Playing the Inflation Blame Game

 

Robert Reich says the corporate sector is trying to punish workers for today's inflation problem. The UC Berkley prof and former US Labor Secretary writes that big corporations are exploiting inflation as a smokescreen in order to raise prices.

Inflation has broken out all over the world – the consequence of pent-up demand from more than two years of pandemic and of limited supplies of everything from computer chips to wheat, due to difficulties getting the world economy up and running.

Add in Putin’s war in Ukraine driving up world energy and food prices, and China’s lockdowns against Covid, and you get a perfect conflagration.

That’s not all. Big corporations are busily raising their prices because consumers have so little choice. Corporations are using inflation as cover.

Reich contends that, whether it's the fossil energy giants or the food giants, it's a scam to manipulate prices and drive up profits.

If markets were competitive, companies would keep their prices down to prevent competitors from grabbing away customers. But they’re raising prices even as they rake in record profits.

The Fed’s firehose is hitting none of this.

Meanwhile, we’re told not to worry because the labor market is doing just fine.

Rubbish.

Old School Profiteering as "Chamber of Commerce" Governments Look the Other Way.

There are two aspects to the labor market – jobs and wages. The number of jobs has been increasing nicely. Let’s hope this continues. But hourly wages have plummeted, when adjusted for inflation.

If the Fed keeps raising interest rates – even if the national economy avoids an official “recession” – most workers will fall even further behind.

The living standards of nearly everyone who borrows money are already dropping. Because of the Fed’s rate hikes, the average rate on credit card debt has reached 17.25% (up from 16.34% in March, before the Fed began raising interest rates). Rates on student loans, car loans and mortgages are also rising.

Reich wants government intervention, now. This could begin with windfall profits taxes to dampen the corporate sector's predatory instincts. 

Bolder antitrust enforcement – even the threat to block mergers and break up giant companies – could also reduce their ardor to raise prices.

Finally, higher taxes on the wealthy – such as Democrats seem finally ready to enact – will help dampen total demand, thereby dousing some of the inflation fire.

The Fed’s single tool for fire-fighting – interest-rate increases – is aimed in the wrong direction. It’s hitting working people rather than corporations responsible for most price increases (over and above the rising costs of global supplies).

We need to fight rising prices, not working people.

Bastards, indeed.