While many Americans struggle to make ends meet, corporate America’s 2021 profits were higher than ever. So why are corporations making more money while supply chain issues are still driving up inflation for the rest of us? The Groundwork Collaborative’s Chief Economist, Rakeen Mabud, wants you to know that the supply chain is working exactly as it was designed: for maximum profit, rather than reliably getting goods to people. And that’s the problem.
Rakeen Mabud is the Chief Economist and Managing Director of Policy and Research at the Groundwork Collaborative.
Twitter: @rakeen_mabud
How We Broke the Supply Chain https://prospect.org/economy/how-we-broke-the-supply-chain-intro/
Corporations Raise Prices as Consumers Spend ‘With a Vengeance’
https://www.nytimes.com/2022/02/27/business/economy/price-increases-inflation.html
Opinion: Larry Summers Shares the Blame for Inflation https://www.nytimes.com/2022/02/28/opinion/larry-summers-inflation.html
Inflation causing financial strain for nearly half of U.S. households, poll finds
https://www.washingtonpost.com/business/2021/12/02/inflation-gallup-financial-hardship/
Stock Buybacks Beat Capital Spending for Many Big Companies
https://www.wsj.com/articles/stock-buybacks-beat-capital-spending-for-many-big-companies-11631611802
The stock market is punishing Walmart and Target for keeping costs low while the rest of the corporate sector prioritizes profits and makes inflation worse
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Nick’s twitter: @NickHanauer
Nick Hanauer:
There is no doubt that we have more of a corporate greed problem today than we have an underlying inflation problem today.
Rakeen Mabud:
A series of policy choices over the last 50 years have given these mega corporations an incredible amount of power over our supply chains.
Speaker 3:
70% of low income households reporting hardship. Well, we know that there will-
Nick Hanauer:
At the same time, all the biggest companies in America are recording record profit.
Speaker 4:
From the home offices of Civic Ventures in Downtown Seattle, this is Pitchfork Economics with Nick Hanauer, the best place to get the truth about who gets what, and why.
Nick Hanauer:
I’m Nick Hanauer, founder of Civic Ventures.
David Goldstein:
I’m David Goldstein, senior fellow at Civic Ventures.
Speaker 3:
So Nick, I know you live in a different world. I’m wondering if you’ve noticed the impact of inflation over the past few months. Did you notice that the prices go up? Do you look at prices? Do you pay your own credit card bill? I don’t know how that works.
Nick Hanauer:
Yeah. I have not been massively impacted by the increase in gas cost, or the increase of grocery costs, not because I have a lot of money, but also because I drive an electric car. But I’m well aware of the dramatic increases in prices that folks are feeling. And not to be glib, the place that I get to see it most vividly is that, my wife and I are remodeling a house right now. And the parts for that house come from all over the world.
And it has been frustrating and interesting to watch what’s happened to prices as we have gone through the pandemic, trying to get this project done. So by way of example, we’re putting in some walnut floors in this house, and our contractor told us last week that it is a darn good thing that we bought it a year and a half ago.
Because if we had tried to buy it today, A, we probably wouldn’t be able to get it. But B, if we did, it would cost almost twice as much. What’s interesting about that of course, is that the global demand for walnut has not gone up. And the rate at which the world was growing walnut trees did not go down, at all, right?
Speaker 3:
Not that I know of.
Nick Hanauer:
Yeah. Okay. So why is walnut so much harder to get and so much more expensive today? This is the question that we’re trying to answer for virtually all goods and services that have gone up in price. And it has nothing to do with workers earning a few cents or dollars more per hour.
Speaker 3:
Or there’s cheques that the government sent out that did not increase demand for premium walnut flooring.
Nick Hanauer:
Exactly.
Speaker 3:
It’s not like people all over America are, “Wow. Now I can have walnut floors.”
Nick Hanauer:
Exactly.
Speaker 3:
That’s not what’s happened. And so, you’ve raised two separate issues here, Nick, one is inflation. We’ve seen that recently inflation in the US has reached a 39 year high. And unlike, I suppose a lot of our listeners, you and I are old enough to remember when we used to have high inflation, when in fact 7% inflation wouldn’t have been such a bad thing. That wouldn’t have been so high compared to some of the inflation we experienced in our youth.
