Robert Reich: Record Corporate Profits From Your Thinning Wallets – OpEd

The latest economic data shows two big things: 

(1) Corporate profits reached a record high in the fourth quarter of last year. 

(2) Inflation is still with us. The government reported Friday that the Fed’s preferred inflation gauge rose 0.3 percent month-to-month in February, following a January uptick that was the largest in a year. Prices have risen 2.5 percent over the past 12 months — certainly better than inflation readings compared with a year ago but still stubbornly above the Fed’s 2 percent target. So-called core inflation, which strips out more volatile food and energy prices and is therefore a more reliable indicator of where prices might be headed, is still coming in more strongly than central bank officials would like to see.

The easiest explanation for both phenomena — record corporate profits and prices remaining elevated — is that corporations have enough monopoly power to keep prices high. (Corporations are also shrinking the size of the products you’re buying without lowering their prices — a variant of the same thing.)

This is one of the biggest reasons the American public is not crediting Biden with a great economy. Most people still aren’t feeling it.

But the mainstream media doesn’t want to talk about this. 

Last November, The New York Times contacted me about contributing a NYTimes Opinion video. I suggested one on corporate monopolies keeping prices high. After lots of to-ing and fro-ing, the editor wrote: “One of our economists felt that it might be a little late, in that the rate of price increases is slowing ... and so this particular take might not be as timely as I'd hoped.”

Not timely? 

In 2023, PepsiCo’s chief financial officer said that even though inflation was dropping, its prices would not be. Pepsi hiked its prices by double digits and announced plans to keep them high in 2024.

If Pepsi were challenged by tougher competition, consumers would just buy something cheaper. But PepsiCo’s only major soda competitor is Coca-Cola, which — surprise, surprise — announced similar price hikes at about the same time as Pepsi and has also kept its prices high.

The CEO of Coca-Cola claimed that the company had “earned the right” to push price hikes because its sodas are popular. Popular? The only thing that’s popular these days seems to be corporate price gouging. 

We’re seeing this pattern across much of the economy — especially with groceries. At the end of 2023, Americans were paying at least 30 percent more for beef, pork, and poultry products than they were in 2020. 

Why? Near-monopoly power. Just four companies now control processing of 80 percent of beef, nearly 70 percent of pork, and almost 60 percent of poultry. So of course it’s easy for them to coordinate price increases.

The problem goes well beyond the grocery store. In 75 percent of U.S. industries, fewer companies now control more of their markets than they did 20 years ago.

So what should be done?

First, antitrust laws must be enforced.

Kudos to the Biden administration for enforcing antitrust more aggressively than any administration in the last 40 years. It’s taken action against alleged price fixing in the meat industry — which has been a problem for decades. 

It has sued to block the merger of Kroger and Albertsons — two giant grocery chains. Kroger operates 2,750 stores in 35 states and the District of Columbia. The company’s 19 brands include Ralphs, Smith’s, King Soopers, Fred Meyer, Food 4 Less, Mariano’s, Pick ’n Save, and Harris Teeter. Albertsons operates 2,273 stores in 34 states. Its 15 brands include Safeway, Jewel-Osco, Vons, Acme, and Shaw’s. Together, Kroger and Albertsons employ around 700,000 people.

It’s suing Amazon for using its dominance to artificially jack up prices, in one of the biggest anti-monopoly lawsuits in a generation. It’s suing Apple for using its market power to control its apps and prevent other businesses from offering them. 

It successfully sued to block the merger of JetBlue and Spirit Airlines, which would have made consolidation in the airline industry even worse. 

But given how concentrated American industry has become, there’s still a long way to go. Biden should make his antitrust enforcement against corporate power a centerpiece of his campaign. 

Second, big corporations must not be allowed to use their power to gouge consumers.

Senator Elizabeth Warren and others recently unveiled the latest version of their Price Gouging Prevention Act.

“Giant corporations are using supply chain shocks as a cover to excessively raise prices and sometimes charging the same price but shrinking how much consumers actually get,” Warren charges.

The bill would empower the FTC (which would also get $1 billion in additional funding) and state attorneys general to stop companies from charging “grossly excessive” prices, regardless of where alleged price gouging took place in a supply chain.

(The legislation would also protect small businesses — those earning less than $100 million — from litigation if they had to raise prices in good faith during crises.)

The bill would also require public companies to disclose more about their costs and pricing strategies.

I don’t have any illusions that this bill will find its way into law soon. Democrats hold a slim majority in the Senate, and not all Democrats support it. Meanwhile, Republicans and their business backers are dead set against it — and are eager to blame continued high prices on Biden, not on corporations.

But this bill is just as necessary as aggressive antitrust enforcement — and an example of what could and will be done if Democrats sweep the 2024 elections.

The record profits of large corporations are coming out of the paychecks of average Americans, who are still struggling to get by.

Biden and the Democrats must say this loudly and clearly, and tell the public what they are doing — and will do — to stop corporate monopolies and price gouging.

This article was published at Robert Reich's Substack