profits would remain static, and wouldn't be growing.
Using this lens then, why is a Big Mac Meal in Fairfield County $18? Because they can.
Blame inflation, blame the president, blame the supply chain, or the fact that McDonald's is under pressure to actually pay a living wage. Blame anything, except the business owner. Or the corporation. And remember, it's not just McDonald's, it's across the board. Keep that in mind the next time you have grocery store sticker shock. It's less about politics and far more about corporate greed and payouts to the 1%.