Is Corporate Greed Causing Inflation?

In reply to Snowdoggie (Forum Supporter) :

Very well said.

It's in our politicians interest to consolidate companies into a few mega corporations for both ease of control and to channel campaign contributions.

The fact that we tolerate politicians taking stock positions and being involved in VC and taking money from lobbyist indicates how little understanding the average person has about what's going on.  

SV reX said:

In reply to GameboyRMH :

When are you starting that company?

I started my own company earlier this year. It hasn't paid off its startup costs and isn't really cash-flow-positive yet. I suppose in theory it was born with a murderous urge to profit, but I don't think it's done any harm yet. No potential for planet-killing unless an AI identifier tool I have in mind goes rogue.

GameboyRMH said:

In reply to SV reX :

I'd have to disagree that corporate greed had no role in inflation or any other problems. 

Hold up a minute there.... that is not what he said. What he said is "Is Corporate greed the CAUSE of inflation..."

Cause. The thing that made it happen, the catalyst. Does corporate greed exist? Yes, to a degree. Does it hurt the economy? Yes, to a degree. Is it the cause of all ills as you are prothlesizing? Nope. Not even close. It's not even top 10 at this point. 

bobzilla said:

GameboyRMH said:

In reply to SV reX :

I'd have to disagree that corporate greed had no role in inflation or any other problems. 

Cause. The thing that made it happen, the catalyst. Does corporate greed exist? Yes, to a degree. Does it hurt the economy? Yes, to a degree. Is it the cause of all ills as you are prothlesizing? Nope. Not even close. It's not even top 10 at this point. 

Uncontrolled federal spending is at least 7 out of the top 10 reasons for inflation in the pandemic and post-pandemic era.

In reply to SV reX :

I don't know if I'd consider it entirely a fallacy. Especially when Board decisions are made to maximize profits above all other considerations. This is also part of the reason for high CEO pay - the price for being the fall guy if something goes south due to those decisions.  The larger to corporation, the greater the insulation between the BoD and those who are affected by their decisions.  "It's just business... nothing personal." 

Duke said:

bobzilla said:

GameboyRMH said:

In reply to SV reX :

I'd have to disagree that corporate greed had no role in inflation or any other problems. 

Cause. The thing that made it happen, the catalyst. Does corporate greed exist? Yes, to a degree. Does it hurt the economy? Yes, to a degree. Is it the cause of all ills as you are prothlesizing? Nope. Not even close. It's not even top 10 at this point. 

Uncontrolled federal spending is at least 7 out of the top 10 reasons for inflation in the pandemic and post-pandemic era.

 

I was thinking top 12 but I'll concede to top 7 

In reply to Ian F (Forum Supporter) :

It's actually pretty rare for CEOs to take blame or otherwise suffer any consequences for ruining a company. Usually it only happens when they dabble in blatant criminality like Elizabeth Holmes. And when the worst career consequence you can suffer is a retirement beyond the dreams of the monarchs of old (for big company CEOs, not jokers who give themselves the title of CEO of their one-person lawn care operation), it's highly questionable to describe any consequence they could suffer as taking a fall.

Their pay is huge because the CEOs are all on the boards of each other's companies and they all vote each other's pay into geosynchronous orbit.

Edit: I do suppose Mansa Musa is the one monarch who would be an exception...

In reply to bobzilla :

If we're going to blame "federal spending" we need to consider that the problem happened in different countries unaffected by US federal budgets. It was undoubtedly also a factor in some countries though. More than corporate greed? I'm not so sure.

GameboyRMH said:

In reply to bobzilla :

If we're going to blame "federal spending" we need to consider that the problem happened in different countries unaffected by US federal budgets. It was undoubtedly also a factor in some countries though. More than corporate greed? I'm not so sure.

If you really believe "corporate greed" is a larger concern than a country printing money willy nilly and adding tens of TRILLIONS in debt than you have absolutely no clue how economics work. 

In reply to GameboyRMH :

We'll have to agree to disagree on the first one.  It seems like every time an automaker has a few crap years in a row, one can pretty much guarantee the CEO's days are numbered. 

I do agree a large portion of the pay is due to a bit of back-slapping within the BoD. 

In reply to VolvoHeretic :

I have noticed two things: 

1) The last tax cut for corporations did only one thing, instead of investing in their workforce or equipment, all they did was buy back their own stock, artificially inflated their stock price, which did nothing to increase production one iota.

