2023-04-26 10:29:08
The superprofits generated by big business fuel inflation. This is what economists from the European Central Bank, but also supporters of France Insoumise, claim. A very controversial view.
The debate started in the United States about a year ago. American commentators quickly pointed to “greedflation”. Inflation caused by players who are too “greedy”, too greedy, in this case companies. Opportunistic firms that increase their prices far beyond their cost boom, thus exacerbating the general price increase. In economics, we talk about the price-profit loop. In France, it was only towards the end of 2022 that this thesis emerged, when the heavyweights of the CAC 40 began to publish their results, posting record margins. This is particularly the case for TotalEnergies or the freight champion CMA CGM.
Fabulous profits out of step with the decline in purchasing power perceived by households.
These profits, sometimes reaching unprecedented heights, are surprising in times of inflation. During the previous historic price surge, following the oil shock of the 1970s, it was the companies that toasted the most. Wages are then indexed to inflation, which is why they see all their costs rise and consequently their margins collapse. Fifty years later, indexation has disappeared and it is the employees who suffer the first. Inflation was triggered by the war in Ukraine and the explosion in energy prices, but it was partly maintained by companies, as several economic studies show, we are talking about sellers’ inflation.
The Governor of the Banque de France considers that there was no greedflation In France.
In a letter published on Monday, François Villeroy de Galhau notes that the margins of French companies have fallen. We went from 34% in 2021 to 32% in 2022. According to him, companies are therefore not responsible for inflation, with a reservation on his part: we must remain vigilant, he says. Because this average figure masks differences in size. The agri-food sector has regained margins that it had not known for twenty years. There have therefore been, among French companies, losers and winners from inflation. This inflation by the profits is the fact of the companies which have a real grip on the market because their production is almost in shortage. This is the case, for example, of TotalEnergies on the French fuel market. This is confirmed for companies that have market power, such as the giants of the food industry capable of imposing their prices on large retailers. These large groups seized the opportunity to rebuild their margins. Inflation has had a good back. We like to talk about “ excuse-flation ».
Will this phenomenon last?
There is a very simple way to put an end to it: it is to tax the super profits. This is also the advice given last fall by Philip Lane, the chief economist of the European Central Bank. He was also the one who recently published the study showing that at European level companies have a share of the responsibility for inflation. Otherwise it is consumers and employees who can turn things around. When the supply is overpriced, the demand crumbles, the profiteers will have to review their prices. Then consumers who are also employees will ask for increases to regain purchasing power. This is already the case in Germany, in France this increase in wages will be felt in the second half according to the Bank of France, it will lower the margins of companies without stoking inflation. This is when prices could start to calm down, which is what President Macron predicts.
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