["Companies increased prices by more than spiking costs of
imported energy," said economists with the International Monetary
Fund.]
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IMF SAYS CORPORATE PROFITEERING CAUSED NEARLY HALF OF EUROPE’S
RECENT INFLATION SURGE  
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Jake Johnson
June 27, 2023
Common Dreams
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_ "Companies increased prices by more than spiking costs of imported
energy," said economists with the International Monetary Fund. _

Greenpeace activists set up a mock gas station price board displaying
Shell's net profit for 2022 outside of the company's headquarters in
London on February 2, 2023., Daniel Leal/AFP via Getty Images

 

Economists with the International Monetary Fund on Monday echoed what
progressive experts and campaigners around the world have been arguing
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for more than a year: Corporate profiteering has been a key driver of
the recent inflation surge.

In a blog post
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on Monday, the IMF's Niels-Jakob Hansen, Frederik Toscani, and Jing
Zhou wrote that "rising corporate profits account for almost half the
increase in Europe's inflation over the past two years as companies
increased prices by more than spiking costs of imported energy."

If inflation is to return to the European Central Bank's 2% target,
the trio argued that "companies may have to accept a smaller profit
share" as workers demand "pay rises to recoup lost purchasing power."

The economists referenced a working paper
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they released last week that shows corporate profits are responsible
for just under 45% of the inflation spike during the coronavirus
pandemic.

As the paper explains, companies have hiked prices beyond what was
necessary to cover the rising prices of energy and other materials
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passing greater costs onto consumers and fueling a cost-of-living
crisis
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across Europe while padding their bottom lines.

The London-based oil giant Shell
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more than double
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$40 billion last year.

"Europe's businesses have so far been shielded more than workers from
the adverse cost shock," the economists wrote in their blog post.
"Profits (adjusted for inflation) were about 1% above their
pre-pandemic level in the first quarter of this year. Meanwhile,
compensation of employees (also adjusted) was about 2% below trend."

The IMF experts' findings were limited to Europe, but economists have
similarly found that corporate profiteering is fueling price increases
in the United States.

In March, the Economic Policy Institute's Josh Bivens wrote
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that "in normal times, corporate profits contribute about 13% to
prices."

"Since the second quarter of 2020, they have instead contributed more
than a third of price growth, or more than twice as much as they
normally do," Bivens estimated.

Data released
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last month by the U.S. Bureau of Economic Analysis showed that
corporate profits rose to a record high in the first quarter of 2023
even as the Federal Reserve worked to slow the broader economy with
aggressive interest rate hikes.

After spending more than a year openly targeting the labor market and
workers' wages
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Fed Chair Jerome Powell has acknowledged
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in recent months that lower corporate profits
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could help curb inflation.

On earnings calls, top executives of major corporations have openly
credited continued revenue and profit growth to their ability to raise
prices even as business costs fall
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"Pricing has continued to be the big driver behind our top-line growth
over the last three quarters," Kimberly-Clark's chief financial
officer said during the company's April earnings call.

Liz Zelnick, director of economic security and corporate power at
Accountable.US, said
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earlier this month that "it's clear the corporate profiteering
epidemic will persist no matter how many times the Fed doubles down."

"Corporate greed is a stubborn thing and requires serious action from
Congress," she added. "The Fed has not seen an adequate return on its
investment in a policy that has already created fissures in the
economy that could lead to recession. It's just not worth it."

Our work is licensed under Creative Commons (CC BY-NC-ND 3.0). Feel
free to republish and share widely.

 

Jake Johnson is a staff writer for Common Dreams.
 

* Inflation; Corporate profiteering;
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