Companies are posting record profits as inflation rates are at their fastest pace in decades. Small businesses and low-income workers, meanwhile, are bearing the brunt of the crisis even as access to safety net programs becomes increasingly tenuous.
That’s the assessment of a group of economists who joined Ethnic Media Services for a press conference to discuss what many see as an impending recession.
“CEOs are telling their investors that the current inflationary environment has created opportunities to extract more and more from consumers by raising prices,” explained Dr Rakeen Mabud, chief economist at the left-leaning Groundwork Collaborative. “These mega-corporations are able to get away with aggressive and extractive pricing because they dominate the market and know more than the consumers.”
Mabud gave two examples of this type of “profit” by mega-corporations.
The first involved the chief financial officer of Constellation Brands, parent company of Modelo and Corona beers, who in an earnings call asked shareholders not to ‘leave any prices on the table’ in these ‘economic downturns’. . The message: keep prices high regardless of the impact on consumers.
Mabud also pointed to Visa MasterCard, the duopoly that controls more than 70% of the credit card market, which alerted credit card users that the company would raise transaction fees despite inflationary profits.
“It hits small businesses because they can’t set prices like big businesses can. They have to kind of swallow those costs and pass them on to their consumers,” Mabud said. “Small businesses can’t compete with the Walmart around the corner.”
A June analysis from the Roosevelt Institute found that companies hit record profits in 2021, charging consumers 72% more than their input costs, up from 56% before the pandemic.
And according to an April report from the Economic Policy Institute, almost 54% of recent inflationary pressures can be attributed to corporate profits, compared to 11.4% during the last inflationary period between 1979 and 2019. Less than 8 % of current inflation can be attributed to rising labor costs.
Concentration and consolidation in specific sectors – including shipping, which raked in $53 billion in profits last year – has also rattled global supply chains and contributed to
To discourage profiteering, Mabud argued, Congress should reinstate a historic excess profit tax, and the Justice Department and the Federal Trade Commission (FTC) should aggressively crack down on monopoly power.
“Not prepared for the next crisis”
Economists argue the Fed needs to raise interest rates and halt wage growth to rein in inflation, essentially putting the economy into a deep freeze until prices begin to stabilize.
But at the briefing, analysts warned that artificially pushing the economy into a recession – defined as two consecutive quarters of negative growth – could spell disaster for black workers and other marginalized groups with high unemployment rates.
“Wages aren’t driving inflation, and workers at the bottom of the wage scale haven’t benefited from job growth,” said Chad Stone, chief economist at the Center for Budget and Policy. Priorities.
According to the June jobs report, the unemployment rate remains at 3.6%, suggesting that a recession may not be in sight, although unemployment rates for blacks and Latinos ( 6.8% and 4.3%, respectively) are high compared to whites.
“If a recession does come, it will be relatively shallow,” Stone said. “Yet we have demographic groups that are affected by even a short, shallow recession…We don’t have targeted safety net programs that can help the most vulnerable people and we’re working to get any kind of extra politics.”
Stone explained that the last recession in April and May 2020 – at the height of the Covid 19 pandemic – only lasted two months thanks in part to the US bailout package implemented by President Joe Biden, which “has gave juice to the recovery “.
Yet even in this short two-month period, the impact on women, people of color, the LGBTQ community, and undocumented people was demonstrably more pronounced than on the nation as a whole.
“Our unemployment insurance system is broken. We rely on band-aids,” said Alix Gould-Werth, director of family economic security policy at the Washington Center for Equitable Growth. “We don’t have enough money to pay benefits, so we’re not prepared for the next crisis.”
On average, unemployment benefits replace only 40% of a worker’s salary.
Gould-Werth called the current unemployment system “weak,” noting that programs such as Temporary Assistance for Needy Families, the Supplemental Nutrition Assistance Program (SNAP), Social Security, Disability Insurance and the Supplemental Security Income are very limited in number and availability.
“Many or all of them are only available to specific subpopulations — like the disabled or the elderly — and they tend to have onerous eligibility criteria,” she added.
The panel agreed on the need to better understand the impacts of economic fluctuations beyond Wall Street, on the lives of ordinary people and communities, and how corporate and government decision-making can either help or harm conditions. .
“When we are successful, the economy is doing well,” said Mabud of Groundwork Collaborative. “We must prioritize the real experience of ordinary people living in this country.”
Ethnic Media Services