Report on corporate price increases amid rising inflation in the US
While home budgets are under the impact of rising prices for fuel, food, rent and other necessities, oil companies and other large business sectors are enjoying huge profits by partially depriving consumers.
According to a new report by the liberal think tank Roosevelt Institute, data verification by 3,698 US-operating companies has found that both markups and profits have risen to their highest levels since the 1950s.
In 2021, the average markup reached 1.72, meaning that the typical price the company charged was 72 percent higher than their cost. That is an increase from the 1.56 markup throughout 2010. The biggest increase in markups since the 1950s last year was two and a half times the next big annual markup. The study found that oil and gas, real estate, quarrying and mining had the biggest markups. The study found that the financial sector has the largest single markup overall, indicating the huge profitability of Wall Street banks.
The report is a net profit margin, divided by net income from net sales. “We see a more consistent range of net profit margins, from an average of 5.5 percent in the 1960s to the 1980s, and an average of 6 percent in the 2010s. In 2021, it jumped to 9.5 percent — again the highest value on record. Profitability is steadily increasing across definitions.
Oil companies in particular enjoyed huge gains in the first quarter of 2022, fueled by war-induced price rises in Ukraine. Oil giant ExxonMobil alone posted a profit of $ 5.5 billion, doubling its results in the first quarter of 2021. Shell earned $ 9 billion in the first quarter, its best single-quarter result. BP reported $ 6.2 billion in the quarter, noting the loss to offload its holdings in the Russian-controlled oil company. It was BP’s best quarter in 10 years and Shell also reported a significant rise. Chevron has seen an increase and Conoco’s profit has increased fivefold since 2020. All told, the Big Five oil giants made $ 35 billion in the first quarter. The 25 top oil companies made $ 205 billion in profit in 2021.
According to the latest New York Times Profits in the article, S&P 500, are up 70 percent from 2020 to 2021 and 33 percent over 2019 before the epidemic. The same report estimated “$ 200 billion in additional operating profit last year because of the increase in this margin.”
These figures further undermine the pro-trade claims that inflation is the result of a “wage-price spiral” and that excessive wage increases are driving up commodity prices. The Roosevelt Institute study concluded, “We find that 2021 is driven mostly by increased sales, with costs (including wages) increasing slightly, which is inconsistent with any indication of a pay-price spiral.
“Changes in labor and workers’ compensation are not the motivating factors in recent markups.
According to the US Bureau of Labor Statistics, the claim that wage demands are the driving force of inflation is further weakened by the fact that real hourly earnings fell by 3.0 percent between May 2021 and May 2022.
Inflation rose 8.6 percent year-on-year in May. The Consumer Price Index, a more realistic measure of inflation based on the type of goods and services purchased by ordinary urban consumers, rose 9.2 percent. The wage increase is below 2 percent to 4 percent for most contracts negotiated by unions in 2021, which is lower than the average increase for non-union workers.
Last February, a day after the Russian invasion of Ukraine, the United Steelworkers (USW) announced that it had reached a new agreement for 30,000 US oil refinery workers, preventing a strike. USW President Tom Conway boasted that it was a “responsible” settlement, which “did not add to the pressures of price rise and inflation” ExxonMobil and others. That is somehow the fault of the workers. The deal imposed a 2.5 percent increase in 2022, ensuring massive reductions in the living standards of oil workers, whose wages have already been slashed by inflation.
Despite the unions’ vandalism, strikes are mounting as workers struggle to keep pace with inflation. According to the Cornell University School of Industrial Relations Strike Tracker, there were 153 strikes involving 73,500 workers from January to May this year, compared to 78 strikes involving 22,500 people in the same period in 2021. A threefold increase in the number of strikes and the number of workers on strike
The “excessive” labor market hypothesis is being used by the US Federal Reserve to justify a series of drastic interest rate increases aimed at undermining workers’ efforts to protect their living standards by triggering recessions and increasing unemployment. The rate hike will further hit the budget of working class families by increasing the amount they pay for credit cards, car loans, mortgages and other loans.
There is no question that powerful corporations have used the crisis to repel the public, and global inflation is essentially the result of the monetary policies adopted by both parties since the 2008 recession. Markets and directly into the coffers of corporations. Additionally, the criminal decision to allow the epidemic to spread unchecked in every country has led to disruption of supply chains and more widespread chaos in the economy. This has been exacerbated by the imperialist-inspired Russian invasion of Ukraine.
Add to this the staggering cost of building arms in the US and Western Europe, which are completely unproductive from a social needs perspective. This is paid for by the working class through cuts in social costs and further increases in prices.
Biden has blamed Russia for raising inflation, calling rising living costs a “Putin price rise.” At the same time, he has shaken a finger at oil companies for price rises “during the war.” But the president does nothing to stop the profits of Big Oil. Meanwhile, working with unions, they have imposed realistic wages on workers.
When the authors of the Roosevelt Institute study the corporate price rise, they only offer warm remedies, which imply a step-up antitrust enforcement or additional profit tax. Along these lines, US Senate Finance Committee chairman Ron Wyden of Oregon has introduced legislation to tax additional profits on gas and oil companies with $ 1 billion in revenue.
Aside from the fact that these measures have no political theater and no chance of being implemented, they do not address the fundamental problem, which is private ownership of banking, oil and gas, transport and other key economic pillars. Now oil companies avoid additional profit tax as they use the army of auditors to avoid paying corporate taxes.
Inflation is part of a broader catastrophe that has plagued mankind with the failure of the capitalist profit system, which has allowed the preventable epidemic to spread unchecked and is now threatening to unleash a global war.
To answer the huge profitability of the oil companies, the Socialists propose to place them under the democratic ownership and control of the working class, and treat them as public utilities, not for private profit, but for the common good. This requires the industrial and political mobilization of the working class independently of the pro-corporate unions and the big business twin parties, Republicans and Democrats.
