It looks like Joe Biden’s plan for dealing with inflation is to force millions of American workers into unemployment. This is not an exaggeration or a misrepresentation.
Recently, the president met with former Treasury secretary Larry Summers, who is publicly arguing that the U.S. needs a jobless rate of over 5 percent for five years to ease inflation.
“We need two years of 7.5% unemployment, or five years of 6% unemployment, or one year of 10% unemployment,” he explained in a speech in London.
Let’s put this into perspective. Just one month into the pandemic, America had a 14.7 percent unemployment rate—the worst since the Great Depression. During the Great Recession in 2009, unemployment hit 10 percent. Most of us are old enough to remember how very, very bad that was.
That’s all old news. There are only two relevant questions to ask now: What caused this inflation spike, and what do we do about it?
There are many contributing factors, but it isn’t rocket science. Inflation happens when businesses raise prices. That’s it. It’s pretty simple. What’s somewhat in dispute is why businesses raise prices when they do? Can they help it? Is it their fault?
The obvious reason businesses raise prices is profit. Corporations want to make money and they’ll charge as much as they can as long as you’re willing to pay. The only limit on how high corporations can raise prices is competition. This is why monopolies are so dangerous. No competition means price gouging. And that’s also why supply chain crises, like the one stimulated by the COVID pandemic, have wreaked such havoc. When people have no alternative—because there’s scarcity across sectors—the sky’s the limit for corporate gouging.
Now, it’s important to ask why COVID has done so much damage to our supply chains. The answer is that the big brains at elite consulting firms like McKinsey and Bain have spent the last 30 years advising American corporations to move overseas and abandon U.S. storage facilities that could have warehoused reserves on American soil—all to earn shareholders additional pennies on the dollar. As a result, when the supply chain was stressed by COVID shutdowns in China and other manufacturing centers around the world, America was caught on its knees, impotent and unable to protect itself. Similarly, when the U.S. decided to sanction Russia, one of the world’s largest oil producers, it incentivized oil companies to raise prices in anticipation of scarcity—even though today, the price of oil per barrel is nowhere near record highs.
The key takeaway is this: raising prices during scarcity is a choice made by corporations. The open question is whether it’s a justifiable one. In this case, raising prices is not something they need to do to stay afloat, or to pay their workers, or to keep the economy going. What’s happening here isn’t just profit, it’s price gouging: raising prices at exactly the time when demand is high and profit is guaranteed. While small businesses are struggling, big corporations aren’t just surviving, they’re thriving.
In true corporatist fashion, the CEOs who indulged in the bad decision-making that got us into this supply chain mess have escaped unscathed. Billionaire wealth has risen more since COVID began than it has in the last 14 years. The ten richest men doubled their fortunes during the pandemic, while the incomes of 99 percent of humanity fell.
Is your meat too expensive? Well, the guys who run the meat packing corporation are eating well. Their profit margins jumped 300 percent during the pandemic.
Is your gas expensive? Big oil has been making historic profits. The top 5 Oil companies just raked in more than $35 billion in profit, all while you’ve been struggling to fill your car and get to work.
These industries are making money despite the havoc COVID has wreaked on the supply chain because they’re passing on the costs to you. Remember, inflation, simply put, means higher prices. And who’s controlling prices? Not the government. Not Joe Biden. It’s the CEOs who run these companies. Instead of tripling profit, meat companies could moderate prices and tell their shareholders that they’re going to earn the same as last year—not three times more. But, in contemporary America, we’ve decided that maximizing profit is more important than affordable food or gas for Americans. We’ve decided that greed is good and profit is king. But never forget: we used to be a proper country.
In 1971, when America was facing runaway inflation, the GOP’s own president Nixon took a stand for the American people. On August 15 of that year, he took to the airwaves to advocate for price controls and a wage freeze.
Republican President Nixon implemented a price and wage freeze for 90 days.
Republican President Nixon noted that wage gains had been completely swallowed by cost increases, and that it was his responsibility, and corporations’ responsibility, to do something about it.
In 2022, Americans are experiencing fewer wage gains than mid-century Americans, along with record price increases. Yet no one in government, even in the most far left circles, is talking about price controls. The absolute limit of the American imagination is a gas tax holiday.
A gas tax holiday would suspend the tax on gas, saving folks about 18 cents per gallon. Not a ton but something. And even that has provoked the rage of CEOs like Target’s Brian Cornell.
He, like many conservatives, has attacked any effort to put money back in voters’ pockets—favoring instead efforts to increase the supply of oil. But Biden, despite his promises to environmental groups, has already done that. In April, Biden opened up public land to drilling in order to bring down gas prices—even though any new drilling would take years to affect the supply of oil.
