“They’re” Coming to Take Your Money Away!
One proven way to motivate the public is to describe a situation where something dearly held is threatened by vaguely described outside forces. After all, many people can’t be bothered with the intricacies of gauging the economy.
This certainly is the essence of mainstream commentary on inflation. Prices are going up and it’s all President Biden’s fault, we’re told.
And prices are going up; at a whopping 7%+ rate, the highest since St. Reagan was in charge. ( He wasn’t responsible for that inflationary cycle, it started under Nixon.)
What amazes me about too much commentary on the subject is the willingness to blame anybody and everything for a phenomenon with a relatively simple root cause.
In a consumer oriented economy, prices rise in response to increased demand coupled with scarcity. Sure, there are other factors, but reality dictates that sellers charge more for goods and services because they can. When this situation becomes widespread, so does inflation.
You wouldn’t know it from the news, but inflation is a world-wide problem. The size of the US deficit and the increased wages being paid to workers are not a primary cause.
Supply chain woes are at the top of the list when it comes to reasons why we’re facing inflation. People who want to buy manufactured goods are limited in their choices.
The European brand dishwasher I bought last spring took ten months to arrive.
The food my geriatric cat (don’t tell her, she hasn’t figured it out) will eat is hard to find. The pandemic caused a dramatic increase in the domestic pet population, and sales for pet food at grocery stores grew 6.9% last year, compared with a 2.3% rise for food overall.
Other shortages you might see at the grocery store could be attributable to difficulties in transporting canned goods, due to a domestic shortage of more than 80,000 truck drivers.
Deregulation of the trucking industry, which accelerated in the 1980s, alongside the decline of unions, means trucker wages have been shrinking for years.
Driving is a tough job. Younger people aren’t opting into the field, and many older drivers who do have commercial licenses have quit. With wages declining by as much as 50% and the end of reasonable working conditions brought on by the Motor Carrier Act of 1980 it’s not hard to understand why there is a labor shortage.
The “owner/operator/independent contractor” labor model means drivers can spend all day or a day and a night waiting around to get a load at a port site offloaded and loaded up, and they’re not getting paid for any of that time.
The offshoring of American manufacturing and widespread adoption of the “just in time” model of inventory replenishment combined with shipping issues that include a shortage of containers to ship merchandise had made scarcity commonplace.
And let’s face it; it’s not like companies are just passing along their increased costs. The greed would seem to be unbelievable, until you understand that unfettered corporate consolidation leads to less competition and less pressure to do anything other than favor stockholders and CEOs.
Companies are increasing consumer prices on top of record profits. While profits aren’t always a bad thing, the least we should expect from the media is a little honesty here.
Chipotle restaurants, which saw a 26% increase in profits, raised prices, leading to a New York Times story about a Chicago stock broker’s sticker shock for a fifty cent increase in cost of his lunchtime burrito.
Starbucks is raising its prices after seeing a 31% increase in profit; McDonald’s (same story) profits up by 59%; Shell/Mobil/BP (yes, it’s one company now) profits up by 60%.
General Mills just paid a $300 million dividend to investors, ran its stock price up by taking back $150 million in shares, pays its CEO $16 million annually, and made $2.1 billion in profit last year. It’s raising prices on cereals due to “inflation.”
See a pattern here yet? Bigger profits plus creating a crisis for the Biden administration potentially leading to four more years of “do whatever you want” is a win-win for corporate America.
The rules about monopolies changed starting about a half century ago, starting with a ruling establishing the consumer welfare standard from Robert Bork, the conservative D.C. Circuit judge best known for his unsuccessful Supreme Court nomination battle during the Reagan administration.
Under this standard, the only reason for the government to block corporate mergers was that they lead to higher prices. So lawyers representing big corporations made arguments about increased efficiency and innovation actually driving prices lower.
The fact that lower prices rarely happened in real life wasn’t considered important, and monopolies weren’t necessarily bad. The invisible hand of the market decided prices, not big government, according to this philosophy.
The times may be changing, under the Biden administration. A growing recognition of the shortcomings of Big Tech and the corrupting influence of money coming from mega corporations has led to calls for regulations that actually consider consumers and society first.
None-the-less, the priorities of the Democratic Congress and the first overall wage increases relative to inflation in decades, are now being blamed for increasing prices.
Inflation to Republicans means it’s time to cut government spending, especially the kinds they don’t like. Unfortunately, there are a few Dem-blicans (who are uniformly wealthy) who agree.
This attitude will (not might!) have consequences, as Paul Krugman noted in the New York Times:
In particular, I’m seeing a lot of denigration of monetary policy from people who don’t seem to realize that they are, de facto, giving aid and comfort to politicians who don’t want to invest in America’s children and the fight against climate change.
So, yeah, inflation could mean somebody’s trying to take something from you. It’s just not what you’re being told. While you’re grabbing your wallet, somebody is burning the joint down.
Email me at WritetoDougPorter@Gmail.com