It is difficult to avoid the topic of inflation in today’s discourse. As of November 2022, the Bureau of Labor Statistics’ Consumer Price Index, the most widely cited measure of year-over-year consumer prices, rose at a rate of 7.1%. This is down from a June 2022 peak of 9.1%, but regardless inflation remains at its highest point since the early 1980s.
The most viewed news channels in America carefully direct the public debate regarding the causes of this remarkable level of inflation. Since the mass media are corporations themselves, they do not frequently publish criticism of the capitalist economic system that they rely on for their profits. So instead of bringing into question the entire puzzle, the media blames a handful of supposed causes. Among them are rising workers’ wages, COVID-19 supply chain shortages, and the war in Ukraine. However, blaming inflation on these developments excludes the widely cited possibility that corporate profiteering might be the reason for today’s price hikes.
In the last year, the Bureau of Labor Statistics identified an increase in wages and salaries for all employees. The mass media has blamed this increase in labor costs with forcing corporations to raise prices to compensate for lost revenue. This causation is valid in sectors like small-scale agriculture where margins are tight, but less acceptable for profitable private corporations. Nevertheless, the reported increase in wages and salaries for all employees is misleading, for it includes the earnings of corporate executives who have received a disproportionate increase in compensation compared to non-supervisory employees in recent years. According to the Economic Policy Institute, the CEO-to-worker compensation ratio was 307-1 in 2019, 366-1 in 2020, and 399-1 in 2021. Hourly earnings of non-supervisory employees corrected for inflation actually decreased 2.9% from October 2021 to October 2022. Contrary to the news media’s narrative, prices are increasing faster than wages, allowing corporations to boost profits while workers struggle to afford basic staples.
What about COVID-19 supply chain shortages? Due to the onset of the COVID-19 pandemic, the U.S. unemployment rate rose to 14.7% by April 2020, a level unseen since the Great Depression. Global production slowed as populations quarantined and demand shifted to specific goods, ultimately leading to supply shortages. Yet, corporations were not adversely impacted by the pandemic in the way that citizens were. On average, the top 25 U.S. companies profited nearly 11% more in 2020 than in 2019. From January 2020 to October 2021, the U.S. experienced perhaps the largest upwards wealth transference in its history. American billionaires collectively increased their wealth by $2.1 trillion, or 70%, while 22 of the nation’s most well-known companies grew shareholder value by $1.5 trillion. Even with the supply shortages, job losses, and mass death brought on by COVID-19, multinational corporations profited while growing shareholder wealth immensely, leaving little justification for continuing to increase prices in 2022.
The war in Ukraine and ensuing sanctions against Russian exports have once again caused supply shortages particularly relating to food. Prices have risen to historic levels as importers lack crucial agricultural products from the two warring countries. However, much less reported is the commodity speculation that may be contributing to these overall price increases as well. Commodity speculation occurs when financial institutions bet on where food prices will fall in the future. Since the early 1990s, Western financial institutions have been purchasing swaths of Eastern European and Russian farmland to be turned over to private agribusiness. Hedge funds, private equity firms, and large banks profit extensively by funding food production for export out of these areas and subsequently speculating on their sales prices. As massive amounts of capital flow in and out of various commodity markets, food prices fluctuate erratically. This system, whose edifice was built long before the war in Ukraine, has been accredited for exacerbating world hunger and contributing to food price spikes in 2008, 2009, 2011, and today.
The mass media does us a disservice by halting our collective understanding at these three supposed causes of inflation without providing additional context to the whole puzzle. According to an investigation by the U.S. House Committee on Oversight and Reform, American corporations have been experiencing their highest levels of profit in 70 years while “using the cover of inflation to raise prices excessively…” It should be widely mentioned that under capitalism there is a need for corporations to outweigh costs with revenues in order to accumulate profit, expand into new markets, and grow shareholder wealth. Perhaps this apathetic institutional necessity is to blame for 2022’s price increases.
William Ryan is a recent graduate of UMass Amherst and lives in Wilbraham.