Biden is pressuring oil refineries that closed during the pandemic to reopen, but they’re refusing despite record profits. Why? Even big oil CEOs see the end of fossil fuels in sight, and don’t think the profit margins are sufficient to justify getting back into the business that COVID closed.
“Just getting the equipment you need could take three years,” explained energy economist Ed Hirs in the Washington Post. “Electric vehicles might already make up 20 percent of the car market by then. You could find yourself investing a bunch of cash to rebuild a refinery that may not be needed for long.”
Even as they admit they have no solutions, big oil executives are wringing their hands over accusations from the Biden administration that they’re engaging in price gouging. Hit dogs will holler. “Biden needs a change in approach” said Chevron’s CEO, advocating a sit-down with the administration. But it’s not clear what approach is left beyond what Biden is already doing. Unless, of course, we’re talking about doing, or at least threatening to do, what Republicans like Nixon once understood was the right thing to do: price controls.
Now, if that’s a bridge too far for you, we should take a look at what’s going on in other countries.
Cities across Europe have embraced free public transportation to help their citizens avoid the costs associated with driving their cars.
For under 10 dollars, Germans will be able to travel on regional rail, bus and subways all month.
And in London, where transit workers realize how essential their work is, 40,000 rail workers have staged the largest rail strike in three decades. Yes, in countries not called America, politicians can’t get away with “working class cred” by pandering to workers in hard hats every four years. Workers elsewhere understand their value. So when inflation went up and wages remained stagnant, transit workers did what is unthinkable to so many American workers: Demand to be paid their worth out of the profits being stolen from the very top.
Now, Americans used to do this all the time.
A post-World War II strike wave led to some of the most important labor protections and wage gains Americans have ever seen, including the mid-century prosperity so many people on both sides of the aisle reflect on nostalgically. Those rosy 1950s memories? They weren’t gifted to mom and pop freely. They were fought for. Because of that labor struggle, American workers back then earned one-fifteenth of what CEOs made. Now, after decades of weakened union power, it’s one three-hundredth. But corporatists have convinced many Americans over the past several decades that fighting to be paid what you’re worth is unAmerican. Even scarier, it might be Marxist. The corporate media tried to smear self-described “working-class bloke” Mick Lynch, leader of the UK transit strike.
Lynch’s focus and integrity are admirable, especially when you consider conditions in America. As we experience a little bit of labor growth after years of wage stagnation accompanied by historic corporate profits, our politicians, on a bipartisan basis, are openly saying that the way to fix the economy is to create massive unemployment.
Corporate vultures are pointing to the sliver of support extended to American families during COVID—the relief checks—as the reason for inflation, hoping we don’t remember that no one benefited from the trillion dollar Trump bailout like the rich.
You got a $1200 check. Great. Direct payments to Americans totaled about $250 billion in cost. Meanwhile, corporations got a $4 trillion bailout.
And while conditions were attached that were supposed to incentivize corporations to keep employees on the payroll and the economy going, these were often flagrantly ignored. It was a giveaway. But few Democrats and even fewer Republicans have any interest in holding these corporate bandits responsible for the “spending” that allegedly has caused inflation, or the price gouging they’re now engaging in. (Don’t even get me started on military spending, which never comes under scrutiny.)
Look: even if you think government spending was excessive, why the scrutiny on $1200 checks and not $4 trillion corporate bailouts?
It’s worth remembering that the right to incorporate is a privilege granted by the government. Governments issue corporate charters. The founding fathers understood that the fledgling nation couldn’t build every road or sewer system and that private industry had a role, but that role was to serve the greater good of the American community. They also understood the risks inherent to excessive wealth and were concerned about private corporations competing with and undermining their new democracy. Early corporations were limited in how much money they could raise, how long they could exist, and what they could do. Unfortunately, we’ve strayed so far from those ideas that politicians openly defend price gouging. James Madison described corporations as a “necessary evil.” He’d roll over in his grave to see a nation now abandoning those principles and worshiping Gordon Gekko.
In summary, populists should remember to be suspicious of narratives that devalue the American worker and which apply no scrutiny to the corporations who got us into this mess. Corporations offshored jobs and distributed profits to shareholders instead of investing in supply chain integrity. And now they’re using limited supply to extract even more wealth from an American labor force they no longer want to employ.
Populists should be skeptical of politicians on both sides of the aisle who take huge amounts of money from these same corporate interests, and who consequently have little interest in holding them accountable.
This is how we get milquetoast policies like a gas tax holiday instead of powerful interventions like Nixon’s price freeze. And populists should notice who offers no solutions at all, just criticisms. This includes both oil companies like Chevron, and conservative politicians who pooh-pooh the gas tax while demanding interventions that Biden is already undertaking, like increasing oil—an intervention that will not have a return for years. It’s all a bait and switch. It’s time that we stop falling for it, and start standing together in solidarity as workers.