Greed is good, actually. At least that’s the journalistic line the Wall Street Journal has decided to take, with a recent headline (5/25/23) reading, “‘Greedflation’ Is Real—and Probably Good for the Economy.”
To refresh your memory, “greedflation” is the idea that corporate profiteering has contributed to inflation—a thesis that was, up until recently, generally downplayed or outright ridiculed by the media (New York Times, 1/3/22, 6/11/22; Bloomberg, 5/19/22, Washington Post, 5/12/22). As Axios (5/18/23) summarized earlier this month, however:
Once dismissed as a fringe theory, the idea that corporate thirst for profits drives up inflation, aka “greedflation,” is now being taken more seriously by economists, policymakers and the business press.
The change in tenor was captured by Intercept reporter Ken Klippenstein on Twitter (5/26/23):
As recently as February, the Wall Street Journal (2/14/23) had completely ignored the role of corporate profiteering in a piece on rising prices for breakfast staples, blaming supply shocks instead. Writing for FAIR (2/21/23), Luca GoldMansour pointed out that the piece completely ignored strong evidence of price gouging by egg producers.
Now, in a piece by columnist Jon Sindreu, the Journal is changing its tune by recognizing the importance of profiteering. But instead of criticizing the practice, it’s celebrating it.
‘A bit of corporate greed’
The Journal (5/25/23) provided a useful graph showing that corporate profits have contributed far more to price increases than in the past. Businesses have enjoyed historically high profit margins over the last several years, as supply shocks have provided them with ready excuses to hike up prices with little resistance from consumers.
In the column, which was published in the paper’s “Heard on the Street” section, Sindreu argues:
A bit of corporate greed may be helping the fight against recession…. Yes, inflation may be higher as a result of corporations flexing their pricing muscle. But it is probably also the reason why the recession everyone expects always seems to be six months away.
All this amounts to is a sleight of hand. As Sindreu admits towards the end of the piece, what’s actually saved the economy from a downturn is not corporate profits, but “the surprisingly strong spending patterns seen during and since the pandemic.” People keep spending money; the economy keeps chugging along.
You might say that exceptionally high corporate profits are a reflection of this strong spending—in which case spending would still be the reason why we have avoided a recession, and high profits would just be an outcome of that spending—but even that is misleading.
As Sindreu notes, “Companies, which in normal times are wary of angering customers with big price changes, seem to have seized on the excuse of generalized inflation to shield their margins.” Basically, in an environment where inflation is rising, and where outlets like the Journal (2/14/23) are portraying price increases as simply the result of “a perfect storm” of issues wreaking havoc on supply, companies suddenly have more wiggle room to raise prices without pushback from consumers. The result has been a more substantial surge in profit margins than we would have seen had companies not had ready excuses for their price hikes (Bloomberg, 3/9/23).
Thus, rather than simply being an indicator of a strong economy, the high profit margins we have seen throughout the pandemic years have reflected companies’ success in capitalizing on well-publicized supply shocks to redistribute consumers’ income to themselves—aided and abetted by a media eager to insist that no such thing was happening.
Extorting billions
A business owner tells Bloomberg (3/9/23) that any national news event can be “an opportunity to increase the prices without getting a whole bunch of complaining from the customers.”
This point is made firmly by the advocacy group Farm Action in its January 2023 letter to the Federal Trade Commission on price-gouging by egg producers. After examining the evidence that supply issues could not explain the more than doubling of egg prices between 2021 and 2022—crucially, the fact that “the industry’s quarterly egg production experienced no substantial decline in 2022 compared to 2021”—the group’s letter concludes:
In the end, what Cal-Maine Foods and the other large egg producers did last year—and seem to be intent on doing again this year—is extort billions of dollars from the pockets of ordinary Americans through what amounts to a tax on a staple we all need: eggs.
And this sort of profiteering is not limited to the egg business; other industries have adopted the strategy of jacking up prices and seeing what the consumer will accept. Take Wingstop, which has continued pushing up prices for wings even as the price of wholesale wings has declined. As Bloomberg (3/9/23) notes, “The chain’s profit margins are up, and its stock has soared almost 250% from the low it hit during the depths of the Covid-sparked market rout in early 2020.”
