President Joe Biden has the misfortune to be president at the moment when corporate America has decided to get together and gouge American consumers.
That, at least, is the story the White House and its allies, most prominently Sen. Elizabeth Warren, want to tell.
The White House has particularly targeted meatpackers over the past several days. Its economists put out an analysis slamming meat processing companies for excessive profiteering, and press secretary Jen Psaki blamed “the greed of meat conglomerates” for rising prices.
The oil-and-gas industry has come in for a similar pounding, and Elizabeth Warren’s theory is that the overall dynamic of rising prices and corporate profits isn’t “simply some inevitable economic force of nature — it’s greed. And, in some cases, it is flatly illegal.”
This is an absurdly reductive depiction of the U.S. economy, as if a broad-based, multi-causal economic phenomenon is being mainly or at least significantly driven by a handful of corporate malefactors wielding nearly unchecked power over the consumer price index.
Did the American economy, after 30 years of notably low inflation, suddenly become more concentrated, such that companies could arbitrarily jack up prices? And why was it that this economic power made itself felt just as supply chain disruptions took hold and the COVID-19 relief bill further stoked demand in an already growing economy?
If greedy corporations are to blame, they are at work across the board. In November, food prices were up 6.1% from the year before, with meat, poultry, fish and eggs up 12.8%, cereals and bakery products up 4.6%, and non-alcoholic beverages up 5.3%. Energy increased 33%. Prices of used trucks and vehicles went up 31.4%.
It is true that most big companies have increased their profit margins. But demand is higher than it was pre-pandemic in many sectors of the economy, providing a strong foundation for profitability. On top of this, a standard feature of an inflationary environment is companies seeing how much they can raise prices without hitting a wall of consumer resistance.
Companies obviously want to recoup current increased costs for labor and production and insulate themselves from increased costs to come. Surely, there’s sheer opportunism, too. Yet if persistent inflation takes hold, the recent price increases and enhanced profits will be eroded away again by yet-higher wages and increased costs.
As for the meatpackers, the White House complains that just four companies dominate the market. But four companies have had an outsized market share over the past 25 years. What’s happened during the pandemic is that there has been high demand that, combined with labor shortages at meatpacking plants, has disrupted supply. Increased demand and limited supply, of course, equals rising prices.
The situation is basically the same when it comes to oil and gas. Global demand has increased, while global supply hasn’t caught up. If companies had the ability to set prices without regard to market conditions, they never would have let prices fall so much during the pandemic and presumably wouldn’t be satisfied today with prices that aren’t any higher than they were in 2014.
All the hokum about the causes of inflation is basically a confession of impotence. If the Biden administration had a good story to tell about how it’s fixing inflation, it wouldn’t need to create cartoon villains. It would be better served by focusing on a whole host of barnacles on the U.S. supply chain — from union rules and environmental laws that have hampered U.S. ports and other infrastructure to the Jones Act, which increases the costs of shipping, to the foolish tariffs on truck chassis at a time when they are in short supply.
Of course, all these measures would be politically painful to address, and none would be a magic bullet. It is easier to pretend that, sometime earlier this year, corporate America suddenly decided, out of nowhere, to become greedy.
Rich Lowry is on Twitter @RichLowry