Profit-led inflation
Robert Reich connects the dots:
The underlying problem isn’t inflation per se. It’s lack of competition. Corporations are using the excuse of inflation to raise prices and make fatter profits.
In April, Procter & Gamble announced it would start charging more for consumer staples ranging from diapers to toilet paper, citing “rising costs for raw materials, such as resin and pulp, and higher expenses to transport goods”.
But P&G is making huge profits. In the quarter ending 30 September, after some of its price increases went into effect, it reported a whopping 24.7% profit margin. It even spent $3bn during the quarter buying its own stock.
It could raise prices and rake in more money because P&G faces almost no competition. The lion’s share of the market for diapers, to take one example, is controlled by just two companies – P&G and Kimberly-Clark – which roughly coordinate their prices and production. It was hardly a coincidence that Kimberly-Clark announced price increases similar to P&Gs at the same time P&G announced its own price increases….
You can see a similar pattern in energy prices. If energy markets were competitive, producers would have quickly ramped up production to create more supply, once it became clear that demand was growing. But they didn’t.
Why not? Industry experts say oil and gas companies saw bigger money in letting prices run higher before producing more supply. They can get away with this because big oil and gas producers don’t operate in a competitive market. They can manipulate supply by coordinating among themselves.
In sum, inflation isn’t driving most of these price increases. Corporate power is driving them.
Read more here.
How the blues blew it
There’s a huge difference between talking the talk and walking the walk. The record of “blue” states on housing, taxation, and education is, well, enough to make you wanna sing the blues.
Watch this powerful video here.
How Democrats lost the working class
It’s not just a matter of “culture wars,” explains Robert Reich:
Both Clinton and Obama allowed the power of the working class to erode. Both ardently pushed for free trade agreements without providing the millions of blue-collar workers who thereby lost their jobs any means of getting new ones that paid at least as well.
They stood by as corporations hammered trade unions, the backbone of the working class. Both refused to reform labor laws to impose meaningful penalties on companies that violated them or enable workers to form unions with simple up-or-down votes. Union membership sank from 22% of all workers when Clinton was elected to fewer than 11% today, denying the working class the bargaining leverage it needs to get a better deal.
The Obama administration protected Wall Street from the consequences of its gambling addiction through a giant taxpayer-funded bailout but let millions of underwater homeowners drown.
Both Clinton and Obama allowed antitrust to ossify – allowing major industries to become more concentrated and hence more economically and politically powerful.
Finally, they turned their backs on campaign finance reform. In 2008, Obama was the first presidential nominee since Richard Nixon to reject public financing in his primary and general-election campaigns. He never followed up on his re-election campaign promise to pursue a constitutional amendment overturning Citizens United v FEC, the 2010 supreme court opinion that opened the floodgates to big money in politics.
What happens when you combine freer trade, shrinking unions, Wall Street bailouts, growing corporate power and the abandonment of campaign finance reform? You shift political and economic power to the wealthy and you shaft the working class.
Read more here.
Dietrich Boenhoeffer on the pandemic of his time
“The ultimate test of a moral society,” wrote Dietrich Boenhoffer before being executed in a Nazi concentration camp for plotting against Hitler, “is the kind of world that it leaves to its children.” Here’s what he had to say about the “stupidity” pandemic of his time:
Source: Sprouts Schools, https://sproutsschools.com/bonhoeffers-theory-of-stupidity/.
Fed economist questions conventional wisdom
Check out this from senior Federal Reserve economist Jeremy Rudd:
Mainstream economics is replete with ideas that “everyone knows” to be true, but that are actually arrant nonsense. For example, “everyone knows” that:
• Aggregate production functions (and aggregate measures of the capital stock) provide a good way to characterize the economy’s supply side;
• Over a sufficiently long span—specifically, one that allows necessary price adjustments to be made—the economy will return to a state of full market clearing; and,
• The theory of household choice provides a solid justification for downward-sloping market demand curves.
None of these propositions has any sort of empirical foundation; moreover, each one turns out to be seriously deficient on theoretical grounds.
$2.3 trillion down the drain
On top of the human costs, the 20-year US war in Afghanistan came with a huge financial price tag:
Source: The Costs of War Project.
War, like famine, brings suffering to many, but to some it means profits. Read who lined their pockets here.
What would $163 billion a year buy us?
The U.S. Treasury Department reports that tax evasion by the top one percent amounts to $163 billion per year:
The wealthiest 1 percent of Americans are the nation’s most egregious tax evaders, failing to pay as much as $163 billion in owed taxes per year, according to a Treasury Department report released on Wednesday.
A really big idea
In his new book, Ours, Peter Barnes lays out a really big idea:
Universal property is a birthright belonging equally to all. It is a complement to private property, not a replacement. In one form or another, it represents the interests of future generations and all living persons together.
We need universal property because markets today are grievously out of balance. They consistently over-reward a small minority of wealth owners at the expense of the majority of humans and nature. Universal property would correct that imbalance and transform the way markets behave.
Read more about it here.
Heads they win, tails the government pays the tab
Bob Pollin and Econ4’s Jerry Epstein dissect free-market hypocrisy to show how bailouts backstop the wealthy and the powerful:
The most basic tenet undergirding neoliberal economics is that free market capitalism—or at least some close approximation to it—is the only effective framework for delivering widely shared economic well-being….
In reality neoliberalism has depended on huge levels of government support for its entire existence. The global neoliberal economic order could easily have collapsed into a 1930s-level Great Depression multiple times over in the absence of massive government interventions…. Bailouts have not only repeatedly rescued neoliberal capitalism during periods of crisis, but they have also, as a result, reinforced neoliberalism’s most malignant tendencies. In 1978, just prior to neoliberalism’s rise, the CEOs of the largest 350 U.S. corporations earned $1.7 million, 33 times the $51,200 earned by the average private-sector non-supervisory worker. As of 2019 the CEOs were earning 366 times more than the average worker, $21.3 million versus $58,200
This curious conjunction—theoretical disdain for government alongside practical reliance on it—has amounted to champagne socialism for big corporations, Wall Street, and the rich and “let-them-eat-cake” capitalism for most everyone else.
Read more here.
