Is inflation partly business-inspired?

An article by staunch liberal Thom Hartmann at RawStory posits that our current inflation is at least partly due to politics and the power of big business cartels with at least semi-monopoly power to control prices. Hartmann writes:

“[T]he monopoly which our manufacturers have obtained against us … like an overgrown standing army, has become formidable to the government, and upon many occasions intimidate the legislature.” — Adam Smith, The Wealth of Nations, 1776

How is it possible that the rest of the world is recovering from the Covid/Oil/War inflation bump, but things are getting worse here in the USA?

The one variable nobody seems to be positing — but I’m going to go there — is that it’s political, at least in part.

So how did we get here?

Prices in America used to be regulated by something called competition.

If one company raises prices above a reasonable level, another company will offer products at a lower price and take away their customers. As long as there are multiple companies in every market sector, and new businesses can easily enter the marketplace to compete with larger companies that have gotten lazy or greedy, competition regulates prices very efficiently.

What blows this up is when companies get large enough that they can use their size and market dominance to keep competitors out of the marketplace.

All of that anti-trust activity came to an end in 1982 when President Reagan appointed William C. Miller III, his former executive director of the Presidential Task Force on Regulatory Relief, to take over the FTC. Miller was the first pro-corporate leader in the nation’s history to corrupt the agency that was supposed to regulate corporate misbehavior.

That year (as it had been since the 1930s) most of this nation’s business activity was centered in the cash registers of our small- and medium-sized companies. The total value of America’s largest corporations — those listed on stock exchanges — was equal to just 39.4% of the entire nation’s economic activity or GDP in 1981.

Miller, however, declined to continue enforcing our anti-trust laws and in 1983 Reagan instructed the DOJ to, essentially, stop prosecuting companies that were violating those laws through mergers and acquisitions, and to only go after the most egregious and flagrant acts of corporate collusion and price-fixing.

As a result, large companies became behemoths, and pretty much every industry in America is today dominated by a small handful of companies that carefully monitor each other to function, essentially, as cartels. When United raises ticket prices by $50, for example, American does the same three hours later.

As Jonathan Tepper pointed out in The Myth of Capitalism, fully 90% of the beer that Americans drink is controlled by two companies. Air travel is mostly controlled by four companies, and over half of the nation’s banking is done by five banks.

In multiple states there are only one or two health insurance companies, high-speed internet is in a near-monopoly state virtually everywhere in America (75% of us can “choose” only one company), and three companies control around three-quarters of the entire pesticide and seed markets.

The vast majority of radio and TV stations in the country are owned by a small handful of companies, and the internet is dominated by Google and Facebook.

This has handed enormous power to the CEOs and senior managers of America’s largest companies, all of them multi-multi-millionaires and many billionaires.

These are not people who want to pay more in taxes. Nor do they want unions or to have their industries regulated in any meaningful way; they’d like things to stay the way they’ve been since the Reagan Revolution.

But President Joe Biden has been working with Senator Bernie Sanders (Chair of the powerful Budget Committee) to create a whole plethora of progressive legislation that would raise corporate and billionaire taxes and increase corporate regulation. Not to mention Democrats’ advocacy of those hated unions.

Is there any doubt in your mind that most of these titans of industry don’t want monopoly breakups, unions, regulation, and higher taxes? Every president since Reagan, Democratic and Republican, has gone along with this neoliberal deregulation, anti-union, and low-tax scheme.

Big business doesn’t want the Reaganomics gravy train to stop and, so far, they’ve been able to buy enough politicians to keep it that way. Until this unholy alliance of Biden and Sanders.

So, is it really possible that our largest corporations and their leaders are ripping us all off and jacking up inflation on an ongoing basis just to stick it to the Democrats and hand the GOP the reins of power in 2022 and 2024?

If political power was the only thing they got out of it, the answer is “possibly.”

But when you realize that they also get massively larger profits at the same time, and billions of that will flow down to CEO compensation, that twofer raises it to “probably.”

.... much of the explosion in corporate profits is made possible by market consolidation: giant companies no longer subject to the pressures of inflation.

I’d add that there’s a big reward down the road for all those CEOs if they can help America dump the pesky Democrats who want to tax those windfall profits and replace them with Republicans who are again demanding more tax cuts for the morbidly rich.

Last Tuesday, Nobel Prize-winning economist and NY Times columnist Paul Krugman wrote a particularly fascinating op-ed wondering out loud why the economic data for the United States doesn’t make sense any more. If the economy is in trouble, so should be American companies; if the economy is doing well, so should the American consumers.

But the companies are doing great while consumers are getting screwed.

Qs: Is Hartmann basically right, or as Republicans and big business would all say, he is simply paranoid and wrong at best, and a bald face, slandering liar at worst? Do Republicans and big business deserve much or any credibility in view of their past history and disregard for inconvenient truth?

The businessman's moral mindset