Inflation isn’t “nipping at our heels,” but rather blocking the road ahead, ready to devour fixed incomes and incremental pay raises. All trips to a gas station, grocery store, or any store inspire disbelief and a reflexive response to buy less or buy cheaper somewhere else. But it’s not luxury items that find us looking at an empty wallet or online account; there simply aren’t options to buy less to meet basic needs, and nowhere to buy cheaper. We are faced with incomprehensible increases for food (up 11% during the last year), energy (including gas, electricity, fuel oil, up 20%), even prescription drugs (up 10%).
As with every social and economic issue today, inflation has become a political football to be incessantly kicked back and forth, and landed upon by heavyweights on both sides. Even naming rights are an issue: Congress passed the Inflation Reduction Act in August 2022. Opponents claim that many of its provisions aren’t directly related to reducing current inflation, even though over $300 billion in savings for consumers may result from reductions in prescription drug prices and an extension of affordable health care insurance.
But as muddy as the waters are for identifying causes of inflation (effects of the pandemic, disrupted supply chains, Putin’s ongoing war, poor government responses, etc.), some facts are crystal clear: the largest corporations are posting record profits and have no plans to reduce prices as their production costs drop. This process is known as charging “sticky prices” that stay the same regardless of improvements in productivity or reduced costs for raw materials.
Corporate earnings reports have recently shown (according to researchers at Groundwork Collaborative) that CEOs at the nation’s largest companies, such as those producing paint, industrial supplies, auto parts, and food are looking forward to continuing high prices. “We don’t reduce prices on the back end of these increases,” stated one. Another noted “our industry has historically not reduced pricing to reflect lower ultimate costs.”
John F. Kennedy is well-remembered for his inspirational “ask not what your country can do for you” inaugural speech in 1961, but he pulled no punches in remarks on commodity price increases in 1962 either. He worked with steel corporations and steelworkers’ unions to avoid a strike and price increases that might cause inflation: workers agreed to delay demands for wage increases (which he thought would lead to inflation) in exchange for no increase in steel prices (also leading to inflation). The largest of 11 corporations at the time (US Steel) backed out of the deal and announced plans to raise their price for a ton of steel. Six others quickly followed suit.
Kennedy was angry and caustic in his remarks that followed. The price increase was “a wholly unjustifiable and irresponsible defiance of the public interest … a tiny handful of steel executives … pursuit of private power and profit exceeds their sense of public responsibility … Price and wage decisions in this country … are and ought to be freely and privately made, but the American people have a right to expect in return for that freedom, a higher sense of business responsibility for the welfare of their country … [But] those with great power are not always concerned about the national interest.”
Surprisingly, his public words (called “jawboning” today), along with behind-the-scenes threats of antitrust investigations, worked, and the steel companies did not immediately raise their prices. (It’s unclear if this interaction had any long-term effects.) But it was a time when people still felt there was something identifiable as “the public interest,” “public responsibility,” and “the welfare of their country.” They had collectively made great sacrifices to win WWII, and JFK symbolized America’s bounty, generosity, and optimism through programs like the Peace Corps and civil rights legislation.
Today, calling on CEOs to moderate their profits “in the public interest” would probably be met with laughter and ridicule. Current corporate leaders believe that shareholder profits are their sole purpose, with exorbitant CEO compensation not far behind. A longstanding rationalization for their actions relies on an unregulated “invisible hand” (described and deified by Adam Smith in a 1760s book praising capitalism) which produces socially beneficial outcomes. But that hand is no longer invisible, and you can judge how socially beneficial the outcomes are with each trip to the grocery store, out-of-pocket payment for medications, and application for a credit plan with the oil company.
Allen Woods is a freelance writer, author of the Revolutionary-era historical fiction novel “The Sword and Scabbard,” and Greenfield resident. His column appears regularly on a Saturday. Comments are welcome here or at awoods2846@gmail.com.