"Greedflation" is a Proxy Battle in a Long War

no, greedflation isn't really a thing - but the people complaining about it are right anyway

This whole “greedflation” thing - the insistence by some commentators that the real cause of recent inflation is corporate greed rather than other factors - has struck me from the very beginning as a matter of people talking past each other, usually opportunistically from the “trying to advance a given political agenda” angle or the “neoliberals demonstrate their partisan allegiances through being perpetually-sneering shithead” angle. The conversation trundles on. Here’s New York’s Eric Levitz, who is among the critics of the concept of greedflation and the people who have advanced it like Robert Reich or David Sirota. Writes Levitz,

the crude greedflation argument has no satisfying explanation for why prices rose when they did, relies overwhelmingly on a correlation that does not imply causation, ignores copious evidence that a mismatch between supply and demand has been the primary cause of inflation, and cannot account for the fact that price growth has persisted in 2023 even as corporate profit margins declined.

So, to show my cards - I think the “crude greedflation argument” that Levitz describes is indeed a little muddled, for reasons he and Matt Bruenig have laid out. In another sense, I think both sides are talking past each other, ultimately, and what’s at issue are really language games. (I hate to say that because I went through a graduate education in the humanities and had to suffer through people constantly saying “isn’t this whole thing just a language game?”) And, much more importantly, I think this argument is ultimately a lot of shadowboxing around what are the actual issues of substance here, which is whether the market economy can deliver outcomes that are consonant with justice and whether corporations can be forces for good. On those questions, I’m firmly with team anti-greedflation - the answer to both questions is no. I just don’t think greedflation is the right frame to make that argument; the structural forces Reich and others identify as the culprits for inflation have simply been parts of our economy for far too long to have explanatory power over this moment.

However, while I don’t think Levitz or Bruenig or others are wrong in saying that the greedflation view is misleading, there’s a different version of “corporate profits cause inflation” that I think is essentially indisputable. It’s indeed true to point out that corporations were always greedy, during the past decade-plus of remarkably low inflation, and that the supply constraints imposed by Covid and a comically fragile supply chain really did provoke inflation. But I do think there’s a simple sense in which the corporate profits-inflation narrative is true.

Companies sell things at prices. They earn profit through those prices, or else the companies disappear. (Unless they’re still lucky enough to be tech firms living under the old economy’s rules of floating forever on a cloud of VC cash.) Inflation, meanwhile, is simply businesses charging more for things and in doing so making any given amount of money worth less than it was in the past. I think there’s a tendency towards mystification on this point, in part because that mystification helps elevate the high priests of economics in our discourse. But while the causes of inflation can be incredibly complex and the remedies very controversial, inflation really is just the fact that companies charge more for stuff. And in a very direct sense, inflation really is controlled by businesses; they’re the ones who set the prices. The issue for the anti-greedflation crew is that a lot of companies operate on thin margins and couldn’t charge less without risking going out of business, which they’re not going to do. The issue for the anti-anti-greedflation crew is that there are also a lot of corporations that could charge less than they charged in the past several years while still earning a healthy profit margin. These companies could have refrained from raising their prices, or even actively lowered them, and if done at a big enough scale this would have meant less inflation because again inflation is simply businesses charging more than they used to. If Profitable Company that actually charged X dollars for their product had instead charged <X dollars, while still charging enough to remain in business, Profitable Company would have contributed to fighting inflation.

Apple made 43 cents in gross profits for every dollar it invested in 2022. This is, if you’re unaware, quite a profit margin. Could they have charged less for iPhones and survived on, say, 35% profit margins? Why yes, yes they could! Did the fact that they didn’t do that contribute to inflation? Yes, yes it did. As much as I think a lot of the greedflation narrative is misguided, it’s just tautologically true that had companies settled for lower profit margins by charging less, there would have been less inflation.

Of course, the pro-market critics of the greedflation thesis would say that corporations just don’t do that, that their natural market behavior is to maximize profits. But this is simply a restatement of the worldview of people like Reich and Sirota! That corporations maximize profits to the detriment of regular people (through inflation or any other mechanism) simply is the political worldview of the people who are talking about greedflation. For my part, the most relevant fact is that even in a minimally-inflationary environment, capitalist enterprise extracts value from labor in significant excess of labor’s contribution to profits. For that reason alone, the market mechanism can’t produce just outcomes. If you’re not a fan of the labor theory of value, you might instead argue that corporate profits ensure the despoiling of our planet, that corporate profits extract value from communities that can’t afford to lose it, or that corporate profits are the engine of the socioeconomic inequality which elevates a wealthy caste above the rest of us and has all sorts of ugly knock-on effects. Or you might argue, as some are, that inflation stems from corporations raising prices and that this is greedflation. But that broader unhappiness with our system, in reality, is the argument here - a critique of capitalism, whether of the narrower “unfettered” capitalism that liberals tend to denounce or the Marxian rejection of capitalism as such. Greedflation is just a stalking horse. When someone like Matt Yglesias sneers that of course corporations are greedy, they’ve always been greedy, it ultimately affirms the worldview of both sides.

The fact of the matter is that the battle here is the one that has consumed the American left-of-center for 50 years: the war between traditional left critics of markets, the socialists and lefties and radicals, and the neoliberals, the New Democrats, the Clintonites, the sensible center-left. For much of recent political history, the left simply was market-skeptical, ranging toward market-rejecting. After the ugly progressive doldrums of the 1970s, when the political foment of the 1960s had completely flamed out and the labor movement had begun a brutal contraction and the Democratic party had collapsed in an ugly intra-party fight between Eugene McCarthy and Hubert Humphrey and a stagnating economy nonetheless produced rampant inflation, the neoliberals gradually took over the Democratic party and with it the direction the further-left (but at this point firmly center-right) tendency in American politics. Leaders of the leftmost major political organizations in the United States were, like Michael Harrington of the Democratic Socialists of America, mostly concerned with not appearing to be that kind of lefty. This all reached some sort of apogee with the presidency of Bill Clinton, whose signature policy victories included tripling Black extreme poverty by gutting welfare, kneecapping whatever union power was left with NAFTA, and banning gay marriage on a federal level. His campaign against Bob Dole had a comedic aspect, if only because of Dole’s perpetual agita that Clinton had stolen his agenda. The anti-left left was the default establishment stance for decades. Even by 2008, when I started writing publicly, declaring yourself a socialist was a good way to attract scorn. Only the financial crisis and ensuing recession reinvigorated American radical politics.

As I’ve said here many times before, that reinvigoration seems pretty much dead to me in substantive terms. But life goes on and hope springs eternal etc etc. Ultimately, the question is not “Is greedflation the cause of inflation?,” but rather “Can the market mechanisms that create inflation and the corporations that profit off of it coexist with justice and human flourishing?” Some people, the neoliberals, think yes. Others, the socialists and radicals and lefties, think no. But that ultimately is the only question that confronts a fractured and confused left-of-center in 2023. Inconveniently, the greedflation fight doesn’t map out entirely cleanly with this dispute - Bruenig is a critic of the concept of greedflation, and he doesn’t believe in the power of the market economy to achieve justice, while Noah Smith is also a greedflation critic, and he very much does. Levitz is another critic of the concept of greedflation and he, I guess, is somewhere in between. But this confusion only goes to the broader point: this isn’t really about greedflation at all. And maybe we ought to just argue about what we’re really arguing about.