Some Democrats suggest high inflation rates result from corporations raising prices.
Their suggestion is that capitalist greed is effectively all that is necessary to explain why prices are roaring ahead at a rate of 7% increases per year. Sen. Elizabeth Warren is particularly keen on making this case.
What happens when only a handful of giant grocery store chains like @Kroger dominate an industry? They can force high food prices onto Americans while raking in record profits. We need to strengthen our antitrust laws to break up giant corporations and lower prices. pic.twitter.com/DMa9Z7adFr
— Elizabeth Warren (@SenWarren) January 7, 2022
The fact Warren uses Kroger as her example is quite simply laughable. Grocery stores have extremely low-profit margins. At Kroger, the profit margin is 0.75% to 2.6%, depending on which period you want to use. This compares to some 12% profit margins for the S&P 500 or 35% plus at Microsoft. Profiteering at the expense of the everyday shopper?
Sorry, senator, you’re no economist.
But this corporate price gouging myth is also a somewhat dangerous idea. Luis Salas also said inflation is just capitalists trying to increase their profits. Not that you should reflexively know who Salas is, but he was the Venezuelan finance minister. He was too ignorant even for that socialist abyss to stay in office. His suggestion is best proved wrong by the subsequent 65,000% inflation rate that afflicted Venezuela in 2019.
What do economists say about the idea that inflation reflects price gouging by corporations?
They don’t like it. They reject the suggestion by 79 to 10 (with some undecided). On the idea that antitrust enforcement would solve inflation, Warren’s other insistence, it’s a stronger no: 84 to 4.
We are often told to listen to science rather than be seduced by the siren calls of populists. Well, the idea groceries are going up in price because the evil capitalists have become more greedy is a good example of deluded populism.
We should reject it.
