Are big businesses profiting from individuals' misery?


Are big businesses profiting from individuals' misery?

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The BBC and other media seem to be pinning the inflation rate on Russia's invasion of Ukraine, and due to the economy largely shutting down over Covid. But on social media, there is a discussion around corporations making huge profits. People say this is causing inflation because a lot of these businesses face little competition and can raise prices whenever they want. Is this true?

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When inflation bites and things become more expensive, people naturally look around for somebody to blame.

Big corporates posting massive profits are easy targets. “If they’re making that much money, why can’t they cut prices,” consumers ask.

Meanwhile I've seen growing use on social media of phrases such as "pandemic profiteers" or "greedflation".

But the accusations don't seem to hold up when you look at the economics behind the profits.

Profits help companies grow, which in turn helps other companies and suppliers, investors, as well as workers and the wider economy.

In short the current global system needs businesses to be successful to keep economies on track.

Forcing them to reduce prices or cut profits could stifle growth and investment which, in turn, could lead to economic contraction.

The reason why Russia's invasion of Ukraine is more likely to be mentioned in relation to inflation is that it has massively disrupted energy supplies, and gas and electricity are a major part of consumer expenditure.

Another issue to bear in mind is the UK’s skills shortage after Brexit, which has left many industry sectors facing problems because of a lack of workers.

Meanwhile, supply chain problems caused by ongoing global uncertainty are hitting many companies' products.

That leads to a scarcity which puts up prices as demand outstrips the available supply.

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