Really, only one thing? Every corporation, and all they did was buy back their own stock? While the underlying premise of your statement could warrant discussion, starting from there implies that you have no interest in having an honest discussion or in understanding how business works. The reality is that corporations had a number of ways that they could have used the tax cuts. And they  didn't have to do any one thing, it could have been a combination of a dozen things. A stock holder is an owner of a piece of the company. Being an owner, you would expect a return on investment- you expect the stock price to go up. That's why the company is in business, to make money. And why one would own a piece of the company, stock. It's job is not to redistribute wealth. If I own stock in a company, I expect them to run the company in a way to maximize the return on my investment. Taking the money and just giving it to the employees is taking my money and giving it to others. While I see why this is attractive to employees, this is not attractive to investors. Without the investors, you have no employees. If the increase in wages can be shown to lead to an increase in profitability, then that would be a valid reason to use the tax cuts to increase wages. There are dozens of other places that money could be used- R&D, marketing, capital investments, lowering the price to the consumer- the company wants to maximize their return in each of these areas. Getting the balance right is much easier said than done, and the better job they do allocating their resources, the more successful the company. If they don't expect an acceptable return in those areas, they may chose to use some of it to buy back stock. Buying back stock is a means of providing value for their shareholders. It also results in the company controlling a greater percentage of their stock, and can indirectly affect stock values as a result of the company showing confidence in itself. And it's not artificial- the stock can go up due to the lower supply and increased confidence- demand- of the stock. There is a lot more too it, plus and minus. 

Now, short term and long term investment into the company is a whole different subject. 

2) I judge inflation by the cost of a 4x8 sheet of 7/16" OSB at Menards. 15 or 20 years ago it was $6 dollars a sheet. In 2019 it was $50 a sheet and today it is $16 a sheet. 
 

Can you not see the problem with trying to make an educated conclusion with one data point? Or is the only product that you buy 7/16" OSB? I suppose you can build things out of it and burn it for fuel. Clothing would be uncomfortable. I wouldn't want to eat it, but I've had worse. 

GameboyRMH said:

If we're going to blame "federal spending" we need to consider that the problem happened in different countries unaffected by US federal budgets.

As they say "when the U.S. sneezes, the world gets a cold".  There are many reasons for this but a leading one is that energy is traded in U.S. dollars.

The generally accepted comparison for the U.S. is the G7 and our inflation rate has been slightly higher than average but close to mid-pack.

I'm having a hard time finding an unbiased source that covers the entire time period of highly elevated inflation but I'll look some more and edit if I find something good.

Edit...This looks reasonable except it's only a snapshot (May of 2022) of when most countries were hitting their peak (July of 2022) but someone please chime in if this is biased in some way.

RX Reven' said:

In reply to Snowdoggie (Forum Supporter) :

Very well said.

It's in our politicians interest to consolidate companies into a few mega corporations for both ease of control and to channel campaign contributions.

The fact that we tolerate politicians taking stock positions and being involved in VC and taking money from lobbyist indicates how little understanding the average person has about what's going on.  

 

A lot of this corporate consolidation is due to overhead and profit. It's really strictly business. 

I run a small company. I have an administrative assistant who does a lot of my paperwork and answers the phone. In all honesty she works 20-30 hours a week and gets paid for 40. She costs me about $55k a year. 

I do the sales, estimating, and the rest of the paperwork. In any other corporation, I'd probably make $75k-$80k on some kind of commission basis. 

If a large company buys me out, there is zero chance my admin will keep her job. Her job moves to corporate where they have an underutilized secretary. If they already have a local branch, my job also goes away and my work is distributed to the existing manager and sales force, or possibly I'm folded into the workforce at a much-reduced pay rate, my warehouse would get closed and operations would move to their local building. That saves them $150k right off the bat. Say they pay me $1.5m for the company. They can pay it off in 10 years just by getting rid of overhead. 

So a large corporation can buy me out, eliminate the overhead I'm spending, and pocket that, plus all the profit I was originally making. The only value they want is my customer list, contracts, and workforce. 

Do that with a multi-million dollar company, and the savings are enormous. It makes the bottom line look good and puts money in the shareholder's pockets. 

Gotta print that money to pay all for those government contracts. Both Boeing and Space-X get a taste. At least Elon's stuff works. And Student Loans. Yes those State Universities need lazy rivers and salaries for those Rock Star Professors keep going up, up, Up! Part time jobs won't pay for all that. Then there are all those foreign countries. They have lobbyists in Washington, you know.  Foreign countries can hire lobbyists to beg for handouts from American taxpayers.  And so on...

Wow...

I'm assuming everyone trashing shareholders and increasing stock values has there money under the mattress and not in any sort of 401k, 403b, Roth, or other stock based  investment?

In reply to No Time :

No stock-based investments here (had some RSUs at my last job but sold them all off over the last few months), and for those who do own stocks, it's probably a relatively tiny amount. In the US the top 10% of wealthiest people own about 93% of the stocks, and within that the top 1% own about 53% of the stocks. So the remaining 90% of the population collectively owns around 7% of the stocks.

In reply to GameboyRMH :

I'm not going to fact check your claim about majority of the ownership of stock, it's not relevant to my point. My point is that majority of working Americans have some money invested in stocks through retirement accounts (except Gen Z) and are benefiting from the increase in value.

