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Analysis Shows How Corporate Profits Drive Inflation—Even as Business Costs Go Down
"It's one thing for corporations to pass reasonable increased costs to consumers," said one analyst. "It's another for them to line their coffers by exploiting Americans who are just trying to get by."
Jan 18, 2024
Inflation has eased over the last two years, and with supply chains no longer struggling to keep up with demand and companies' business costs stabilizing, an analysis out Thursday asks: Why haven't American households seen the benefits of a more secure economy, with the prices of consumer goods and services falling?
The answer, said economic justice think tank Groundwork Collaborative, is that high prices linked to the coronavirus pandemic were never just the result of higher labor and production costs—but were partially caused by corporations' deliberate price gouging.
When the pandemic upended the U.S. economy, said the group, "businesses jumped on the opportunity to pass these costs on to consumers—and added a little extra to pad their profits."
"The worst part?" said the group. "They're still doing it."
Groundwork analyzed corporate earnings reports starting in 2021, focusing on numerous industries in which consumers were facing sky-high prices.
"This research revealed CEOs openly bragging to their shareholders about their ability to raise prices beyond their rising costs to increase profits," said Groundwork. "To justify these moves, CEOs hid behind the cover of supply chain issues and the economic turmoil caused by the pandemic."
"The fundamental question we need to ask ourselves is whether we want an economy where corporations can exploit pandemics, supply chain crises, and wars at the expense of American workers and families, or an economy where corporations are put in check, allowing everyone to thrive?"
More than two years later, executives from companies including Kimberly-Clark, General Mills, and PepsiCo have continued to "be explicit about how they have [raised prices] and will continue to do so even as inflation comes down and supply chains normalize," Groundwork warned, with the companies benefiting from rising profits as working families struggle to afford necessities.
Groundwork found that corporate profits—not labor and other business costs—drove 53% of price increases in the second and third quarters of 2023. In the four decades preceding the pandemic, profits drove just 11% of price growth.
Business costs have risen by about 1% since early 2023—and in some sectors, input costs have gone down due to drops in prices for transportation, warehousing, and fuel. Yet prices for consumers have gone up by 3.4% in the same time period.
Groundwork Collaborative used the example of the U.S. diaper industry, in which just two companies—Procter & Gamble (P&G) and Kimberly-Clark—control 70% of the domestic market.
Families are paying an average of 30% more for diapers than they were in 2019—and from 2021-23, high prices were partially linked to the soaring cost of wholesale wood pulp, a component of diapers.
Wood pulp prices went up by 87% over those two years, but over the past year, prices have dropped by 25%.
Still, reported Groundwork, "using their pricing power, P&G and Kimberly-Clark have kept diaper prices high for American families, allowing their profit margins to expand considerably."
In earnings calls with shareholders, executives at the two companies said their skyrocketing profits—an $800 million windfall in P&G's case—were attributed to declining input costs and high prices.
Mike Hsu, CEO of Kimberly-Clark, told investors the company has "a lot of opportunity to [expand margins over time] between what we're doing on the revenue side and also on the cost side."
Other companies have also been clear in recent months about their plans to keep prices high to pad their profits, with PepsiCo chief financial officer Hugh Johnson telling shareholders the company may "increase margins during the course of the year" as its costs decrease, after the company raised consumer prices by about 15%.
"It's one thing for corporations to pass reasonable increased costs to consumers. It's another for them to line their coffers by exploiting Americans who are just trying to get by," said Liz Pancotti, strategic adviser for Groundwork and a co-author of the report. "It's time to rein in corporate price gouging—or families will continue to pay the price."
The group noted that Congress will consider expiring provisions from the 2017 corporate tax cuts pushed by former President Donald Trump over the next year.
Congress "must take a hard look at the corporate tax," said Groundwork. "Our tax code should support a robust and equitable economy, not incentivize profiteering."
"The fundamental question we need to ask ourselves," reads the report, "is whether we want an economy where corporations can exploit pandemics, supply chain crises, and wars at the expense of American workers and families, or an economy where corporations are put in check, allowing everyone to thrive?"
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New Report Reveals How Plastic Polluters Have Avoided Regulation Worldwide for Decades
"This report is a damning exposé of the tactics employed by the plastics industry and shines a welcome light on the shadowy world of corporate lobbying."
Sep 17, 2020
Analysis released Thursday of the world's top 10 biggest plastic polluters in 15 countries reveals how major corporations hide behind the veneer of corporate responsibility while actively working to thwart regulatory legislation around the globe.
"This report is a damning expose of the tactics employed by the plastics industry and shines a welcome light on the shadowy world of corporate lobbying," Natalie Fee, founder of City to Sea, which supported the research conducted by the Changing Markets Foundation, said in a statement.
