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What’s happening: The idea that corporate greed, or “greedflation,” is the cause of persistent inflation is making the rounds again, so it’s worth reiterating the obvious: there is no such thing as “greedflation.”
The facts: Inflation is caused by clear and well-understood economic factors that stem from supply and demand. Prices rise when we have too many dollars chasing too few goods and services. There is nothing more complicated to the story than that.
During the pandemic, we had a limited supply of goods and services coupled with an increase in demand. Prices rose as a result, but that effect was short-lived. It faded once the economy began reopening.
The Fed’s role: The more long-lasting effect of inflation is the Federal Reserve’s (the Fed) expansion of the money supply. This expansion of the money supply was well above any increase in the size of the economy, hence too many dollars facing too tew goods and services. The persistent inflation we are experiencing now is from that expansion. The slow reduction of inflation coincides with a declining money supply, which takes time to achieve.
This is not to criticize the Fed’s COVID-era monetary policy. It had to do what was necessary to stop a financial crisis while the world dealt with a pandemic.
Unfortunately, the timing for unwinding those actions got away from the Fed for a variety of reasons, including how long the virus lingered and the size and timing of the fiscal response to COVID.
You can argue a case that the current inflation is not specifically or even mostly due to corporate greed. Inflation has many factors to it, and covid supply chain interruption was a major factor as was the Fed’s necessary reaction to it. But you lose me at ‘there is no such thing as “greedflation.”’ That is obviously bullshit.
Corporations can and did use the temporary inflation from supply chain interruptions causing empty shelves as an excuse to raise prices, arguably justifiably to a degree to keep your business afloat. But when the entire market has uniformly raised prices, when production and supply chains return to normal, they have no incentive and no competitive pressure to return prices to pre-interruption levels. The higher prices have been normalized, the consumer has already adapted to that expectation and no vaible alternative options, and businesses have no reason to provide substantive releif to their consumers when they are making bigger margins and profits than ever.
Corporations, and in fact all capitalistic structures, are powered fundamentally by greed, by desire to maximize profit. If they were not profit-driven they would be non-profits/charities. In fact they are, to some extent, legally required to be greedy, to prioritize maximal return for their shareholders. The idea that profit-driven corporations that must, at all times, continually grow, lest they die completely, that must get the maximum price with the minimal overhead (including labor) does not materially contribute to inflation… that is a fucking fantasy.
No, don’t you understand? A small company will jump in and more efficiently produce GPU to undercut the big players and steal market share. That will return the market to normal. Yup, any day now.
No, I don’t know what “barrier to entry” is, why do you ask?