And the other is that supply chain issue, that some things just cannot be had, or cannot be had in a timely manner. And it has nothing to do with prices, it has, in some cases, nothing to do with demand, in some cases, there’s higher demand, putting strain on it. But we have this phenomenon right now, where there’s just ships lined up outside the West Coast ports, filled with containers, and not enough capacity at the ports to unload all those ships, and not enough truck drivers to take those containers to their destinations.
It’s not simply the fact that we’ve run out of a supply, except we can’t get stuff one place to another, and that has put stress on the system, which has resulted in rising prices. And as always ends up happening when we have a shock to the system like this, it’s impacting people in different ways. We have seen surveys that say that 70% of low income households reporting hardship.
Nick Hanauer:
Yes.
Speaker 3:
Well we know that nearly-
Nick Hanauer:
At the same time, all the biggest companies in America are reporting record profits.
Speaker 3:
Record profits, at the same time that you’ve got these rising prices.
Nick Hanauer:
Yeah. It’s so weird.
Speaker 3:
Yeah.
Nick Hanauer:
I wonder if those two things are connected.
Speaker 3:
Well, here’s the thing, and we’ll get into this maybe a bit with our guests and afterwards. It’s almost as if Nick, it’s almost as if market capitalism isn’t working as advertised. But to help us step through this issue, the stress that the supply chain is facing, and Americans, consumers are facing right now, we’ve got a great guest this week.
Nick Hanauer:
That’s right. Rakeen Mabud is the Chief Economist and Managing Director of Policy and Research at The Groundwork Collaborative. And she’s done some really interesting thinking and writing about this circumstance, and it’ll be fun to chat with her about what’s going on.
Rakeen Mabud:
Hi everyone. My name is Rakeen Mabud. I am the Chief Economist and Managing Director of Policy and Research at the Groundwork Collaborative.
Nick Hanauer:
So Rakeen, you recently co-wrote an article for The American Prospect with David Dayen, and in it, you discuss how we broke the supply chain. So who’s we, and how did we break it?
Rakeen Mabud:
In many ways the title is a bit of a misnomer, because I don’t think we broke it. I think these big companies that run the supply chain designed it exactly as it’s supposed to be designed for them. But to take a step back, essentially, the article really dives into how a series of policy choices over the last 50 years have given these mega corporations an incredible amount of power over our supply chains.
Which has led to this incredibly brittle system that is unable to withstand shocks, has no sort of inventory or fail-safes built into it. And as a result, when it was hit with something like a pandemic, or even a storm halfway across the world, this brittle supply chain broke down. And that’s exactly what we’re seeing today.
Nick Hanauer:
There’s obviously a connection between the supply chain and higher prices, and what we’re presently calling inflation. Where does one stop and the other begin?
Rakeen Mabud:
When you think about this whole system, we have what is essentially a system of really big links that is incredibly concentrated. So for example, three ocean shippers control pretty much all of the ocean shipping in the entire supply chain. So if one of those links goes down, the whole supply chain falls apart. And so when we do see something like a shift in demand, or an increase in demand, like we saw over the course of the pandemic, one, that creates bottlenecks and supply shortages, which invariably raises prices.
But what it also does is, gives these big corporations who have such a hold on our markets, the ability to jack up prices just a little bit more, just to pad their profits a little bit more. And so it is really that market power that is both at the root of the very real price increases that we’re seeing in terms of input costs.
But it’s also that market power, as well as that cover of quote, unquote, inflation, that’s giving these big companies the ability to jack up prices on consumers. Because consumers don’t actually know where the input costs stop, and where the profit padding begins.
Nick Hanauer:
Is it possible to determine what proportion of the price increases that consumers are facing today are a consequence of increased corporate profits?
Rakeen Mabud:
That’s a really tricky question. I think coming up with an exact number is difficult just because macroeconomic modeling is difficult. But I will say that, what my organization, the Groundwork Collaborative has done is, we’ve combed through 100s and 100s and 100s of earnings calls over the last three quarters or so.
