• Osa Iluobe

Rand & Wrong: US Inflation & The Myth of Corporate Greed

According to Ayn Rand, ‘To justify and extol human greed and egotism is not only immoral, but evil.” Unsurprisingly, several people don’t agree with Rand’s exaggerated claim that extols the apparent perpetual virtues of being selfish. For many people, greed is something that ought to be managed as the consequences of not doing so are understood to be harmful to oneself and others more generally. This is widely accepted. Its diagnosis of certain problems is not. Cue inflation.

Frederick Von Hayek compared the management of inflation to trying to catch a tiger by the tail. Amid the discourse surrounding the supposed relationship between corporate greed and inflation, it would seem appropriate to also apply this logic to an understanding of inflation’s causes. This is because, corporate greed appears to be thrust into the already packed arena of potential causes of inflation, thereby accompanying the intellectual old guards of demand-pull, cost-push, and regulation as understood factors. Yet, the corporate greed argument ought to be reconsidered as it cannot be said to be a major cause of inflation, if at all. Hence, White House Press Secretary, Jen Psaki’s claim that ‘greedy meat conglomerates’ are to blame for inflation in America is as misinformed as it is misleading. But, if this is the case, then why is the explanation of corporate greed only increasing in popularity? The answer, politics.

Because after a series of federal stimulus packages, the American economy appears to have overheated and as a result inflation has ensued. The overheating of the economy is less due to the packages per se than it is the structural factors that ill-prepared the American economy to manage them in the first place. Its lacklustre welfare system meant that stimulus checks came as a real shock to the system, a measure that probably needn’t have been resorted to had a sufficient safety-net already been in place. The COVID-19 pandemic exposed the extent to which America is divided, and in a federal system, state governors who were only too happy to tap into divisions politicised public health leading to a disjuncture in approaches towards managing the pandemic. As a result, America’s had trouble in dealing with COVID-19 and its economy has suffered more than its conceivably had to.

It’s for this reason that many on the left find the corporate greed hypothesis attractive. An acceptance that government handouts lead to inflation will seemingly falsify their view that otherwise is the case. Furthermore, it allows their espousing of government intervention to remain credible by laying the blame squarely at the feet of private enterprise. However, it would be a mistake to run with the corporate greed theory. Corporations, like workers, are not immune to the effects of inflation - raw materials, supply-chain management and sourcing are all made more expensive amid inflationary pressures. In response to this, it’s in accordance with the laws of capitalism that they increase their prices to make up for any potential losses to their bottom-line. Yet, corporate greed implies that corporations seize the opportunity that a given environment presents them with to increase profits. But, in reality, corporations respond to shortfall.

We should also hesitate to see corporations as more powerful than they when the going gets tough. That is not to say that corporations are not influential or indeed powerful in other ways. However, corporations are far from the first movers when it comes to inflation. Governments, workers, and technocrats all typically have a role to play when it comes to periods of higher prices. Recognising this will be a step in the right direction and allow us to rid ourselves of the flawed idea that corporate greed can be said to be the cause of inflation in America and beyond.