Greedflation By James Reed
I think it was a book by philosopher Mario Bunge (1919-2020), who tried to create a systematic scientific world view, where I saw it, but he had a view of inflation where the cause was not cost push or demand pull, but corporate greed, doing what the market could bear. How else to account for simple price rises like frozen blueberries increasing by a dollar in price over a few days, then another dollar. The blueberries come from Chile or Canada in large containers, and are then distributed at the depots. So, it is not resource shortages, or an increase in transport costs. It can only be coronations trying to squeeze as much money as they can out of shoppers. That theory of inflation is now known as greedflation.
“Large corporations have fuelled inflation with price increases that go beyond rising costs of raw materials and wages, pushing shopping bills to record highs, according to an analysis of hundreds of company accounts.
Highlighting a trend dubbed “greedflation”, the research indicates that supermarkets, food manufacturers and shipping companies are among hundreds of major firms who have improved their profits and protected shareholder dividends, giving an extra lift to prices, while the cost of living crisis has meant workers face the biggest fall in living standards in a century.
Analysis of the top 350 companies listed on the London Stock Exchange by a team of researchers at Unite, the UK’s largest private sector trade union, showed that average profit margins – a company’s revenue above the cost of sales – rose from 5.7% in the first half of 2019 to 10.7% in the first half of 2022.
“This means the average profit margin of firms in the FTSE 350 jumped 89% in the first half of 2022 compared with the first half of 2019,” the report said.
In the UK, Tesco, Sainsbury’s and Asda made combined profits of £3.2bn in 2021, almost double pre-pandemic levels, Unite’s 170-page report shows. Global food manufacturers such as Nestlé have also increased profits and margins over the last 18 months.
Higher profits margins are the result of “tacit collusion” by large companies, adding to the prices of hundreds of goods and services that were already under pressure after the Covid-19 pandemic and Russia’s invasion of Ukraine, the report said.
“Profiteering is a reflection of Britain’s broken economy. From price gouging to state-licensed monopolies in energy and utilities, the choices made by corporations are revealed to have caused historic ‘price spiralling’ – and governments are letting them do it,” it said.
Unite said it had also examined the accounts of international companies that sell services and materials that directly affect UK inflation figures.
“The four global giant agribusiness corporations that dominate crucial crops such as grains – ADM, Bunge, Cargill and Louis Dreyfus – saw profits shoot up 255%, making a combined $10.4bn in 2021. The world’s top 10 semiconductor manufacturers made £44bn profit between them – 96% more than in 2019,” the report said.
Tesco and Sainsbury, which together have a 43% share of the grocery market, are on course to make large profits again this year. Tesco said it expected to make profits up to £2.5bn this financial year, and Sainsbury indicated that it would hit almost £700m.
Sharon Graham, Unite’s general secretary, said households were suffering from a systemic problem. “Our research exposes where and how the economy is being rigged against workers – from supermarkets to energy bills, oil refineries to transport, we’re all paying the price,” she said.
Graham said she was concerned that policymakers in the Bank of England and the Treasury were focused on workers’ wages as a driving force behind rising prices when the analysis of corporate profits showed boardrooms played a significant role – insulating themselves from the impact of higher raw material costs by passing on price rises.
The report is an update on figures published last summer by Unite that revealed the growth of corporate profits while inflation soared and economic growth slowed to a halt across the industrialised world.
Graham said: “The profiteering crisis isn’t just a few bad apples – it’s systemic across our broken economy. Entire industries are choosing to take advantage of a crisis, resulting in the spiralling prices of goods we all need.”
The supermarket chains included in the report denied that they were partly to blame for rising prices. A spokesperson for Sainsbury’s said: “We are acutely aware of the pressures facing millions of households right now, and our number one priority continues to be doing all we can to keep prices low for our customers.”
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