While the world was continuing its shock over the indictment of a former American president, a pro-capitalism conservative economist was warning that corporate greed has gone too far.
Fortune reported this week that Albert Edwards, a global strategist at the 159-year-old bank Société Générale, issued a blistering memo coining the practice Greedflation.
"Corporations, particularly in developed economies like the U.S. and U.K., have used rising raw material costs amid the pandemic and the war in Ukraine as an 'excuse' to raise prices and expand profit margins to new heights, he said. And the French investment bank isn’t just historic: It’s one of the select banks considered to be 'systemically important' by the Financial Stability Board, the G20’s international body dedicated to safeguarding the global financial system."
After a horrific few years due to the pandemic, both parties in the American government swooped in to help bail out citizens, small businesses and corporate America. Many corporations took the money to do stock buybacks instead of helping workers.
At a time when Americans are fighting inflation, it turns out corporations are also making record profits.
"When costs go up, so do profits? That’s not how capitalism is supposed to work, but that is the recent trend," Fortune explained. But thanks to the pandemic and the Russian invasion of Ukraine, corporations saw an opening to score extra cash.
"The companies in last year’s Fortune 500 alone generated an all-time high $1.8 trillion in profit on $16.1 trillion in revenue," the report explained.
Last summer, the U.S. watched as the price of eggs soared. The largest egg company in the U.S. Cal-Maine Foods Inc. enjoyed record quarterly net sales for the second quarter at the end of 2022, Business Wire reported. That means at a time when the price of eggs exploded, the two quarters that followed scored record profits for the company. They made $801.7 million in the last quarter, a 110 percent increase compared to 2021. The company scored a quarterly income record for them.
Edwards wrote, in the Tuesday edition of his Global Strategy Weekly, that after working in finance for four decades, he's never seen anything like the “unprecedented” and “astonishing” levels of corporate greed as he has in this economic cycle.
Fortune cited a January study from the Federal Reserve Bank of Kansas City that revealed “markup growth,” which is the increase "in the ratio between the price a firm charges and its cost of production," was a larger factor driving inflation in 2021. In fact, it was a larger driver than it ever has been in economic history.
Edwards also cited the data released by the Bureau of Economic Analysis (BEA) this month, showing "profit margins still near a record high relative to costs in the fourth quarter." Edwards confessed that he assumed the margins would have “declined sharply” at the close of 2022, but, “How wrong I was!”
“The end of Greedflation must surely come. Otherwise, we may be looking at the end of capitalism,” he warned. “This is a big issue for policymakers that simply cannot be ignored any longer.”