So the questions are collusion and abuse of a monopoly. Is that happening? Price gouging is not illegal, but competition usually limits it, if there is effective competition.
We’ve had similar ridiculous inflation as everyone else, but this is not an area dominated by one chain. We have several major chains and Walmart is just one of them: are they all colluding? Is there some vast conspiracy? Within the confines of the new much higher prices they seem to be competing as much as before
When there are enough corporations to fit a boardroom table. Competition doesn’t exist.
It’s well within reason to think that many of Executives all attend the same events, have overlapping social circles, and moved around positions between the corporations.
All it takes is one company to get away with higher prices for the other companies follow suit.
They’ve always been conspiring. They just rarely get caught. It’s even easier now because they can all use the same “market pricing software”.
Inflation is a macroeconomic phenomenon. It’s silly to attack grocery stores for an economy-wide rise in the price level. As if Walmart wasn’t greedy during the 2010s when inflation was quiescent, and suddenly became greedy now, just because.
What actually caused inflation was the big spending by both Trump and Biden, not funded by tax increases. The US federal budget deficit is now over 6 percent of GDP, and is projected to keep ramping up. And the Federal Reserve has been slow to raise interest rates to sterilize various federal spending increases, like the Covid spending packages and the Inflation Reduction Act. These are classic ingredients for inflation.
So, plenty of blame to go around, but it’s mostly in Washington, not individual companies here and there.
Can you use changes in monetary policy to explain why grocery store profits are higher than before? I would think that in the event of inflation stores would stabilize to profits that are roughly the same (percentage wise) as they were prior to the inflation occurring. To the best of my knowledge, this has not happened.
This is the first article I found, and in it they don’t mention any economic policy as a major cause.
When an economy undergoes inflation, not all prices rise by the same amount. That’s one of the reasons high inflation can be so disruptive. For example, wages (the price of labor) often rise some time after other prices, to the detriment of some wage earners.
It’s pretty believable that grocery store chains have acquired enough market power that they’re able to pass on all their cost increases to customers, and more, thereby increasing their profit rate. But the fact that individual companies and sectors are well placed to cope with inflation doesn’t explain the economy-wide and world-wide inflation.
We can also look at the “companies have market power” explanation using the overall labour share, which measures how much income is going to labor vs capital, economy wide. It doesn’t seem to have shifted much during the recent bout of inflation. But again, individual wage earners have seen huge disparities, including some who have been made much worse off by the inflation.
But why are the prices of food rising faster than the costs paid by companies (this is inclusive of all costs)? The naive assumption is that if all costs were originally x and prices were 1.1x, then as costs become 1.3x, prices become 1.1*1.3x. However, their profit margins as a percentage rose. So instead of 1.1 we now have 1.4.
Obviously the numbers used are fake, but this is why people are angry and it’s not something I’ve seen explained using economic principles that don’t involve terms like market consolidation at best or collusion at worst on any article. Rage sells so telling people their groceries cost more because there aren’t enough grocers or the grocers are collaborating is good business for newspapers as long as they can find an expert or group to make the allegations for them.
There’s actually quite a bit of evidence that post-pandemic price fixing across multiple sectors is to blame for the “inflation” we’re seeing - one example is the energy sector and what the FTC recently reported on: https://www.thebignewsletter.com/p/an-oil-price-fixing-conspiracy-caused
So, why didn’t all these companies collude to fix prices before? Were they virtuous before? Did their turn to the dark side just happen to coincide with a large unfunded fiscal expansion?
Because they had unlimited money with low interest rates, which made them do mergers and acquisitions, consolidating the playing field further and further so that when the free money dried up, the market was so concentrated on the supply side, they could ratchet up prices this much. This happened in pretty much all markets, not just the US food market.
What if isn’t inflation but they’re hiding behind that narrative as a reason to keep raising prices. Not saying that’s 100% what happens but we got a whole lot of companies out there claiming there’s nothing they can do about the price hikes while also reporting record profits (after adjusting for inflation). The maths ain’t mathing.
Left to their own devices, companies want to raise prices and always have. You need a way to explain why they didn’t hike prices in the 2010s, when they were presumably just as greedy as they are now.
Put another way, inflation is about the loss of value of money itself, not individual prices going up. That’s a matter of macroeconomics: government spending, money supply, trade, etc.
Because people tend to notice when one price goes up. They notice much less when there are multiple excuses and many prices are going up. It’s a lot easier to refuse to buy one thing than it is to refuse to buy everything.
We don’t have the kind of supply/demand price curve you read about in econ 101 because there are too many barriers to entry to starting any business. Once you’re established, you can either choose to race to the bottom so that both you and your competitors lose money OR you can implicitly agree to set your prices about the same as theirs. So choose, do you like more money or less money?
Yes, it’s partly inflation. And it’s partly the PPP. But largely it’s just greed hidden behind excuses with no real threat of PR fallout.
So people shouldn’t be upset that Biden hasn’t done enough because he’s not the king.
And then Democrats in the Senate who could investigate these things ask Biden because they’re incapable of it.
So are we to assume that the entire government is incapable of dealing with this?
The prices legitimately went up due to supply chain constraints during the pandemic. The problem is, they never went back down, and then continued to follow the steep inflation trends of a post-pandemic nation. That all just became additional revenue for the food industry.
The last time a President signed an Executive Order to fix grocery prices, it blew up in Nixon’s face when it expired and prices blew well past what should have been a consistent inflation trend.
The only way the government could successfully address it would be through congressional legislation, by either establishing a legal rate of inflation for food products, or finally breaking up the big food monopolies. There’s just no way Republicans would ever go for any of it.
He has done lots. People aren’t interested in positive news. Even if grocery prices drop in half, people will say he did nothing.
Okay but it would be nice to know if anyone our government is capable of doing anything about this.
They’re perfectly capable. About half just don’t want to.
I don’t know how to convince people to vote for ourselves instead of hate. I don’t know how to get people to vote for solutions, even imperfect ones, over someone to blame.
But if you figure it out, these are the kinds of problems we can go about solving.
A White House spokesperson noted that the Administration does not play a role in or comment on enforcement actions but pointed to another example of Biden’s DOJ blocking a merger that would have raised prices for lettuce and packaged salads, and also suing to address price-fixing of chicken, pork, and turkey meats
The sheer balls to say there’s nothing you can do because it’s not your job…
And then immediately demand credit for something similar?
I’m confused how you think it’s similar. Do you have some source that claims the Biden administration instructed the DOJ to block that merger?
Cause what they are doing is pointing out how their independent DOJ has a track record of already investigating these occurances. They aren’t demanding credit for directing them to do so.
We went over this when the last guy was in office. You don’t want politicians deciding who the FBI investigates.
Republicans abuse power so we can’t use it correctly
Not to mention you’re not addressing the part where they try and take credit