Amidst all the drama and scandal driven these days by Republican skullduggery, from Kevin McCarthy’s allying with and empowering fascist and white supremacist factions in the House of Representatives to newly-elected Representative George Santos’ shameless deception of American voters (and his and the GOP’s shoulder-shrugging about it), the key political issue of inflation tends to get lost in the mix—maybe intentionally so.
I refer to “inflation” as a political, rather than simply an economic issue, because to call it an economic issue maintains the illusion that somehow the surging prices for key commodities are simply a result of impersonal economic laws, such as supply and demand, rather than a result of unchecked or unregulated power bestowed upon corporations by the political powers that be.
And I put “inflation” in quotation marks because, really, it misnames and thus obscures what’s really going on, which is price-gouging, particularly when it comes to gas and housing prices. And when we use the term “inflation” instead of “price-gouging” or “profiteering,” it galvanizes the beltway wonks to turn to their stale solutions for trying to rein in out-of-control prices, which usually means attacking American workers and making their lives worse, which misapprehends the real causes of skyrocketing living costs for Americans.
Federal Reserve Chairman Jerome Powell has defaulted, for example, to the tired and largely unexamined strategy of raising interest rates to slow the economy. Raising interest rates leads to higher prices, which slows demand, which leads to companies needing less workers to make and transport their products, which raises unemployment and thus puts downward pressure on wages.
The solution to “inflation,” or, more appropriately, price-gouging, is to punish workers. I guess, despite the mantra we hear so often, we’re not all in this together.
As Sylvan Lane concisely explained in The Hill:
Put simply, the Fed knows its past and future rate hikes will lead to higher unemployment and won’t stop fighting inflation because of it.
But higher unemployment isn’t just a side effect of the Fed’s plans: It’s a goal.
Powell and scores of other economists believe the U.S. job market is too strong to allow inflation to fall. The combination of super-low unemployment and record-high job openings have fueled rapid wage growth, they contend, which forces businesses to raise prices to afford higher labor costs.
But we need to unpack the falsehoods informing this hackneyed and misleading, if not outright deceptive, narrative that effectively perpetrates a hoax on the American people.
First, let’s consider the skyrocketing profits oil companies and corporate landlords have been reaping.lately.
And let’s keep in mind that if these corporations were simply passing on their rising costs to consumers, their profits would be remaining level, not surging.
Just take three of the largest oil companies and look at their third quarter profit growth year-over-year for 2022. Exxon’s profits grew from $19.7 billion in the third quarter of 2021 to $24.4 billion in the third quarter of 2022, Chevron’s from $6.1 billion to $11.2 billion, and Shell’s from $4.13 billion to $9.45 billion.
And when it comes to price-gouging in the housing rental industry, Irina Ivanova reported for CBS News:
The largest publicly traded property groups in the U.S. saw their combined earnings surge more than 50% last year to nearly $5 billion, government watchdog group Accountable.US found in a new analysis. During that time, their top executives saw raises of more than 20%, the group calculated.
Again, to underline the obvious, these increases in profits and executive pay would not be realized if these companies were simply passing on their own cost increases to consumers.
Understanding this dynamic is key for finding an appropriate and humane solution and for addressing Americans’ needs.
Seeing rising costs as a result of price-gouging, as opposed to “inflation,” which suggests prices are going up because companies’ costs are rising and simply being passed on, logically means that making workers’ lives worse by increasing unemployment is neither an effective nor a humane solution to the problem of rising costs.
And we have to ask another key question: why is the reflexive default solution to lower wages and suppress employment prospects for average Americans, inflicting substantial pain on them, rather than finding a political means to rein in and limit corporate profiteering? Why is it acceptable to suppress wages but not limit profits? Why don’t workers get the same treatment and care as corporations, who will arguably feel the pain much less, if at all?
We need to flip the script so expert economists’ first instinct isn’t to attack workers, where the pain will be felt the most, but rather to legislate limitations on corporations, who ought to have some responsibility to act as good citizens and neighbors.
Irina Tsukerman, a geopolitical analyst, a member of the American Bar Association’s Oil and Gas Committee, invokes the traditional script when explaining why oil companies made a “killing.” She says, “They are free enterprise, and like any other commodity in the U.S they are not controlled by the government, nor can the government regulate prices.” And she invokes the typical narrative of supply and demand, explaining that “when demand rises so do the prices, because consumers are willing to pay more for the same product.”
Again, we have to interrogate this harmful language. Consumers aren’t so much “willing” to pay as they are forced to pay. They need to drive to work to make a living. They need to pick up their kids, and so on.
When it comes to housing, people need a place to live. It’s not matter of willing; it’s a matter of have to or be homeless. According to the Government Accountability Office, every $100 increase in rent results in a nine percent increase in homelessness.
President Biden did last year suggest the need to address price-gouging and profiteering through legislation.
Our political leaders need to get back to addressing and naming price-gouging, calling “inflation” what it is in order to inform and educate the American voter and spur reflection on our national values, hopefully motivating a turn to genuine concern for the needs of Americans.
Tim Libretti is a professor of U.S. literature and culture at a state university in Chicago. A long-time progressive voice, he has published many academic and journalistic articles on culture, class, race, gender, and politics, for which he has received awards from the Working Class Studies Association, the International Labor Communications Association, the National Federation of Press Women, and the Illinois Woman’s Press Association.