And essentially what we see is that, these CEOs are saying the quiet part out loud. Over and over again, what they say is, “Hey, isn’t this a great opportunity? We can raise our prices and no one will know because inflation is happening, and consumers are aware of that, and they’re able to just eat these price increases.”
And that’s especially the case for sectors where there’s an incredible inelastic demand for goods, which essentially means that the demand for goods is not responsive to price increases because those goods are essential. Take something like diapers, so if the entire diaper market in the US is essentially covered by two big companies. And if you’re a parent with a kid, it doesn’t matter if diapers are $20 a box or $40 a box, you’re going to need to buy those diapers. And these two companies know that and they can jack up the prices as a result, and that’s exactly what we’re seeing.
Nick Hanauer:
I have racked my brain for a way that the country or the world could have avoided the majority of this system. So Goldie and I were arguing about this beforehand. There is simply no doubt that corporate concentration is a deep evil that permeates Western capitalism that we need to defeat, because it is most definitely contributing to this problem. But if there were 10 shipping companies, not three, they’d still be in a commanding position, wouldn’t they?
Rakeen Mabud:
They would. I think also it’s important to note that this particular moment in time, it is unique. The underlying power that these companies have is not unique, and obviously it’s been that way. This power I balance has existed in our economy for a long time. But I think the fact that we are in this moment where there is a general rise in prices, there is inflation happening, it gives these companies cover.
And I think, just to give an example, in one of the earnings calls, we looked at Hostess, which produces all sorts of snack products. And the CEO of the company, and in March 2022, so just a couple weeks ago said, quote, “We’re also seeing consumers experience a lot of disruptions, and it’s a large range of variability as we flow throughout the year. They’re losing benefits, they’re moving to a normalized COVID environment. They haven’t fully recognized they were absorbing pricing.”
And then later on in the same call, he says, “Pricing by definition is a change model, it’s temporary, consumers get used to it. When all prices go up, it helps.” And really the point he’s making there is, consumers are, they’re really leveraging this information asymmetry. They’re really leveraging the fact that consumers don’t know how much of it is input cost rising, and how much of it is profiteering.
And from Q3 to Q4, we really see that lock in, because all these CEOs are doing a little trial balloon in Q3, they’re like, “Maybe we’ll test this out, see how it goes.” And then by Q4, they’re telling their investors, “Yes, this is the way, let’s go for this because it’s really working for us.”
Nick Hanauer:
Yeah. No. And I have no doubt in having run a bajillion companies, there is nothing harder than raising prices. And this dislocation is creating a lot of distraction, which is enabling companies to do that. And there is no doubt that we have more of a corporate greed problem today than we have an underlying inflation problem today.
Speaker 3:
Can we expand this a little more? Because the problem, Rakeen, has been more than just inflation. We’ve actually had shortages over the past two years, we’ve had empty shelves. And so it’s not just CEOs raising prices here that we’re talking about.
In your piece, you say that we broke the supply chain and it was the result of certain policy choices. What are some of the policy choices we made over the past 50 years that led to this, the fragile supply chain that we have now, and the consequences that we’re seeing from it?
Rakeen Mabud:
Yeah. There are a lot of big shifting pieces here. So one of them is just our permissiveness towards bigness. We have allowed these companies to become huge and really exert more power over our economy than is healthy for a sustainable, equitable, resilient economy. We’ve also deregulated a lot of things. Not just in terms of mergers and acquisitions, but we’ve allowed working standards to come down and really precipitated this race to the bottom. And that is a liability for a supply chain.
80% of port truckers are misclassified as independent contractors, so they’re not actually an employee of the port. And the upshot of that is that, these truckers, these really essential workers who are getting goods from those ships to another point in the supply chain, aren’t able to use the bathroom. They’re sitting there waiting in these long lines.
The fact that these jobs have such rock bottom quality to them means that nobody wants them. So we have a lot of CEOs out here complaining about labor shortages. But it is actually, they’re pushed to push wages down to push quality of jobs down. That’s resulted in nobody wanting those jobs in the first place, which ultimately, is another weak point in our supply chain.