From census.gov:

Evil Corporations? How about asset stripping private-equity firms. Venture (Vulture) Capitalists like Mit Romney come to mind?

Yahoo.com: How private equity rolled Red Lobster

Assigning blame for company failures is tricky. But some analysts say the root of Red Lobster’s woes was not the endless shrimp promotions that some have blamed. Yes, the company lost $11 million from the shrimp escapade, its bankruptcy filing shows, and suffered from inflation and higher labor costs. But a bigger culprit in the company’s problems is a financing technique favored by a powerful force in the financial industry known as private equity.

In reply to VolvoHeretic :

Most of the guys here who own businesses are not evil and in fact probably work more hours than their employees. They have their own money, sweat and blood tied up in those businesses. They create a product for their customers and jobs for their employees. These are not the droids you are looking for.

The corporate raiders who strip companies are not posting here. They are in Washington and Wall Street. Mitt Romney and Bain Capital. Senator Mark Warner on the Democratic side is the founder of Colombia Capital and Capital Cellular. The Bush Family is heavily invested in the Carlyle Group. The Clintons are involved with Goldman Sachs. And so on.

I had an interesting thought recently that's relevant to this thread. Imagine an alternate history branching off of our own in 1970 where workers across the first world continued to receive pay that kept up with overall productivity, but instead governments instituted another layer of income tax. In the US there are state and federal income taxes for example, just imagine a 3rd one. It started out at 1% but has crept up rather steadily over time to match increases in productivity. It's strictly enforced with no possibility of evasion. And at today's date in the alternate timeline, this new income tax has reached about 40%. It's a regressive tax with only two brackets, the steadily increasing bottom bracket that ends around a top-9% income level, and the top bracket beyond that, which has a 0% rate.

The money from this new income tax doesn't go toward infrastructure or public services or defense or any of the usual government expenditures. It's only paid out to the people in the 0%-bracket as a stipend. The payout is also regressive, scaling up sharply at higher incomes. Plus anyone with income that put them into the upper bracket gets a 100% refund on the new income tax, so that they are effectively exempt from paying any of it.

Some people might be skeptical that an economy could survive with such high levels of taxation. It's a tax that clearly wouldn't survive in a democracy. If the governments turned into dictatorships to continue enforcing it, I'd guess it would result in mass revolt before it reached 20%. For the purpose of this exercise we'll also assume that there is no revolt, the arrangement continues to our date with little sign of any end in sight.

Sounds like a horrible and perhaps unrealistic dystopia right? Maybe a contrived backstory for some kind of futuristic cyberpunk Robin Hood retelling?

But this alternate history would be economically indistinguishable from our own. The exact same arrangement has been achieved through a different mechanism, one that obscures any control people have over it, or even that the "tax" has been collected, to the point that few people realize it's happened, much less have any idea how to fight back against it.

In reply to GameboyRMH :

Seems like your "tax" is a redistribution of wealth. 

While the numbers may looks the same as today, the process is not. Rather than the 9% growing wealth through work, risk, investment, or other methods to "earn" it, your scenario has it gifted to them as a form of welfare. 

I'm sorry, but whether it was luck, nepotism, hard work, or some combination of things coming together, I don't necessarily fault people for their success. 

If they accrue it through less scrupulous means, defaulting on debt, not paying vendors, or unethical market practices, then I can see an issue. Not because they succeeded, but because of the ethics. 

In reply to GameboyRMH :

How much of other people's money do you deserve for free, and why?

In reply to GameboyRMH :

Show up early, work hard and smart, make some money, spend less than you make, give some money to charity, save some money for short term goals, and invest some money for the long term.  That's the secret of the wealthy. 

Robinhood was a royalist nobleman aka "wealthy" whose lands were confiscated by an unjust government. He stole tax money from corrupt government officials not from men of industry.  You probably ought to find a different revolutionary to invoke in your fantasies. LOL 

In reply to No Time :

I don't think doing it through corporate power is any more honorable than doing it through a theoretical rigged welfare system. That's the same corporate power that was used to lock women in shirtwaist factories, work people half to death 7 days a week, and send kids crawling into machines in the past, things just haven't degraded to the point where that's possible again...yet. Child labor did start to surge again in the US a couple years ago, and there was that incident where workers were forced to stay in an Illinois Amazon factory as it was hit by a tornado...we have to draw an ethical line somewhere, and this half-century-long runaway hoarding of earnings crosses the line to me.

In reply to Steve_Jones :

Oh not for free, I don't make money by owning things, I work for it. The people who think they deserve other people's money for free are the ones taking greater and greater fractions of workers' productive output over time just because they have the power to. Ask them if there's a limit to how much more of it they think they're entitled to or if they'll stop taking more any time soon (and why not).