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Greedflation is back in the discourse—though did it ever really leave?
Last week, Pennsylvania Sen. Bob Casey sent letters to Target, Walmart, and Amazon “linking the retailers’ pricing practice to greedflation and demanding they disclose information about how they have made pricing decisions over the last two years,” the three-term Democrat said in a release.
While all three of the retail giants have announced recent price cuts, Casey claims “the overall cost of goods began to drop well before these price decreases occurred.”
“Given the slowdown in the price of goods since at least late summer of 2023, Americans should have been seeing decreases in prices for many products for over a year, not just now,” Casey said in a statement. “It is now readily apparent that corporations have had the ability to lower consumers’ costs and still turn a profit.”
Unless you were living under a rock, you surely remember the “shrinkflation” era of the past year. Even Cookie Monster got on board, for goodness’ sake.
Greedflation, or exploiting inflation to bolster profits, however, has always been a murkier scapegoat. Economists at the Federal Reserve of San Francisco, for instance, found that corporate price hikes may not have been the primary driver of the inflation surge of 2021 to 2022, nor of more recent inflation starting in mid-2022, calling the greedflation theory into question.
Still, a 2023 study of more than 1,300 companies listed on the stock markets in the US, UK, Germany, Brazil, and South Africa found evidence of profits outpacing rising costs, particularly in certain industries like energy, technology, banking, and food.
“Because energy and food prices feed so significantly into costs across all sectors of the wider economy, this exacerbated the initial price shock—contributing to inflation peaking higher and lasting longer than had there been less market power,” the report’s authors wrote.
Still, greedflation can be hard to parse. In a recent interview with the Financial Times, Olivier Blanchard, a Massachusetts Institute of Technology economist, pointed out the difficulty of correlating individual factors, such as supply chain disruptions or fiscal policy, with recent price surges.
“How much came from Covid shock, supply chain disruptions? How much came from strong fiscal policy or weak or loose monetary policy?” he asked. “I think this hasn’t been established and that remains to be done.”
Casey, though, seems content to play the bad cop. Someone needs to “create a measure of pressure and deterrence for these skyrocketing prices. If [a retailer is] not engaged in gouging, then they have nothing to worry about,” the senator told NBC News.