According to federal data released on August 25, nonfinancial company earnings in the United States increased to an all-time high of $2 trillion in the second quarter of 2022 as businesses kept raising prices, which caused inflation to reach a 40-year high at the expense of employees and consumers. According to the Bureau of Economic Analysis (BEA) of the Department of Commerce, corporate profit margins over the last three months were the broadest they’ve been since the 1950s as continued price increases bolster the bottom lines of big corporations and reduce employee wages.
The BEA numbers came after major corporations in the food, oil, and other industries reported second-quarter profits that broke all previous records as they exploited supply chain disruptions brought on by the ongoing coronavirus pandemic, the Russian invasion of Ukraine, and other factors to raise prices. Eight of the largest oil firms, including Chevron, ExxonMobil, and Shell, reported earnings that were up 235% over the previous year, according to a recent analysis.
In response to the new information, Chris Becker, senior economist at the Groundwork Collaborative, commented:
“We can argue until the cows come home about the cause of inflation. But we can’t lose sight of the basic moral point that it is outrageous that corporations are seeing skyrocketing profits while purchasing power for so many American households is declining.”
Meanwhile, Helen Brosnan, the executive director of Fight Corporate Monopolies stated:
“While corporations enjoy record profits and CEOs get millions more in bonuses, workers are still waiting in vain for better working conditions and working families are still reeling from the immoral price-gougers who jacked up their expenses under the guise of inflation…
Our politicians have a choice: stand up to corporate monopolies and their corrupting influence or stand by while they take advantage of working people trying to pay their bills. Until then, it’s fair for voters to continue to wonder whose side you’re on, and whose interests you’re protecting.”
As the cost of living continues to rise, Bloomberg reported on Thursday that “some businesses have been able to offset any decline in demand by charging more to the clients they’ve retained.” According to the source, “adjusted pretax company earnings grew 6.1% overall from the prior quarter from April to June, the quickest pace in a year, after declining 2.2% in the first three months of the year.
According to the chief economist of the Groundwork Collaborative, Rakeen Mabud:
“Astronomical corporate profits confirm what corporate executives have been telling us on earning calls over and over again: They’re making a lot of money by charging people more, and they don’t plan on bringing prices down anytime soon.”
Mabud then continued:
“Corporate profiteering continues in full swing, and we are all paying the price. Policymakers should take note of these data. Megacorporations are a major cause of excessive costs, thus we need to take decisive action to control them”.
Market power is a significant contributor to price increases, according to Sarah Miller, executive director of the American Economic Liberties Project. She also added “Policymakers need to use this new information — which confirms what working families across the country know all too well — to attack concentrated corporate power immediately and aggressively across the board.”
Miller then continued:
“That means levying excess profits taxes, ensuring big penalties for price-fixing, and resourcing enforcement agencies to prosecute price-gouging and other forms of corporate abuse… and it means banning large mergers, stock buybacks, and ‘payoffs for layoffs’ to help build durable market power for working people and consumers and level the playing field for small businesses and entrepreneurs.”
The recently passed Inflation Reduction Act includes a corporate minimum tax, modest reforms to drug prices, and a small tax on stock buybacks, but analysts say the law alone is unlikely to have a significant impact on a company’s ability to set prices as it sees fit for the benefit of its executives and shareholders. Meanwhile, the Federal Reserve appears prepared to keep raising interest rates sharply in an effort to rein in inflation, threatening widespread job losses and a recession that would disproportionately hurt regular people.