WSJ Says Corporate Profiteering Is Good, Actually
Greed is good, actually. At least that’s the journalistic line the Wall Street Journal has decided to take, with a recent headline (5/25/23) reading, “‘Greedflation’ Is Real—and Probably Good for the Economy.”
To refresh your memory, “greedflation” is the idea that corporate profiteering has contributed to inflation—a thesis that was, up until recently, generally downplayed or outright ridiculed by the media (New York Times, 1/3/22, 6/11/22; Bloomberg, 5/19/22, Washington Post, 5/12/22). As Axios (5/18/23) summarized earlier this month, however:
Once dismissed as a fringe theory, the idea that corporate thirst for profits drives up inflation, aka “greedflation,” is now being taken more seriously by economists, policymakers and the business press.
The change in tenor was captured by Intercept reporter Ken Klippenstein on Twitter (5/26/23):
As recently as February, the Wall Street Journal (2/14/23) had completely ignored the role of corporate profiteering in a piece on rising prices for breakfast staples, blaming supply shocks instead. Writing for FAIR (2/21/23), Luca GoldMansour pointed out that the piece completely ignored strong evidence of price gouging by egg producers.
Now, in a piece by columnist Jon Sindreu, the Journal is changing its tune by recognizing the importance of profiteering. But instead of criticizing the practice, it’s celebrating it.
‘A bit of corporate greed’
The Journal (5/25/23) provided a useful graph showing that corporate profits have contributed far more to price increases than in the past. Businesses have enjoyed historically high profit margins over the last several years, as supply shocks have provided them with ready excuses to hike up prices with little resistance from consumers.
In the column, which was published in the paper’s “Heard on the Street” section, Sindreu argues:
A bit of corporate greed may be helping the fight against recession…. Yes, inflation may be higher as a result of corporations flexing their pricing muscle. But it is probably also the reason why the recession everyone expects always seems to be six months away.
All this amounts to is a sleight of hand. As Sindreu admits towards the end of the piece, what’s actually saved the economy from a downturn is not corporate profits, but “the surprisingly strong spending patterns seen during and since the pandemic.” People keep spending money; the economy keeps chugging along.
You might say that exceptionally high corporate profits are a reflection of this strong spending—in which case spending would still be the reason why we have avoided a recession, and high profits would just be an outcome of that spending—but even that is misleading.
As Sindreu notes, “Companies, which in normal times are wary of angering customers with big price changes, seem to have seized on the excuse of generalized inflation to shield their margins.” Basically, in an environment where inflation is rising, and where outlets like the Journal (2/14/23) are portraying price increases as simply the result of “a perfect storm” of issues wreaking havoc on supply, companies suddenly have more wiggle room to raise prices without pushback from consumers. The result has been a more substantial surge in profit margins than we would have seen had companies not had ready excuses for their price hikes (Bloomberg, 3/9/23).
Thus, rather than simply being an indicator of a strong economy, the high profit margins we have seen throughout the pandemic years have reflected companies’ success in capitalizing on well-publicized supply shocks to redistribute consumers’ income to themselves—aided and abetted by a media eager to insist that no such thing was happening.
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