The mystery of rising prices: Are greedy corporations to blame for inflation?

a shadow of a man against a brick wall
Who is to blame for inflation? Some say greedy corporations are the culprits. (Peter Ruck/BIPs/Getty Images)

Everyone agrees inflation is happening. What they don’t agree on is whodunit.

The most recent numbers show prices up 7.7% over 2021. But for some items like eggs, health insurance and gasoline, prices have been rising much faster than that.

Inflation can be an elusive foe: quietly making off with our savings and chunks of our paychecks and stealing away everything from vacations to favorite foods.

But who let this thief loose on the U.S. economy? What is the source of inflation? Let’s examine the clues and the potential culprits.

The prime suspects

The main suspects differ across party lines. Many economists and politicians on the right say inflation has been caused by government spending and various aid programs (stimulus checks, student debt forgiveness, Biden in the White House with the public purse).

Many economists and politicians on the left point to the war in Ukraine (for pushing up oil prices, which bleeds into most everything else), and also greedy companies, many of which, despite tales of supply chain snarls and rising costs, have been bringing in record profits. (Corporations, in aisle 4, with the price gun.)

The smoking price gun

As in any good mystery, we look to our clues. In the case of corporate greed, there are a couple of rather compelling ones.

First, corporate profits: They reached an all time high this year. Many companies saw profits hit record highs.

This, naturally, raises some eyebrows. If companies are struggling with costs and supply chains so much, where are all of these billions in profits coming from?

It begins to seem like all of this corporate crying about rising costs might be a case of crocodile tears, as companies jack up prices for all of us.

Corporate confessions?

Rakeen Mabud is chief economist for the progressive think tank Groundwork Collaborative. “Companies are taking a spoonful of sugar off the … backs of families who are all really struggling to get by,” she said.

Mabud has sat in on dozens of corporate earnings calls and says she often hears CEOs bragging about how much they were able to raise prices.

Grocery giant Kroger has earned billions in profits over the last couple of years. On a recent call with investors, Mabud heard CEO Rodney McMullen say, “We view a little bit of inflation as always good in our business and we would expect to be able to pass that through.”

AutoZone, which sells car parts and accessories, saw earnings jump 13%. CFO Jamere Jackson called inflation “a little bit of our friend in terms of what we see in terms of retail pricing.”

Hostess has seen profits jump more than 15% this year. CEO Andrew Callahan had this to say: “We’re also seeing the consumers experience a lot of disruption, and they haven’t fully recognized or absorbed pricing.”

Et tu Twinkies?

Murder on the competition express

Adding to the case against corporations is a lot of the consolidation we’ve seen in corporate America over the last 40 years.

Case in point: There are four companies in the U.S. that control about 80% of the beef and poultry market.

That kind of consolidation can mean companies don’t have to compete as much for our business and there’s less pressure to keep prices low.

Meat companies have settled lawsuits over price-fixing just this year and a proposed merger between grocery giants Kroger and Albertsons has raised concerns that it will mean higher prices for many consumers.

The alibi

Of course, every suspect needs an alibi, and in the case of inflation, corporations have some pretty strong ones.

For one thing, companies really have seen their costs rising.

Prices of raw materials have been rising all year. They’ve been rising at about the same rate as the prices we’ve been paying in stores.

Actually a bit more. Wholesale prices (the cost of the raw materials companies buy to make the stuff they sell to us) are up more than 8% over last year, compared with consumer prices, which are up 7.7% over last year.

That is powerful evidence that a lot of the higher prices we are paying in the store are just the higher cost of raw materials being passed along by manufacturers and retailers.

The twist

University of Michigan economist Justin Wolfers says corporate greed is a red herring and companies are not the source of inflation.

“My friend and economist Jason Furman says, ‘Blaming inflation on greed is like blaming a plane crash on gravity,'” says Wolfers. “It is technically correct, but it entirely misses the point.”

Wolfers says companies are always trying to charge as much as they possibly can. In fact, the only reason we’re not all paying $800 for a pair of socks or a cheeseburger is simply due to greed in another form: competition.

“That greed forces them to offer low prices because they’re trying to muscle out their competitor,” says Wolfers.

So what’s changed?

So why are prices rising now? Clearly something has changed.

Wolfers says most companies have two main expenses: raw materials and workers’ wages. Raw materials have gotten a lot more expensive, as we saw.

Wages, though, are another story.

So far this year, wages have risen about 5% compared to prices, which have risen 7.7%.

Companies are not raising wages as fast as they’re raising prices. Wolfers thinks that lag is where some of these corporate profits are coming from.

“Most economists are a little puzzled that wages haven’t kept up a little more,” says Wolfers. And it is puzzling. After all, workers have more power now than they have in decades. Why aren’t they negotiating for more?

Wolfers suspects they are, in fact, negotiating, just not always for more money. It could be for the ability to work remotely instead.

For many workers, flexibility and other perks have been more valuable than money, so companies have been able to get away with offering lower wages, even at a moment when they are competing for workers.

A crime of opportunity

Still, Wolfers thinks wages lagging behind prices won’t last for long.

With prices rising at the same time unemployment is low and many companies competing to hire, workers are likely to push harder for higher pay. And companies will probably have to pay up to keep and attract talent.

As soon as companies start paying out more in wages, those record profits CEOs are bragging about will likely go into workers’ paychecks.

“What’s happening in the interim is there’s a bit of money that we might hope should go to workers,” explains Wolfers. “But it’s staying in the boss’s pocket instead.”

Wolfers predicts corporate profits will start coming back to normal levels as wages rise. But will prices?

And the killer is …

As it turns out, consumers might be the guilty party in the inflation mystery. We’ve at least been aiding and abetting. “Inflation is coming from demand,” says Wolfers.

In spite of inflation, demand hasn’t really blinked. Companies have been raising prices and we have been paying them. In fact, in many parts of the economy, spending has been rising right along with prices.

We’re not necessarily buying more because we have more money, though. Our collective savings has been shrinking and household debt has been on the rise. It’s possible we’re spending money we don’t have to keep up with rising prices.

That is likely not sustainable. And when our buying slows down, Wolfers says, companies will start lowering prices to entice us to buy: Prices will fall and inflation will ease. But, until demand drops, companies will push prices up as much as they can. It’s elementary.

Copyright 2022 NPR. To see more, visit
Previous articleIn new bipartisan Alaska Senate majority of 17, members vow compromise and consensus
Next articleJuneau murder suspect was already in custody on harassment charges