Freedom

Story by Brad Polumbo

Serious economists don’t take socialists seriously. But increasingly, ostensibly serious legacy media publications sure seem to.

In fact, despite being widely rejected by actual economists, a socialist conspiracy theory about inflation has managed to infiltrate some of the biggest news outlets in the United States as unwitting journalists just keep uncritically repeating it.

“Once a fringe theory, ‘greedflation’ gets its due” — Axios

“Companies Push Prices Higher, Protecting Profits but Adding to Inflation” — New York Times

“Why Is Inflation So Sticky? It Could Be Corporate Profits” — Wall Street Journal

The theory goes like this. The Federal Reserve printing trillions of dollars and Congress going on an unprecedented stimulus binge didn’t cause inflation. The real cause of inflation was “corporate greed,” i.e., monopolistic companies using the pandemic as cover to jack up prices and maximize their profits.

This never made any sense.

Why? Well, for one, corporations are always greedy. They always maximize their profits. That didn’t suddenly change in 2020, so using it as an explanation for a phenomenon that emerged after the pandemic doesn’t make any sense.

What’s more, prices for some goods rose more than for other goods. Are we supposed to believe that some corporations in some sectors are just greedier than others? Again, that doesn’t make sense.

Hence why most economists reject this theory out of hand.

A January 2022 IGM Chicago survey of top economists found that, weighted for confidence, 80% rejected the notion that greedy corporations jacking up prices is a “significant factor behind today’s higher U.S. inflation.” Only 10% agreed that it was. Economists are a fickle bunch, and you rarely ever see this kind of consensus on a politically charged matter. That they almost all agree tells you just how fringe this theory truly is.

No example better reveals the absurdity of “greedflation” than the huge increases in egg prices we saw in early 2023. Socialist economists such as Robert Reich, who is actually taken seriously and held up as an “expert” by outlets such as MSNBC, repeatedly argued this was because of corporate greed (not the bird influenza that wiped out a large amount of egg-laying hens). Now that egg prices have gone back down, they have not explained why the corporations suddenly got less greedy.

It’s almost like it was always about supply and demand and never about “greedflation,” which is an ideologically motivated conspiracy theory masquerading as serious economic analysis.

“Greedflation” activists also never reckon with the fact that, as economist Scott Lincicome pointed out, nominal profits always rise after a recession, without inflation surging, and they’ve actually done so slightly less this time around than usual. So, too, they cannot explain why profits have been falling for months now but inflation remains sticky.

And the media outlets promoting this theory aren’t asking activists these basic questions. That’s the real problem.

No one’s saying that the legacy media ought to ignore fringe economic ideas. It’s fine to cover and discuss all sorts of ideas. But that coverage ought to be critical, not parrotlike, and include critics and basic facts that contradict a narrative that’s being pushed by ideological actors. Yet much of it is failing to do anything of the sort, even from outlets such as the Wall Street Journal that really should know better. 

That’s what makes “greedflation” yet another example of the establishment media failing the public.