Is it about inflation or corporate price gouging?
Hayri Alper Arslan hasn’t experienced sticker shock the same way most of us have. It’s all relative. Arslan, an assistant professor of economics at the University of Texas at San Antonio who got his doctoral degree at Vanderbilt University, is from Turkey. He’s used to prices rising and fluctuating with a volatility incomparable to ours.
Still, when he’s in the checkout line, he estimates he’s paying about 15 percent more.
I wanted to know if inflation is causing prices to increase or whether corporate pricing — gouging and greed — is happening.
Without data, Arslan says it’s hard to know, and data is hard to come by.
But what Arslan will say is that when inflation rises, corporations and companies have an “opportunity.”
They can raise prices beyond their costs and thus increase their profit margins.
When prices are stable, he said, a company could try to charge more for a product. But a consumer knows when she’s being overcharged and takes her business elsewhere.
In periods of inflation, prices rise across the board so quickly it creates an instability that can translate into consumer confusion. Rising prices make comparison shopping fruitless.
All of it creates an enticing situation for companies — and an incentive — to raise prices, potentially increasing profit margins above costs — way above costs.
Companies and corporations also can deflect blame for rising costs on a host of valid reasons, including inflation, the coronavirus pandemic, global supply chain disruptions, labor costs, labor shortages and Russia’s invasion of Ukraine.
Isabella Weber, an economics professor at the University of Massachusetts Amherst, has studied pricing policies and recently spoke on National Public Radio. I drove slower to listen to the entire report.
She said supply chain issues are real.
But that doesn’t mean price increases have been justified “by the increase in costs,” she said. “As a matter of fact, what we have seen is that profits are skyrocketing, which means that companies have increased prices by more than cost.”
During calls to investors about quarterly earnings, she said CEOS are bragging about how they’ve “managed to jack up prices more than their costs” to deliver more profits.
The White House responded, pointing to the difference between what oil companies paid for unfinished gasoline from refineries, which dropped by 5 percent, and what they charge at the pump, up by 3 percent, Weber said.
Weber said oil companies didn’t pass along the benefits of price decreases that they enjoyed in November.
The Federal Trade Commission is investigating.
Lindsay Owens, executive director of the Washington, D.c.-based Groundwork Collaborative, whose mission is to develop and advance a progressive economic worldview, was more blunter.
The headline on her New York Times commentary said, “I Listened In on Big Business. It’s Profiting from Inflation, and You’re Paying for It.”
“Curious how CEOS were justifying higher prices, my team and I started listening in on hundreds of earnings calls, where, by law, companies have to tell the truth,” she writes.
“Executives from the nation’s largest publicly traded companies had a lot to report to their shareholders about supply chain snarls, product shortages and rising prices — mostly that they were very good for business.
“What was striking in the earnings calls was not the supply chain shortages or companies’ typical profit motives; it was the plain old corporate profiteering.”
Some corporations have announced modest increases and losses in quarterly earnings, for sure, but others are doing very well.
A headline from CNBC on Thursday said, “Shell reports highest quarterly profit since 2008 on soaring commodity prices.”
None of this may represent price gouging. But it’s hard to discount it altogether, especially when some of the nation’s richest corporate leaders grew richer during the pandemic.
It’s hard to discount suspicions of gouging when there are too few labor unions around to better advocate for workers, and when the poorest people in the country are children.
UTSA’S Arslan said his students are feeling the crunch. He reads about their worries on discussion boards.
It’s why the San Antonio Food Bank remains such a necessary institution and why so many universities and colleges have set up food pantries.
It’s easy to see corporations as the bad actors, but not so much when the shoe fits.