WASHINGTON (AP) – Outraged by rising prices at gas stations and supermarkets, many consumers feel they know where to blame: on greedy companies that are relentlessly raising prices and taking profits.

Responding to these sentiments, the House of Representatives led by Democrats last month voted along party lines – a majority of Democrats for, all Republicans against – a bill designed to combat the alleged price increase energy producers.

Similarly, the UK last month announced plans to introduce a temporary tax of 25%. on the profits of oil and gas companies and direct revenues to the financial problems of households.

However, despite all the public discontent, most economists say that corporate price increases are at most one of the many causes of rapid inflation, not the main one.

“There are much more likely candidates for what is happening,” said Jose Azar, an economist at the Spanish University of Navarre.

These include: Reliable consumer costs. Interruptions with deliveries at factories, in ports and on cargo platforms. Shortage of workers. A huge pandemic relief program for President Joe Biden. Shutdowns in China due to COVID-19. Russia’s invasion of Ukraine. And last but not least, the Federal Reserve, which has kept ultra-low interest rates longer than experts say.

The guilt game, if anything, intensifies after the U.S. government reported it inflation in May was 8.6%. compared to a year earlier, the biggest price spike since 1981.

To fight inflation, the Fed is now belatedly aggressively stepping up loans. June 15 is raised the base short-term rate by three-quarters of a point – its largest increase since 1994 – and signaled that there will be even larger rate increases. The Fed hopes to achieve what is known to be a difficult “soft landing” – a slowdown in growth enough to curb inflation without leading the economy into recession.

Over the years, inflation has remained at or below the Fed’s annual plan of 2%, even as unemployment has fallen to its lowest level in half a century. But as the economy recovered from a pandemic recession with staggering speed and strength, the U.S. consumer price index rose steadily – from a 2.6% increase over the same period last year in March 2021 to a four-decade high.

At least for a while – before the S&P 500’s profits fell earlier this year – the surge in inflation coincided with an increase in corporate profits. It was easy for consumers to connect the dots: companies seemed to be inflating prices. It wasn’t just inflation. It was greed.

On request to name the culprits in the jump in gasoline prices 72% of 1,055 Americans interviewed in late April and early May The Washington Post and George Mason University School of Politics and Government have blamed profit-seeking corporations more than the proportion of those who pointed to Russia’s war against Ukraine (69%) or Biden (58%) or to a pandemic failure (58%). . And the verdict was bipartisan: 86% of Democrats and 52% of Republicans accused corporations of inflated gas prices.

“It’s very natural for consumers to see prices go up and get angry about it, and then look for the culprits,” said Christopher Conlan, an economist at Stern School of Business at New York University that studies corporate competition. “You and I can’t set prices in a supermarket, at a gas station or in a car dealership. That’s why people, of course, blame corporations, because they see a rise in prices. “

However, Conlan and many other economists are reluctant to blame Corporate America – or advocate for punishment. When this month the University of Chicago Booth School of Business asked economists whether they will uphold the law to prohibit large companies from selling their goods or services at a “recklessly inflated price” during a market shock, 65% said no. Only 5% supported the idea.

What combination of factors is most responsible for rising prices “remains an open question,” economist Azar admits. COVID-19 and its consequences have complicated the assessment of the state of the economy. Today’s economists have no experience analyzing the financial implications of a pandemic.

Politicians and analysts have repeatedly been blinded by the way the economy has gone since the COVID strike in March 2020: they did not expect a quick recovery after a recession fueled by huge government spending and record low rates developed by the Fed and other central countries. banks. They then slowly became aware of the growing threat of high inflationary pressures, first dismissing it as a temporary consequence of supply disruptions.

However, one aspect of the economy is undeniable: the wave of mergers in recent decades has killed or reduced competition between airlines, banks, meat processing companies and many other industries. This consolidation has given surviving companies leverage to demand from suppliers lower prices, restrain employee wages, and shift higher costs to customers who have little choice but to pay.

This was discovered by researchers from the Federal Reserve Bank of Boston less competition has made it easier for companies to incur higher costs customers, calling it a “factor that amplifies” the resurgence of inflation.

Josh Beavens, research director at the Institute for Liberal Economic Policy, estimated that nearly 54% of price increases in nonfinancial businesses from mid-2020 could be attributed to “greater profitability” versus only 11% from 1979 to 2019.

Beowens acknowledged that neither corporate greed nor market influence has likely grown significantly over the past two years. But he suggested that during the COVID inflation boom, companies redirected how they used their market power: many moved away from pressure on suppliers to cut costs and limit workers ’wages, and instead raised prices for customers.

У a survey of nearly 3,700 companies published last week, Roosevelt’s left-wing institute concluded that margins and profits last year reached their highest level since the 1950s. It was also found that companies that aggressively raised prices before the pandemic were more likely to do so after its impact, “indicating the role of market power as an explanatory factor for inflation.”

However, many economists are not sure that corporate greed is the main culprit. Jason Furman, Obama’s chief economic adviser at the Obama White House, said some data even suggests that monopolies are running slower than companies facing stiff competition to raise prices when their own costs rise, “in part because their prices were high from the start. ”

Similarly, Conlon of New York University cites examples where prices have soared in competitive markets. Used cars, for example, are sold by many across the country and by many individuals. However, average prices for used cars have risen by 16% over the past year. Similarly, the average price of large machinery, another market with more competitors, rose nearly 10% last month from a year earlier.

On the contrary, the price of alcoholic beverages increased by only 4% compared to last year, despite the fact that the beer market is dominated by AB-Inbev, and alcoholic beverages – Bacardi and Diageo.

“It’s hard to imagine that AB-Inbev isn’t as greedy as Meitag,” Conlan said.

So what caused the inflation surge the most?

“Demand,” said Furman, who now works at Harvard University. “A lot of government spending, a lot of financial support – all together to maintain an extremely high level of demand. Delivery could not keep up, so prices rose.

Researchers from the Federal Reserve Bank of San Francisco have calculated that state aid to the economy during the pandemic, which put money in the pockets of consumers to help them withstand the crisis and caused high costs, raised inflation by about 3 percentage points from the first half of 2021.

In a report published in April, researchers from the Federal Reserve Bank of St. Louis blamed bottlenecks in the global supply chain for having played a “significant role” in inflating factory costs. They found that in November last year, it added a staggering 20 percentage points to wholesale inflation in manufacturing, raising it to 30%.

However, even some economists, who do not blame greed for last year’s price jump, say they think governments should try to limit the market power of monopolies, perhaps by blocking mergers that reduce competition. The idea is that more companies fighting for the same customers will stimulate innovation and make the economy more productive.

Despite this, tougher antitrust policies are unlikely to slow inflation in the near future.

“I find it helpful to think about competition, such as diet and exercise,” said Conlon of New York University. “More competition is good. But like diet and exercise, the payoff is long-term.

“Now the patient is in the emergency room. Of course, diet and exercise are still good. But we need to treat the acute problem of inflation. “

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AP Economics writer Christopher Rugaber contributed to this report.

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