'Greedflation' caused more than half of last year's inflation surge, study finds, as corporate profits remain at all-time highs Irina Ivan, Fortune
"We may be looking at the end of capitalism." Those words, from the pen of the loquacious Albert Edwards of Societe Generale, shocked the Wall Street analyst set last April and set Alberts on his way to becoming a financial press favorite for his witty turns of apocalyptic phrase. He was commenting on the phenomenon of "greedflation," an economic bugbear previously beloved of progressive economists, not quite venerable 160-year-old French investment banks.
But after falling from its blistering pace in 2022, consumer inflation has gotten stubbornly stuck in the 3% range—rising unexpectedly for the last two months even as wholesalers' prices stay flat or fall. That is greedflation's music, offering a clear bit of evidence that excessive profit-taking is happening above the raw cost of goods. And yet another progressive economic study, this time from the Groundwork Collaborative, sheds light on the problem, arguing that more than half of the consumer price price increases in the middle of last year were due to excessive profits, according to the findings. Corporate profits, by the way, remain at all-time highs.
Corporate profits drove 53% of inflation during the second and third quarters of 2023 and more than one-third since the start of the pandemic, the report found, analyzing Commerce Department data. That's a massive jump from the four decades prior to the pandemic, when profits drove just 11% of price growth.
"Businesses were really, really quick, when input costs went up, to pass that on to consumers. [But] had they only passed on those increases, inflation would have been maybe one to three points lower," Liz Pancotti, a strategic advisor at Groundwork and one of the report's authors, told Fortune. ....
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