It’s a paradox. Inflation is dropping, but prices aren’t coming down. How can this be?
Because corporations have enough monopoly power to keep them high.
Here’s just one example that will make you fizz: Pepsi.
In 2021, PepsiCo, which makes all sorts of drinks and snacks, announced it was forced to raise prices due to “higher costs.” Forced? Really? The company reported $11 billion in profit that year.
In 2023 PepsiCo’s chief financial officer said that even though inflation was dropping, its prices would not. Pepsi hiked its prices by double digits and announced plans to keep them high in 2024.
How can they get away with this?
Well, if Pepsi were challenged by tougher competition, consumers would just buy something cheaper. But PepsiCo’s only major soda competitor is Coca-Cola, which – surprise, surprise – announced similar price hikes at about the same time as Pepsi, and also kept its prices high in 2023. The CEO of Coca-Cola claimed that the company had “earned the right” to push price hikes because its sodas are popular. Popular? The only thing that’s popular these days seems to be corporate price gouging.
We’re seeing this pattern across much of the economy — especially with groceries. Inflation is down. You see, the rate of inflation measures how quickly prices are rising. Prices are now rising far more slowly than in the past couple of years. And while supply chain disruptions really did make it more expensive to produce a lot of goods, the cost to produce them now is rising even more slowly than prices.
But consumer prices are still up, allowing most corporations to keep their profit margins near a 10-year high.
They can get away with overcharging you because they have monopoly power — or so few competitors they can easily coordinate price increases.
If Pepsi and Coca-Cola had lots of competitors, they wouldn’t be able to raise prices so high because someone would make cheaper substitutes, and consumers would buy those instead. But Pepsi and Coke own most of the substitutes!
This isn’t just happening with Coke and Pepsi. Take meat products. At the end of 2023, Americans were paying at least 30% more for beef, pork, and poultry products than they were in 2020.
Why? Near-monopoly power! Just four companies now control processing of 80 percent of beef, nearly 70 percent of pork, and almost 60 percent of poultry. So of course, it’s easy for them to coordinate price increases.
And this goes well beyond the grocery store. In 75 percent of U.S. industries, fewer companies now control more of their markets than they did twenty years ago.
So what can we do?
Well, it’s largely flown under the media radar, but the Biden administration is taking on this monopolization with the aggressive use of antitrust laws.
It’s taken action against alleged price fixing in the meat industry — which has been a problem for decades.
It’s suing Amazon for using its dominance to artificially jack up prices — one of the biggest anti-monopoly lawsuits in a generation.
It successfully sued to block the merger of JetBlue and Spirit Airlines, which would have made consolidation in the airline industry even worse.
But given how concentrated American industry has become, there’s still a long way to go. Inflation is down. But many people don’t feel it because prices are still high, and in some cases are still rising because of continued price gouging.
This is where you have more power than you might think.
You might not be able to break up big corporations, but you can keep up the pressure on our government to fight corporate monopoly power.
And help spread the truth by sharing this video.
Read it on Robert Reich’s blog.
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