And then also we’ve built in the system. And the reason we have such a brittle system, is because shareholders and investors have demanded no fail-safe, no inventory, no real wiggle room when it comes to demand, because that’s the best way of making sure that your costs are kept low, and your profits are kept high.
So if your only incentive is to maximize short-term profits, of course, you’re going to offshore to the one company that has the lowest cost for goods, or you’re going to keep no padding in your supply chain. And so it’s a lot of these decisions that have come together to create the incredibly brittle system that we have today. And that’s not a pandemic problem, I think it’s just being exposed by the fact that we’re going through this rapid shift in demand.
Speaker 3:
Right. Right. To be clear, we’ve had a trucker shortage for more than a decade. And one obvious solution the trucking industry refused to embrace, which was raise wages.
Nick Hanauer:
Yeah. Pay more for truckers.
Speaker 3:
Yeah.
Nick Hanauer:
Capitalism actually does offer a ready solution to this problem, which is, just pay people more. But that is not music to the ears of the people running trucking businesses. So there are some parts of this problem, to me, that seem super clear. The egregious profiteering, it needs to be addressed and exposed.
And I think you guys at Groundwork are doing a fabulous job on it, so that people understand that we have less of a inflation problem and more of a corporate greed problem. But I’m really wrestling with how you would build… And the corporate concentration problem is absolutely also incredibly clear, that letting these companies get so big isn’t good for anybody, but a few dozen shareholders in the world. For everybody else, it’s a downside.
But I really struggle with how you would build a capital efficient supply chain… What you would do to an incentivize people to have a more robust global supply chain? That’s a really complicated question. Do you have thoughts on that?
Rakeen Mabud:
It is a complicated question, and there’s no one-shot policy solution. This is a problem that took 50 years to create, and may take 50 years to undo. Although I think there are some real policy steps that we can take to start to address it. So first of all, to your point about investors, the largest US companies in 2021 have seen the highest levels of stock buybacks in our history, at $850 billion. That’s just wild.
That is simply companies deciding, “I’m going to pay out to my shareholders rather than investing in the productive capacity of my firm.” And you don’t have to take my word for it, we see this over and over again in those earnings calls I mentioned earlier. So Senator Whitehouse just proposed a windfall profits tax.
And really starting to tax excess profits and really incentivizing these firms to invest back in their business. Actually invest in efficiency, actually invest in resiliency is, to me, a really clear way to start to reorient who companies are really beholden to. And that doesn’t have to stop with excess profits, you can just tax corporations a little bit more.
Nick Hanauer:
Yeah. No, no, no. For sure.
Rakeen Mabud:
That’s also a good place to start.
Nick Hanauer:
Yeah, yeah, yeah.
Rakeen Mabud:
So that’s one piece of it. I think there’s also interventions that you can take at the point of price gouging, or at the point of profiteering. So I testified in front of the Consumer Protection Subcommittee last month, about a bill that Congresswoman Schakowsky has around price gouging. And really empowering the FTC and state attorney generals to go after price gougers, where they see that bad behavior happening.
So putting these companies on notice, giving these agencies and offices the tools to go after bad actors, I think is a really important prevention. And then addressing the concentration of our economy, I think is obviously a clear next place to go as well. The majority of American goods are delivered by as few as three ocean shipping alliances, packed by four meat packers, and equipped by single ship makers.
So is it any wonder that we’re seeing used car prices jump up, that we’re seeing the price of beef go up by 30%, and that we’re seeing bottlenecks and shortages across our supply chain? Of course not. And so really it’s starting to break apart some of these big companies and encourage a bit more competition. So there are a lot of prongs on the table, but I think this is a multifaceted problem that requires multifaceted solutions.
Speaker 3:
Yeah. What about reregulation? We used to have a regulated trucking industry, the shipping industry used to be a lot more regulated. What would that do in terms of putting a little more resiliency back into the supply chain, if that was the goal of the regulations?
