Is Inflation Just an ‘Excuse’ To Hike Prices? 80% of Americans Think There’s ‘Greedflation,’ Study Finds
Written by
Vance Cariaga
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Ashley Almario
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High prices are supposed to be bad for everyone — consumers and businesses alike. But while soaring inflation has certainly hurt consumers financially, corporations have been raking in record profits, and the vast majority of Americans point to “greedflation” as the reason, according to a new survey.
The survey of 2,000 U.S. consumers, conducted by consumer research platform Attest and released on Tuesday, April 25, found that 80% of respondents feel that brands are involved in greedflation. That’s the term that describes using inflation as an excuse to hike prices. Of those respondents, more than half (58%) believe “more needs to be done” to protect consumers and stop brands from benefiting from the practice.
In terms of which types of products have seen the most rapid price hikes, three-quarters of respondents answered that it was groceries. Energy ranked second at 37%, followed by travel (27%).
Fears of greedflation are not unfounded. As Fortune recently reported, companies in last year’s Fortune 500 generated an all-time high $1.8 trillion in profits on $16.1 trillion in revenue. Those profits came despite an inflation rate that soared as high as 9.1% in 2022 — the highest level in more than 40 years.
A January 2023 study from the Federal Reserve Bank of Kansas City found that a growing number of companies have boosted profits through “markup growth,” which is the increase in the ratio between the price a company charges and its cost of production. In 2021, for example, markups grew by 3.4%, whereas inflation increased by 5.8%. This suggests that markups could account for more than half of 2021 inflation, according to the Fed.
This will not be happy news to the millions of Americans who have struggled to pay their bills or even afford basic necessities like food and shelter due to high inflation. Some experts warn that greedflation could lead to social unrest in parts of the world (including the United States) where consumers have reached the breaking point on high prices.
One of those experts is Albert Edwards, a global strategist at Société Générale. In a recent edition of his Global Strategy Weekly, Edwards said current levels of corporate greedflation are “unprecedented” and “astonishing.” He also cited recent Bureau of Economic Analysis data showing that corporate profit margins in the 2022 fourth quarter were still near record highs relative to costs.
“The end of Greedflation must surely come. Otherwise, we may be looking at the end of capitalism,” Edwards warned. “This is a big issue for policymakers that simply cannot be ignored any longer.”
He is among those who favor looking at price controls to combat greedflation. With price controls, the government would have the power to mandate the prices that businesses are allowed to charge consumers. But as Fortune noted, this is a wildly unpopular idea in the business world and among many politicians.
Even so, Edwards argued that price controls might now be warranted because “something seems to have broken with capitalism.” He cited a paper by University of Massachusetts Amherst economists Isabella Weber and Evan Wasner, titled, “Sellers’ Inflation, Profits and Conflict: Why Can Large Firms Hike Prices in an Emergency?”
In that paper, the economists argued that U.S. COVID-19 inflation mainly derived from “the ability of firms with market power to hike prices” — especially if they expected their competitors to do the same. Temporary price controls might be the only effective way to combat this kind of price gouging, according to some experts.
For now, one of the best ways for consumers to battle greedflation is simply to switch to cheaper brands — and a lot of them are doing just that. The Attest survey found that food and beverage brands are the products consumers are most likely to switch to save money, at 71% of respondents. That was followed by clothing/shoes, at 40%. A comparatively small percentage are likely to change their financial services provider (only 14%).
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