This chart shows the inflation rate as measured by the Consumer Price Index (CPI);
Currently inflation is "raging" along a 5.6% The FED, custodian of national inflation fighting, insists this figure is transitory as it is primarily a result of supply bottlenecks after the passage of the coronavirus pandemic that closed down nearly everything. This explanation does not stop conservatives from using the inflation boogyman to flagellate Joe Biden and his historic social spending agenda. Plutocrats, including Joe Manchin, want nothing more than to stop legislation that includes tax hikes for the wealthy, expanded social programs, and funding for climate change measures. To them the "3B" plan is a socialist nightmare worthy of legislative sabotage.
Robert Reich, former Labor Secretary and Berkeley economist, thinks the inflation going now is not classic wage-price inflation or caused by 'free money' give aways by the federal government, but an example of the power of oligopolies. US Person agrees; the timing of the inflation scarecrow's arrival could not be more fortuitous. The US has excess productive capacity; we are still 7 million jobs short of the employment level before the pandemic began. Cities have oodles of vacant office and commercial space. Contrary to the double digit inflationary conditions of the 1970s, companies can outsource for additional capacity. Unions are reduced and cannot dictate wage increases that lead to higher demand. If anything, consumer demand has been undercut by the pandemic and a historic wealth gap that is larger than any other in this nation's history since the 1920's. The fact is that the wealthy spend only a small percentage of their income on consumption. The rest of us spend almost all of our money, which is why we are called "consumers". The pandemic has made the rich richer just as it did after the Black Death pandemic of the 14th Century. This difference in spending behavior creates an imbalance between output and production in our consumer driven economy. The government has attempted to close this gap by providing near zero interest money and stimulus checks. But this situation cannot last as the government incurs more and more debt to close the gap.
Marriner Eccles, a FED chairman in the thirties explained the Great Depression as a failure of buying power. As more wealth was concentrated at the top income levels, the little guys in the game could only stay in by borrowing more, using a game of poker as an analogy:
“A giant suction pump had by 1929-1930 drawn into a few hands an increasing portion of currently produced wealth. As in a poker game where the chips were concentrated in fewer and fewer hands, the other fellows could stay in the game only by borrowing. When their credit ran out, the game stopped.”The other force in the inflation game is the power to control prices by huge corporations able to dominate the market with their goods and services. The federal government has largely ceased to enforce anti-trust law since the 1980's, allowing big companies to engage in anti-competitive practices. Reich points to one conglomerate, Procter & Gamble, as an example of an oligopoly. P&G raised prices on a wide variety of its popular consumer products despite making huge profits. For the quarter ending in September, it reported a profit margin of 24.7%! P&G along with Kimberly-Clark controls the disposable diaper market. These two companies coordiante their prices and production. Kimberley-Clark announced its price rises at about the same time as Proctor & Gamble did--NOT a coincidence.
Other examples of anti-competitive practices abound in the US economy. Pesico and Coca-Cola, which manufacture a number of well known food products, both raised their prices based on claims of increases in manufacturing and distribution costs. Were these increases necessary to maitain profit margins? Hardly--Pesico reported $3bn in profits through September. Coca-Cola increased it profit margin to 28.9%. The same power to ratchet prices exists in the energy markets. Prices for energy have skyrockted, just before the winter heating season. Five banks control credit in the US. Only one company makes commercial aircraft in the US since the Boeing-McDonald Douglas merger. Three giant companies control broadband: AT&T, Verizon and Comcast. A handful of companies control drug prices: Pfizer, Eli Lilly, Johnson & Johnson, Bristol-Myers Squibb and Merck. The three companies who control 90% of the world's insulin supply—Eli Lilly, Sanofi, and Novo Nordisk—have worked in tandem to systematically raise prices. Corporate concentration is the enemy of market competition. And when you have thousands of lobbyists at your disposal, your will be done on Capitol Hill. Inflation is an enemy of the people--but is it also a weapon in the hands of the plutocracy to fend off policies intended to level the game? Think about that.