Yesterday, the Boston Globe published a new op-ed, “Who’s really to blame for inflation,” by Dr. Lindsay Owens, Groundwork Collaborative’s Executive Director. The piece makes the case that companies are choosing profiteering over passing their savings on to customers, even as costs are coming down.
Dr. Owens and the Groundwork Collaborative have been researching corporate earnings calls and found that CEOs are admitting to the strategy of keeping prices high because it means bigger profits for their companies and massive payouts to their shareholders. You can find all of Groundwork’s research at endcorporateprofiteering.org.
Key excerpts below (read the full Boston Globe op-ed here):
“After more than a year of surging inflation, gas prices are down, pandemic supply chain snarls are starting to ease, and shipping costs for companies are coming down. But instead of passing on the savings to customers, companies are making a different choice. Big corporations are choosing to keep prices high for consumers, even as their own expenses, for things like materials and transportation, go down.”
“For example, the CEO of PPG, a Fortune 500 paint corporation, was asked if the company would lower prices as the cost of raw materials subsides. In response, he said, ‘We’re not going to be giving this pricing back…we’re telling people, this is the new price and if you don’t like it, please don’t place purchase orders.’”
“‘Price stickiness’ is a term for prices staying roughly the same even as the costs of producing and selling things change. But sticky prices aren’t an iron law of nature, like gravity. The CEOs choose to keep them sticky — because sticky prices and declining costs make a profitable combination.”
“HB Fuller also revealed that it will be ‘pushing harder’ on price increases. Its CEO told analysts, ‘We don’t reduce prices on the back end of these increases,” adding, “a nice light recession would be perfect for us’ because it would bring raw material costs down even more.”
“Of course, many factors affect prices — the pandemic, supply chain disruptions, and the war in Ukraine, to name a few. But because of excessive corporate power and consolidation, and financial markets designed to maximize short-term profits, big corporations with huge market power don’t think twice about extracting ever more profit to line the pockets of their CEOs and shareholders. The proof? They’re now seeing the highest profit margins since 1950, thanks largely to massive price markups.”
“The need for urgent action is undeniable — but you don’t have to take the word of watchdogs or critics. Corporations themselves are admitting to profiteering at the expense of American consumers. And one thing is clear: These companies won’t stop doing the ‘inflation dance,’ as one CEO called it, until we change their tune.”