Companies say they have raised prices in the COVID-19 era to keep up with soaring production costs, but research shows most consumers believe prices have been jacked up more than necessary.
The trend has been dubbed “greedflation.” An unlikely but growing alliance of shoppers, liberals and market-limiting conservatives say it explains why companies are making record profits while presenting themselves as beleaguered.
In a survey of 2,000 shoppers that consumer researcher Attest released Tuesday, 80% said brands have cited inflation as an excuse to raise prices. Another 58% said “more needs to be done” to protect consumers and stop companies from using such practices.
“Inflation’s impact is weighing heavily on brand loyalty for American consumers, with … [88%] saying they are now willing to try different products and services due to price pressures,” said Attest, noting fast-spreading unhappiness with leading companies.
Three-quarters of respondents said they have seen the steepest price hikes for groceries, and 71% said they would consider different food brands. The next-biggest price increases they reported were for energy (37%) and travel (27%).
Companies in the Fortune 500 rankings last year reported a record high of $1.8 trillion in profits on $16.1 trillion in revenue despite a four-decade-high inflation rate of 9.1%.
Companies blamed their price increases on higher costs of transportation, raw supplies and other needs. They said contributing factors included pandemic-era supply chain disruptions, rising oil prices and global economic disruptions arising from Russia’s invasion of Ukraine.
Consumers may be underestimating the impact of the war in Ukraine, one analyst told The Washington Times.
Boycotts of Russian natural gas raised costs for American farmers by cutting off Western nations’ access to inexpensive fertilizer, said Joe Trotter of the American Legislative Exchange Council, a network of conservative state lawmakers and investors.
The Biden administration’s efforts to reduce U.S. reliance on natural gas by promoting clean energy alternatives such as electric stoves have not lowered costs, he said.
“Forget the ‘greedflation’ myth. Grocery prices are up for two specific reasons: the war in Ukraine and our government’s assault on fossil fuels,” Mr. Trotter told The Times.
Some analysts say that fails to explain the record profits for American food and energy producers.
A January study by the Federal Reserve Bank of Kansas City found that more brands have jazzed profits through “markup growth,” increasing the ratio of sticker price to production costs. The bank found markups grew by 3.4% and inflation increased by 5.8% in 2021, suggesting markups could have accounted for more than half of inflation that year.
In a recent opinion piece, Albert Edwards, a global strategist at Societe Generale, blamed such practices on an “unprecedented” and “astonishing” rise in corporate greed during the COVID-19 pandemic.
He pointed to the most recent figures from the Bureau of Economic Analysis, which show corporate profit margins in the fourth quarter of last year remained near record highs relative to costs despite the alleged hardships of rising production costs.
“The end of Greedflation must surely come. Otherwise, we may be looking at the end of capitalism,” Mr. Edwards wrote.
He cited a paper by University of Massachusetts Amherst economists Isabella Weber and Evan Wasner, who blamed “the ability of firms with market power to hike prices” as the leading cause of U.S. inflation in the COVID-19 era.
As more analysts blame price gouging for inflation, some say the government needs to impose temporary price controls.
Others, including free market economists, say critics have exaggerated the profit margins.
The problem with the greedflation theory is that greed remains constant regardless of prices rising or falling, said Ryan Young, an analyst at the free market Competitive Enterprise Institute. He blames the “runaway spending” of the federal government’s pandemic relief efforts for the price increases.
“Companies are always charging the highest prices they think consumers will accept,” Mr. Young said in an email. “Food prices were unchanged in March. Does that mean food companies didn’t get any more greedy, right after they became 0.4 percent greedier in February? It’s other things that are changing prices, not greed going up and down.”
More conservatives who have feuded with companies over “woke” political advocacy during the pandemic are coming to reject that explanation. They have formed an unlikely alliance with liberal lawmakers who have called for increased corporate accountability.
Sen. Bernard Sanders, Vermont independent and self-described democratic socialist, recently rejected the farm industry’s claim that an avian flu outbreak caused egg prices to surge early this year by reducing the nation’s supply of hens.
“We must break up Big Ag,” Mr. Sanders said this month after the nation’s largest egg producer reported that profits surged by 718% to $323.2 million during the quarter ending Feb. 25.
Companies have not been transparent about the reasons for marking up the prices of staple items such as food, clothing and home utilities, said Edgar Dworsky, founder and editor of the website Consumer World. He said that lack of fiscal accountability makes it impossible to tell whether and when brands engage in “greedflation.”
“I can suspect it, like everyone else, but don’t know for sure,” Mr. Dworsky said.
More companies have spent money on politically trendy diversity officers and transgender outreach instead of keeping prices down, said Will Hild, the right-leaning executive director of Consumers’ Research, a Washington-based advocacy group.
He said the effect has been to distract consumers from rising prices with political posturing.
“Companies across America are increasingly passing on higher input and energy costs to consumers thanks to the greed of Wall Street,” Mr. Hild told The Times. “American consumers are now suffering the consequences of these foolish and destructive policies.”
Conducted on Feb. 15, the Attest survey also found that 15% of consumers said they would be concerned about any brand engaging in “left-wing, socially liberal politics” in public controversies. By comparison, 12% said they would worry about a company accused of right-wing politics.
• Sean Salai can be reached at ssalai@washingtontimes.com.
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