Rakeen Mabud:
Yeah, absolutely. Trucking and rail deregulation really brought down federal standards, really ensured that workers are being paid rock bottom, that these companies are, that there was huge amounts of mergers happening too in rail and trucking. So reregulation is a pretty key part of making sure that we make sure that this system works for everyone. That’s the main thing.
Currently we have a system where the only stakeholder that is prioritized are shareholders, that’s the only one. But really in the ecosystem we’re talking about, there are shareholders and there are corporate executives, but there are also consumers, there are also workers, there are also families who depend on these goods.
And what we really need to do with all of these tools is to reorient our supply chains, and fundamentally our economy, because supply chains are a kind of a microcosm of our whole economy. So that actually works for all of those stakeholders, not just the shareholders.
Nick Hanauer:
Yeah, for sure. Corporate greed is best reflected in the stock buyback thing, which is just the most egregious part of our economy. For listeners who haven’t done the math lately, $850 billion worth of stock buybacks is 4% of GDP. It’s just an-
Rakeen Mabud:
It’s unbelievable.
Nick Hanauer:
It’s just an astonishing amount. $850 billion per year is enough to basically fix every road, bridge, school, name your thing, in America, in three years or four years. It’s just an unbelievable amount of money that is really creating no social value. It’s just this ridiculous economic merry-go-round between corporations and big holders.
And the idea that this money is reinvested is just nonsense. The way to get corporations to reinvest and actually build capacity, is to make stock buybacks illegal and to raise the corporate income tax rate to 45 or 50%. Because in that scenario, the only way you can avoid high levels of tax is to bury the profits in more productivity in your businesses and pay your workers more. It just drives me crazy.
Rakeen Mabud:
Yeah, it’s a really egregious problem. And the thing that I worry about the is, as we’ve seen in these earnings calls, jacking up prices on consumers is a tactic that is working for executives, and it’s working for these shareholders. These record buybacks are going straight into shareholders pockets. And we saw it from Q3 to Q4, and probably in the next set of earnings call data too, that the shareholders keep demanding it.
We’re seeing this tactic spread from one industry to another, and prices are going higher and higher and higher. And a lot of economists like to talk about a wage-price spiral, this idea that, as workers demand higher wages, prices are going to have to rise and then they’re going to demand higher wages. There’s no evidence that that’s happening whatsoever.
What we are seeing evidence of is a profit price spiral. And it’s the idea that, the higher profits go, the more the investor demands are going to rise for those profits. Which means that that same tactic of jacking up prices on consumers will get applied over and over and over again all the way across the economy.
And fundamentally, I think this is a really interesting thing because I think it’s a part of the systemic issues that we don’t talk about a lot. But our whole economy has this scaffolding of investors who are really pulling the strings.
They’re these sort of puppet busters across the entire economy, and it is corporate greed, yes, and it is really investor greed, shareholder greed. And until we break down Wall Street’s influence in every single corner of our economy, we’re only going to see this bad behavior persist.
Speaker 3:
So let me ask you something, Rakeen, you said that you’ve been listening to these corporate conference calls, the quarterly conference calls. And there’s all this evidence that they’re focusing on raising prices. Is there any evidence that they’re also investing substantially in increasing supply?
Rakeen Mabud:
That’s not something I’ve seen. We are really focused on looking at the extractive elements of it, and those two are inherently zero-sum. If you’re extracting a lot, you’re probably not investing back in your business. And really over and over and over what we see is that, even companies that are getting infusions of money from outside of the firm.
So Johnson & Johnson, for example, which expects to make, I think more than $3 billion from it’s COVID-19 vaccine this year. Which by the way, is the result of more than a billion dollars in federal funding for R&D for the same vaccine. They’re jacking up prices, and they’re really citing things like suffering and death.
And their optimism around the need to address that suffering as a real strength of their business. So we haven’t seen really evidence that firms are investing back in their businesses, and frankly, that’s been the case for decades. We’ve seen just… Yeah, go ahead.
Speaker 3:
I’m trying to wrap my mind around this because, I’ve read the Econ 101 textbook, and allegedly, when demand outstrips supply, prices rise, and then that incentivizes capitalists to invest in increasing supply, and that will bring down the price. So you’re telling me the capitalism, the markets aren’t working here.
