OPINION: Why American corporations had their most profitable year since 1950
American corporations had their most profitable year in 2021 since 1950.
The Commerce Department released data showing that profits surged by 35 percent last year. In all four quarters of the year, the overall profit margin remained higher than 13 percent, something seen in just one other three-month period during the past 70 years.
Workers for American corporations also saw compensation rise by 11 percent, despite wages and salaries falling back to pre-pandemic levels. Profits are eclipsing increases in workers’ pay. These numbers support the argument, made by us and many other economic observers, that corporate greed and opportunistic price gouging is the main factor behind current inflation.
The narrative that social spending and money in the pockets of working-class people are driving inflation is wrong. It’s a harmful trope aimed at hurting any sort of political project seeking to strengthen the social safety net program and address the actual needs of the broader American public.
Republicans like Senator Rick Scott (R-FL), who also chairs the National Republican Senatorial Committee, are even going as far as proposing a GOP midterm plan that includes sunsetting immensely popular programs like Medicare, Medicaid, and Social Security.
Some Democrats are not wasting time in making the point that rich CEOs and their shareholders are enriching themselves off the back of American consumers.
“Everyone is talking about inflation & giant corporations have figured out that’s an opportunity to not only pass along their own costs, but also do some price gouging to pad their profits,” Sen. Elizabeth Warren (D-MA) tweeted in late March. “We must enforce our antitrust laws & promote competition so consumers don’t get ripped off.”
Senator Bernie Sanders (I-VT) has taken action and introduced legislation creating a 95 percent “excess profits” tax on the earnings of the largest U.S. corporations. It would gather $400 billion a year that could be used to provide services and programs for the American public.
President Biden addressed the issue during his State of the Union address, marking a stark difference from past presidents who have propagated the wrong notion that wage increases drive inflation.
“We have a choice,” Biden said. “One way to fight inflation is to drive down wages and make Americans poorer. I have a better plan to fight inflation. Lower your costs, not your wages.”
Oil companies have recently also come under fire for their recent price gouging after Russia’s invasion of Ukraine. The White House criticized them for “profiteering” and singled out shipping companies for welding excessive market dominance.
Illicit price gouging has gotten so bad that the Justice Department is launching a new initiative aimed at identifying companies exploiting supply chain disruptions to make increased profits. Promising to prosecute any violations of federal antitrust laws they uncover, Justice Department lawyers acknowledge that companies may “seek to exploit supply chain disruptions for their own illicit gain” through secret deals between businesses to fix prices or wages or to rig bids.
“Temporary supply chain disruptions should not be allowed to conceal illegal conduct,” said Assistant Attorney General Jonathan Kanter. “The Antitrust Division will not allow companies to collude in order to overcharge consumers under the guise of supply chain disruptions.”
When you hear Republicans claim that rising wages and social spending are behind inflation, remember that you are being lied to. You are paying more for things because greedy American corporations and billionaires are taking advantage of you.
Thomas Kennedy is an elected Democratic National Committee member representing Florida. He tweets from @tomaskenn.
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