Today, Groundwork Collaborative’s Chief Economist and Managing Director of Policy and Research Dr. Rakeen Mabud appeared at a hearing of the House Committee on Financial Services. The hearing, entitled “The Inflation Equation: Corporate Profiteering, Supply Chain Bottlenecks, and COVID-19,” focused on the critical issues of rising prices and inflation.
“There are a range of factors driving inflation right now, including increasing and shifting demand, as well as supply chain disruptions and resulting shortages,” Dr. Mabud told the Committee. “However, the 70-year record high corporate profit margins demonstrate that megacorporations are taking advantage of this crisis to pad their profits, accelerating price hikes for consumers.”
KEY EXCERPTS FROM DR. MABUD’S TESTIMONY:
“Over and over, the message from corporate America is clear: CEOs are telling their investors that the current inflationary environment has created significant opportunities to extract more from consumers by raising prices and pocketing extra profits.”
“Mega-corporations are able to get away with this kind of aggressive and extractive pricing precisely because of the current inflationary environment.”
“…Wall Street’s influence in every corner of our economy makes this period of inflation unique and puts us at risk for a profit-price spiral. As profits rise as a result of price hikes, so too does the investor demand for those profits – sending prices spiraling upward.”
“Now this is important: While investor demands for higher profits are sending prices spiraling up, there is no evidence that wages are playing a role.”
“Importantly, interest rate hikes, which slow inflation by tamping down demand and making people poorer, will do nothing to make our markets more competitive, nothing to help spur overdue investments in housing and infrastructure, and nothing to address profiteering.”
FROM THE GROUNDWORK DOSSIER:
The Groundwork Collaborative’s mission is to advance an economic vision for strong, broadly shared prosperity and true opportunity for all. Visit our website and follow us on Twitter @Groundwork.