Rakeen Mabud:
Well the markets are working in the way that these CEOs want them to work. Why do all the work of increasing supply and making sure your companies are actually delivering the good it set out to deliver, when you can just juice profits. And that’s what we’re seeing, that’s the easy way out. It’s just, you can change that sticker price a little bit.
And it’s so easy to do when everyone is freaking out about inflation, and the reason everyone is worried about inflation is because we do have higher prices. We do have these higher input costs that are the result of the same bad actors creating a system that was meant to maximize their short term profits in the first place.
So I think Econ 101 just ignores completely the element of power that is just threaded throughout our economy and the way that power is used, and abused, and used to extract from all of us to enrich the people who hold that power in the first place.
Nick Hanauer:
We always ask this one question, which is the benevolent dictator question. If it was you, politics aside, what would you do, Rakeen?
Speaker 3:
Yeah. No filibuster, and anything you want to do you can pass through congress.
Rakeen Mabud:
Oh gosh. That’s a big question.
Nick Hanauer:
You are queen to the day.
Rakeen Mabud:
Man, I would love to, fundamentally all of the policies that I’ve named that have both gotten us into this point, and the ones that will get us out from taxing corporations, taxing excess profits, going after price gougers, passing the PRO Act and making sure workers have the wages and standards that they deserve, breaking up big companies.
All of those policies, what do they boil down to? They boil down to, “Let’s make sure that the wealthy and powerful corporate executives and shareholders who exert too much power in our economy have less power, less influence. And let’s make sure that the workers and the people who actually create our economy in the first place, make it work, make it run, make it resilient and successful, are empowered and are healthy.” Because that is really when we’ve seen that work.
We’re in the middle of what is arguably one of the fastest economic recoveries in American history. And that is because we pass policies like the ARP package, which really centered people and made sure people were able to make it through a moment of crisis. They’re not going to see long-term scarring, I hope.
Because they had those cheques in their pockets, because they had a child tax credit, because they had unemployment insurance that was extended for a little bit, because student loan payments were put on pause. And that’s a proof point to me. That, when you center people in our economy, that is when we actually get to a system that works for everyone.
And we’ve tried this trickle down thing for decades, it’s clearly not working. It’s how we ended up in this point in the first place, and so I think really it’s that simple. It’s like, “Let’s rebalance power dynamics,” that’s what it comes down to.
Nick Hanauer:
Fabulous. So one final question. Why do you do this work?
Rakeen Mabud:
I do this work because, fundamentally, I care about people. Why do we care about inflation? We care about inflation because of the way it affects people. And I think they’re, for too long, and for too many, especially those who have historically been excluded because of their sex, or their race, or their gender, this system is not working.
And not only does that harm all of us, not only does that harm these individuals, not only does that not allow people to live a life of dignity, it fundamentally harms our entire system. It holds us all back collectively when the people who make things run are not doing well. And so that’s why I care about it, that’s why I get mad about it. And I’m really glad to be in conversation with others who feel the same.
Nick Hanauer:
Well, thank you so much for being with us, and thank you for your work.
Rakeen Mabud:
It was such a pleasure. Thank you for inviting me.
Nick Hanauer:
That was a really super interesting conversation. And I think it does underscore how complicated this issue is to understand. But it is still true that in recent polling from Data for Progress, that a majority of American people, including 51% of Republicans, know that corporate greed is playing an outsized role in the higher prices they’re paying every day.
Price gouging doesn’t account for all the extra money folks are spending in grocery stores, but it does represent a pretty significant part. And here’s a way to dimensionalize what the relationship between corporate profits and how ordinary families are doing through this process. So as Rakeen mentioned, stock buybacks are at a ridiculous high, $850 billion per year.
But to put that amount of money in perspective, if you took there’s about 140 million workers in America, if you took the bottom 100 million, which is about two thirds of folks, and divided that number of people by 850 billion in stock buybacks, it’s about $6,000 a worker or $12,000 a year for a typical two worker household. That explains why prices are higher.