That is greedy. It’s hard to see how it’s good for the economy.
‘Investors should push back’
Sindreu wants the wealthy to be able to defend themselves against claims that they have been rewarded excessively in the midst of inflation:
As for the political optics, investors should push back against notions that income distribution is the simple result of a power struggle between capital and labor. Profit margins need two to tango: Corporations have successfully increased prices only because—unlike in the 1970s—the rest of the economy has kept spending.
You see: If companies successfully dupe consumers into accepting price increases above and beyond their cost increases, while media spread word of supply chain issues and downplay the possibility of corporate profiteering, then who’s really at fault? Forget all that talk about class struggle, let me introduce you to victim-blaming.
Profits good, wage growth bad
The Wall Street Journal (3/2/23) sees wage growth as bad, even though it’s much more closely tied than profits to the consumer spending that it says is saving the economy—because the paper sees itself as being on Team Owner and not on Team Worker.
Notably, the way the Journal has decided to frame profit growth in this piece is completely different from how it and the rest of the media tend to frame wage growth. In the case of profit growth, the Journal tells us it’s actually good, because it’s supposedly helping stave off recession.
In the case of wage growth, by contrast, the media has consistently told us it’s bad, because it pushes up inflation:
- “Wages Grow Steadily, Defying Fed’s Hopes as It Fights Inflation” (New York Times, 5/5/23)
- “Cooler Hiring and Milder Pay Gains Could Aid Inflation Fight” (Associated Press, 1/6/23)
- “The Jobs Market Is Still Hot. And That’s a Problem.” (Politico, 10/7/22)
- “The Red-Hot Labor Market Still Isn’t Cooling Off. The Fed Has Its Work Cut Out.” (Barron’s, 7/8/22)
- “Worker Pay Is Rising, Complicating the Fed’s Path” (Washington Post, 4/28/23)
- “Wage Growth Has Slowed, but Still Pressures Services Inflation” (Wall Street Journal, 3/2/23)
But profit growth has also pushed up inflation. And while it’s true that wage growth has contributed to inflation (in a very mild way), wage growth has also helped stave off a recession, and has done so in a much more obvious way than profit growth has.
Strong consumer spending—the very factor that, by the Journal’s own admission, is preventing an economic downturn—has been possible partially due to strong wage growth. Rising wages give people greater purchasing power, which they can then exercise to keep the economy afloat. On the other hand, rising profits, at least in the context of the last couple years, have facilitated a redistribution of income away from consumers, draining them of purchasing power.
But the Journal says, Never mind that! Profit growth good. Wage growth bad. Why? Because high profit growth helps prevent a recession. (Forget about the fact that it’s also pushing up inflation.) And high wage growth drives up inflation. (Forget about the fact that it’s also helping prevent a recession.) See if you can spot the contradiction.
Maybe greed is good. Maybe the Journal has things exactly right. Maybe a newspaper owned by Rupert Murdoch isn’t siding with his fellow billionaires over the vast majority of its readers.
Or maybe not.
ACTION ALERT: You can send a message to the Wall Street Journal at wsjcontact@wsj.com (or via Twitter: @WSJ) Please remember that respectful communication is the most effective. Feel free to leave a copy of your communication in the comments thread.
FEATURED IMAGE: The Wall Street Journal (5/25/23) illustrated its defense of “greedflation” with a photo of an outlet for Ralph Lauren, which raised prices an average of 12% despite already sky-high profit margins.
The post WSJ Says Corporate Profiteering Is Good, Actually appeared first on FAIR.
This content originally appeared on FAIR and was authored by Conor Smyth.
Conor Smyth | Radio Free (2023-06-01T19:06:17+00:00) WSJ Says Corporate Profiteering Is Good, Actually. Retrieved from https://www.radiofree.org/2023/06/01/wsj-says-corporate-profiteering-is-good-actually/
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