Following yesterday’s announcement that the Federal Reserve will hike interest rates by another 75 basis points, Dr. Rakeen Mabud, Groundwork Collaborative’s Chief Economist and Managing Director of Policy and Research, testified before the House Oversight Subcommittee on Economic and Consumer Policy.
The hearing, “Power and Profiteering: How Certain Industries Hiked Prices, Fleeced Consumers, and Drove Inflation,” showcased how decades of corporate consolidation and deregulation has enabled megacorporations to keep prices high in order to make record profits. And she shared specific policy steps Congress can take to tackle inflation – without pushing the country into a painful recession.
“Giant corporations’ control over our supply chains has supplanted the functioning, resilient system we could have built through robust public investment and free and fair competition,” Dr. Mabud told the Committee. “Big corporations are getting away with pushing up prices to fatten their profit margins, and families are quite literally paying the price. It’s time to rein them in.”
“While families have struggled to navigate both a deadly pandemic and rising costs that have further strapped family budgets, corporations saw the highest quarterly profit margins in over 70 years in the second quarter of this year. “
“And we know why. For over a year now, Groundwork has combed through hundreds of corporate earnings calls to better understand how these megacorporations are taking advantage of recent crises to make record profits for themselves and their shareholders. Executives are forthright that these crises have been very good for business.”
“These mega-companies are acutely aware of how their market power affords them the ability to keep prices high, even as the costs of expenses go down. Procter & Gamble, a massive conglomerate that encompasses major diaper brands such as Luvs and Pampers and major detergent brands Tide, Downy, Bounce, and Gain, said in July that they planned to raise prices ‘across most categories’ in the coming months, despite paying shareholders $3.5 billion last quarter.”
“In other words, big companies like Procter and Gamble know they can take advantage of consumers’ basic needs because they make necessities, like diapers and laundry supplies: even if the price rises, people will continue to buy them.”
“And these high prices are hitting the poorest families the hardest because essentials like food and shelter – major drivers of higher costs right now – take up a bigger proportion of their household budgets.”
“Importantly, interest rate hikes, which slow inflation by tamping down demand and making people poorer, will not address any of the underlying causes of our supply shortages and do nothing to address profiteering.”