"For too long," said Fee, "the true cost of plastic production has been externalized, meaning plastic producers continue to get away with ecocide while waste management companies, consumers and marginalized communities around the world are left to deal with millions of tons of toxic plastic waste."
\u201cOut now! \ud83d\udce2 Our ground-breaking new report reveals the hypocrisy of the world\u2019s biggest #plasticpolluters, who claim to be tackling the plastic crisis while actually fighting legislation behind closed doors #TalkingTrash https://t.co/p2CJDQhhFR\u201d— Changing Markets Foundation (@Changing Markets Foundation) 1600326412
The report--titled "Talking Trash: The Corporate Playbook of False Solutions,"--exposes how Coca-Cola, Colgate-Palmolive, Danone, Mars Incorporated, Mondelez International, Nestle, PepsiCo, Perfetti Van Melle, Procter & Gamble, and Unilever deploy "tactics to undermine legislation in individual countries are in fact part of a global approach by Big Plastic to ensure that the corporations most responsible for the plastic crisis evade true accountability for their pollution."
According to Changing Markets Foundation Thursday, the investigations found:
- Big Plastic is a well-organized network of organizations that fight against proven solutions to the plastic pollution crisis through similar tactics across the world
- Voluntary commitments and group initiatives from the ten biggest plastic polluters are used to distract consumers and governments, enabling polluters to continue with business as usual
- Corporations work behind the scenes to delay and derail legislation and ensure they can continue flooding the world with cheap, disposable plastic packaging
- Plastic producers have co-opted the Covid-19 pandemic and capitalized on people's fear to call for regulatory rollbacks and delays on environmental legislation
\u201cDELAY, DISTRACT and DERAIL: 3 tactics that help Big Plastic fight plastic legislation behind the scenes across the world. New report by @ChangingMarkets out today #TalkingTrash https://t.co/Kq35HJYtC6\u201d— GAIA is at #COP27 for #ZeroWaste (@GAIA is at #COP27 for #ZeroWaste) 1600326036
"This report exposes the two-faced hypocrisy of plastic polluters, which claim to be committed to solutions, but at the same time use a host of dirty tricks to ensure that they can continue pumping out cheap, disposable plastic, polluting the planet at a devastating rate," said Nusa Urbanic, campaigns director for the Changing Markets.
"Plastic is now pouring into the natural world at a rate of one garbage truck a minute, creating a crisis for wildlife, the climate and public health," Urbanic continued. "The responsibility for this disaster lies with Big Plastic--including major household brands--which have lobbied against progressive legislation for decades, greenwashed their environmental credentials, and blamed the public for littering, rather than assuming responsibility for their own actions."
Big Plastic jumped at the opportunity presented by the Covid-19 pandemic--which has caused a surge in single-use plastic consumption--to pressure lawmakers to roll back current regulations and prevent new ones, according to the report.
Additionally, Changing Markets noted that plastic pollution has devastating effects on the environment and is a key contributor to the climate crisis.
According to the group:
"The plastic pollution crisis is a deeply interconnected climate crisis, a biodiversity crisis, and a public health crisis all combined... Plastic saturates almost every surface of the planet--from the deepest abysses to the highest mountains and remotest islands--causing an unprecedented crisis for wildlife... Virgin-plastic production is a major contributor to climate change, generating enough emissions--from the moment they leave the ground as fossil fuels, and throughout their entire life cycle--to use up 10 to 15% of our entire carbon budget by 2050 at current rates of growth. Disposal of plastics through incineration and backyard burning also contributes to climate change and creates a toxic fallout undermining human and planetary health."
The industry's contribution to the global climate emergency is nothing new, but progressive legislators continue to face an uphill battle when it comes to regulating these powerful corporations.
President Donald Trump, for example, has called climate change a "hoax," and, despite pleas from environmental advocacy groups and progressive lawmakers, many Democratic lawmakers, including House Minority Leader Nancy Pelosi (D-Calif.) and Senate Majority Leader Chuck Schumer (D-N.Y.)--as well as presidential nominee Joe Biden--still do not support the Green New Deal.
\u201cAmount of federal government subsidies given to the fossil fuel industry every year: $15 billion.\n\nThe amount it should be, immediately: $0.\n\nIt's time to end fossil fuel subsidies and enact the Green New Deal. https://t.co/F075fNHSJt\u201d— Bernie Sanders (@Bernie Sanders) 1600284448
Urbanic urged lawmakers to act to protect the planet.
"The voluntary initiatives and commitments by the industry have failed," she said in a statement. "Policymakers should look past the industry smokescreen and adopt proven, progressive legislation globally to create the systemic change that this crisis so urgently needs."
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