Of all the events of 2022, global inflation may have had the biggest impact on ordinary households.
In the February 2022 article in this series, we covered the supply chain disruptions caused by the coronavirus pandemic and price trends pushed up by rising energy and raw material prices. He touched on the fact that the turmoil in the economy led to further price increases.
In addition to these factors, the “Great Resignation” phenomenon that occurred when workers reconsidered their livelihoods in the wake of the COVID-19 crisis made labor shortages permanent, and labor costs rose. has been a major factor.
The Federal Reserve (Fed) has hiked interest rates at an unprecedented rate, with the belief that rising wages will cause inflation and that interest rates need to be raised to stop inflation. It happened.
I myself spent more than half of last year in the United States, and the impact of inflation was great. It has been said that wages have risen accordingly, but compared to the extent of price rises, the rate of wage increase is nothing but water.
Gasoline prices have soared, long lines have formed in front of relatively cheap gas stations, and more people have started carpooling to get to the supermarket. Rising food prices and labor costs have raised the cost of dining out, resulting in fewer meetings at restaurants and more home parties, while people involved in the food service industry have been screaming. The term “shrinkflation,” in which the quantity or size of goods shrinks as prices rise, has also appeared.
The rapid depreciation of the yen has caused serious lamentation, especially among those who earn their salaries and compensation in Japanese yen, but many believe that given the coronavirus pandemic, war, and other geopolitical factors, it was inevitable that prices would rise. seemed to accept it.
Exxon records record profit after “price hike”
In the United States, gasoline prices rose around the summer of 2022, hitting consumers’ lives directly. But in the shadows, ExxonMobil posted record quarterly profits.
There was a point I had overlooked myself with these narratives. That is, the end consumer’s price for goods and services has risen more than the rise in various costs.
That became clear at the end of October 2022, when oil giant Exxon Mobil announced its quarterly results.
Especially last summer and fall, American consumers gasped at rising gas prices, which Republicans and many conservative commentators blamed on economic sanctions against Russia and the policies of the Biden administration.
Nonetheless, ExxonMobil posted its best quarterly profit since its inception 152 years ago. The company’s sales in the third quarter of 2022 are 112 billion dollars (approximately 14.89999 trillion yen, converted to 1 dollar = 133 yen), more than doubling from the same period of the previous year, and net income is 19.6 billion dollars (approximately 2 trillion yen). 600 billion yen).
At the financial results announcement, CEO Darren Woods cited increased oil production through capital investment as a factor behind the strong performance. I was receiving a benefit called a loan. ExxonMobil’s profits are priced into the retail price of gasoline, which is also considered “price-gouging.”
The company also returns to shareholders a dividend of $0.91 per share, the second highest among companies on the S&P 500. “There’s been a lot of talk in our industry about giving some of our profits back to the American people, and that’s exactly what we’re doing,” Woods said.
The remark sparked controversy, with President Biden tweeting, “I can’t believe I have to say this, but returning profits to shareholders is not the same as lowering prices for American families.” bottom.
By the way, ExxonMobil clarified in the documents submitted to the SEC (Securities and Exchange Commission) in December 2022 that it will increase the compensation of executives below Woods.
‘A little inflation is good for business’
Since there was no conspicuous reluctance to buy, companies were able to easily raise prices.
Piggybacking is not unique to ExxonMobil or the energy industry. 2022 profits announced by companies in industries that have a high impact on consumer finances, such as retail (including groceries), consumer goods and raw materials, will outweigh increased costs due to supply chain disruptions, higher energy and labor costs. indicates that was factored into the price.
According to the Roosevelt Institute, a New York think tank, price hikes by American companies in 2021 represent the largest profit margins since 1955.
In addition, according to Groundwork Collaborative, a progressive think tank that pursues corporate social responsibility by summarizing the statements of corporate executives to investors and shareholders, an executive at Kroger, a major supermarket chain, said, “A little inflation is bad for our business. Good thing,” and many CEOs and executives have made statements to the effect that they welcome inflation, which allows them to boost profits by piggybacking on prices.
While the corona crisis has pushed up prices, it has also proved that many consumers will accept higher prices and continue to consume.
Especially from 2020 to 2021, general households who received various forms of support and loans for companies and individuals continued to consume without restraint, and temporary shortages of goods occurred, leading to a state of emergency. The number of consumers stocking up on items to prepare for the future has also increased. Large companies and chains took advantage of consumer trends to continue spending even when prices rose, and continued to raise prices.
Inflation caused by corporate greed
The net worths of some of the world’s top 10 billionaires, including Amazon founder Jeff Bezos (left), have risen substantially since the pandemic.
The beneficiaries of this are investors and shareholders, as well as the management team, who have been successful in increasing compensation through their recognition. The fact that many CEOs and millionaires have further increased their assets since the start of the coronavirus crisis is not unrelated to the price hikes.
Robert Reich, a former Clinton administration secretary of labor and now a public policy professor at the University of California, wrote in an article for The Guardian that companies are allowed to take this position because of acquisitions and It points out that there is a monopoly created by the merger.
“Companies are using the rising costs of materials and labor as an excuse to raise prices even further to expand profits. Corporate profits have reached levels not seen in more than half a century. That’s why companies can raise prices without losing customers because there is so little competition.
Since the 1980s, two-thirds of American industry has consolidated. Why are food prices soaring? Four companies monopolize 85% of meat and poultry processing. Only one company sets the price for most of the seed corn in the country.”
As it became clear that large companies had taken advantage of the price hikes, voices of criticism against it have grown louder. A new concept called “greedflation” has emerged, meaning that inflation under the pretense of high costs is caused by corporate greed.
That said, it’s hard to imagine companies giving up their own profit margins, even as public opinion slams them. This is because corporate executives such as CEOs and executives are financially and legally responsible to companies and shareholders. And as long as the current stock market system of calculating earnings on a quarterly basis exists, we can’t see a future where corporations put the public good ahead of profits.
The “Inflation Mitigation Bill,” which was passed as a compromise to scale back the Build Back Better plan pursued by President Biden, would provide limited measures to fight inflation by adding regulations to the energy and pharmaceutical industries. introduced. However, most of them have implications for climate change countermeasures, and there is little hope of direct inflationary effects.
Reich has advocated antitrust regulations and higher taxes on price hikes, but with Republicans winning a majority in the House of Representatives in last year’s midterm elections, it is unlikely that he will pass legislation to impose further restrictions on companies. It will be difficult.
Meanwhile, inflation seems to have finally started to slow, but it is said that a major recession is coming. Will the economic pressure on the middle class continue?
In my book “We’s Citizen’s Revolution” published in December 2020, I introduced the existence of B Corps that prioritize the public interest over shareholders and long termism (long-termism), but there are still few companies that commit to such an approach. Plus, the stock market tends to hate them.
At least for now, we cannot see any measures to create a future in which companies that exist without putting pressure on the household budget of consumers will be evaluated.
Yumiko Sakuma:Born in 1973. Writer. He graduated from Keio University and completed a master’s degree at Yale University. He moved to the United States in 1996 and has lived in New York since 1998. After working for a publishing company and a news agency, he became independent in 2003. He writes interviews, reports, travelogues, etc. in a wide range of fields, from culture and fashion to politics and social issues. His books include Let’s Talk About Marijuana Seriously, Hip Seikatsu Kakumei, and his translated book Son of a Terrorist. He continues to distribute podcasts “Konnichiwa Mirai” and “Moshi Moshi Sekai”, publish “SakumagZine”, and publish the newsletter “Sakumag”.
Source: BusinessInsider
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