Obviously, if every household below in the bottom 100 million was earning approximately $12,000 more a year, because instead of doing stock buybacks, corporations were paying their workers more fairly, none of these price increases would be impacting people in the way that they are.
Speaker 3:
I want to put this in further perspective, Nick, because what we’re having right now is, prices are rising. So that we can take $850 billion of excess profits out of the economy, and pissing it away on stock buybacks to mostly go into the top of 0.1%.
Alternatively, we could have prices rising from raising wages collectively by $850 billion and the then having that increasing demand push prices up. Now, some economists might say that’s a wash, but if I was one of those 140 million American workers, oh wait, I am, I’d say, “I’d rather have the money than you Nick.”
Nick Hanauer:
Yeah. Correct, 100%.
Speaker 3:
I’d rather go to me than go to you. Me and the other 140 million workers in America. And, oh yeah, by the way, prices aren’t going to rise so much that it’s going to eat up all of my income.
Nick Hanauer:
That’s right. But I think that it’s fair to say that the pandemic has exposed a ton of weaknesses in the neoliberal economy, low wages, delicate supply chains, egregious profit taking, increasing inequality, all this stuff.
But the problems are not really different than the problems we’ve been talking about for a long time, pre-pandemic. Corporate concentration is a huge problem, and it is in many ways affecting the capacity for the economy to respond to this massive dislocation.
Speaker 3:
I think Rakeen focused in on it when she started talking about power. And we’ve talked about this a lot on the podcast, how important power is and how much economists ignore it. There’s imbalance of power in the American economy that has been building over the past 50 years. It’s not just income inequality, it’s power inequality, and the two go together.
And you see it again and again, the things that are at play here, the rising consolidation, the monopolization and consolidation within industry after industry that gives these companies the power to raise prices. Simply because there isn’t enough competition to force them to keep the prices down, the power that allows them to keep wages low.
The power that allows them to offshore jobs to save couple bucks an hour on labor. The power that allows them to buy enough political influence to keep their taxes low so that they’re not paying to reinvest in public goods and public services. The power that allows corporations to lobby to keep their regulations down. We grew up in a very different economy, and we’re both old enough to remember the inflation of the 1970s, which supposedly is what we should be afraid of.
My big takeaway from this conversation, Nick, is that this is not your grandfather’s inflation. This has nothing to do with what we experienced in the 1970s, which was that stag inflation, that undermine confidence in the old Keynesian consensus. Where we had high unemployment and high inflation at the same time, we don’t have that right now, we have low unemployment.
Nick Hanauer:
That’s right. And I think what’s happening right now is effectively the confluence of two things, A, once in 100 year dislocation, which would’ve created higher prices and good shortages under the best of circumstances.
Even if every single thing in policy you and I wanted had happened, we would still have some challenges. But that dislocation has been irredeemably magnified by the neoliberal construct that we live with today and the price gouging that is enabled by that.
Speaker 3:
We could have had a more resilient supply chain because we could have made the decision to have a more resilient supply chain. And we have sacrificed resiliency throughout our economy. We have made the supply chain less resilient, we have made corporate America less resilient, we have made workers and families less resilient.
Nick Hanauer:
All of it is true.
Speaker 3:
All for the sake of low prices and-
Nick Hanauer:
And high profits.
Speaker 3:
… and high profits. And we have deregulated across the board to do that. And I think we’ve gone too far, and we could make the decision to reregulate with the goal of having a more resilient economy, making Americans less precarious.
And that would be more expensive and things might cost a little more, but we wouldn’t be subject to such severe and prolonged shocks as we are now. And we could construct an economy in which the pains of these shocks would be more broadly shared.
Nick Hanauer:
From your lips to God’s ears, building.
Speaker 4:
Pitchfork Economics is produced by Civic Ventures. If you like the show, make sure to subscribe, rate and review us wherever you get your podcasts. Find us on Twitter and Facebook @civicaction and Nick Hanauer. Follow our writing on Medium at Civic Skunk Works and peek behind the podcast scenes on Instagram @pitchforkeconomics. As always, from our team at Civic Ventures, thanks for listening. See you next week.