For millions of households across the West, the years following the Covid-19 pandemic were defined by a relentless climb in the cost of basic survival. From the supermarket aisles of London to the gas stations of Ohio, the “inflation crisis” became a daily struggle, peaking globally at a rate of 8.7% in 2022, according to the International Monetary Fund.
But while consumers watched their purchasing power evaporate, a different story was unfolding in corporate boardrooms. As prices surged, corporate profits didn’t just hold steady—they soared to 70-year highs. This paradox has sparked a fierce debate within the international political economy of corporations and post-pandemic inflation, challenging the long-held belief that inflation is simply a matter of “too much money chasing too few goods.”
Economists have traditionally split into two camps. “Inflation hawks” argued that pandemic-era stimulus packages overheated the economy, while “doves” blamed exogenous shocks, such as supply chain bottlenecks and the energy spike following Russia’s invasion of Ukraine. Whereas, a third, more provocative theory has gained traction: “seller’s inflation.” This suggests that dominant firms used the noise of global instability as a smokescreen to raise prices far beyond their actual cost increases, effectively engineering a massive wealth transfer from the working class to shareholders.
The Mechanics of ‘Seller’s Inflation’
Seller’s inflation occurs when companies with significant market power exploit the “imperfect pricing information” of consumers. During the pandemic, when everyone expected prices to rise due to supply chain issues, large corporations found a golden opportunity. Instead of simply passing on higher costs, many expanded their profit margins, behaving as “price makers” rather than “price takers.”
This opportunistic pricing is not possible in a truly competitive market. It requires high levels of market concentration—where a few giant firms dominate an entire sector. In these oligopolies, firms can engage in tacit collusion, following each other’s price hikes without ever needing to meet in a smoke-filled room to coordinate. When “upstream” providers—such as energy giants or shipping firms—raise prices, they create a domino effect, forcing “downstream” businesses to hike prices for the finish consumer, often adding a layer of extra profit at every step.
The scale of this phenomenon varies by region, but the trend is consistent across advanced economies. The following table outlines the estimated contribution of corporate profits to inflation during the peak of the crisis.
| Region | Estimated Profit Contribution | Key Driver/Observation |
|---|---|---|
| United States | Approx. 40% | Markups rose to an average of 72% above marginal costs in 2021. |
| United Kingdom | Up to 75% (late 2022) | Bank of England acknowledged profits’ outsized role in price hikes. |
| Eurozone | Approx. 50% | Unit profits reached a record 9.3% in 2022. |
The Neoliberal Architecture of Market Power
To understand how corporations gained the power to amplify inflation, one must gaze at the last four decades of economic policy. The rise of neoliberalism—characterized by deregulation, privatization and a systemic retreat from antitrust enforcement—created a fertile environment for corporate consolidation.
For years, the prevailing wisdom, influenced by the Chicago School of Economics, was that private monopolies were “benign” as long as they were efficient. This led to a period of lax oversight, allowing dominant firms to acquire rivals and crush smaller competitors. The result was a landscape where a handful of corporations control critical infrastructure, from agribusiness to pharmaceutical supplies.
This concentration of power extends beyond the balance sheet and into the halls of government, a phenomenon described as “corporate state capture.” Through multi-billion-dollar lobbying efforts and a “revolving door” between regulatory agencies and the private sector, corporations have successfully shaped the narratives used to explain economic pain. During the inflation crisis, this manifested in a concerted push by corporate-funded think tanks to blame “wage-price spirals”—the idea that workers demanding higher pay was the primary driver of inflation—effectively deflecting scrutiny away from corporate markups.
The Human Cost and the Wealth Transfer
The real-world consequence of this pricing power was a stark decline in living standards, often referred to as the cost-of-living crisis. While nominal wages rose in some sectors, they failed to keep pace with the cost of necessities. This led to a phenomenon known as “cheapflation,” where the prices of the most inexpensive grocery staples rose faster than luxury goods, disproportionately impacting the poorest households.
The redistribution of wealth was staggering. In the UK, the energy sector saw profits jump by 198% in 2022. Globally, the shipping industry saw some profit margins increase 650-fold as they exploited port bottlenecks. This was not a random market correction; it was a systemic siphoning of wealth. According to data from Oxfam, a significant portion of the revenue generated by major multinationals during this period was returned to shareholders via dividends and stock buybacks rather than being reinvested in productivity or used to lower consumer prices.
The psychological toll was equally severe. In Western Europe, surveys indicated that one-third of respondents worried about whether their families would go hungry. Meanwhile, central banks responded to the crisis by raising interest rates to historic highs. While intended to “cool” the economy, this move often placed further pressure on debtors and small businesses while providing windfall gains for the banking sector through increased net interest income.
A Shift Toward Accountability
There are signs that the era of unquestioned corporate pricing power may be facing a challenge. In France, the government pressured 75 food manufacturers to lower prices in 2023, though some firms responded with “shrinkflation”—reducing product size while maintaining the price.
In the United States, the Biden administration has pursued the most aggressive antitrust agenda in decades. This includes blocking mergers that would further reduce competition, such as the proposed Kroger-Albertsons grocery deal, and filing lawsuits against giants like Amazon for alleged monopolistic practices. President Biden has explicitly called for an end to “price gouging,” arguing that corporations must bring prices down as supply chains recover.
However, the structural forces of the international political economy remain formidable. The reliance on government borrowing to shield citizens from energy costs has increased public debt, which some critics argue will lead to a return to austerity measures in the coming years.
The next critical checkpoint for this economic shift will be the continued rollout of the U.S. Federal Trade Commission’s (FTC) antitrust cases and the potential for new European Union regulations targeting “excess profits” in the energy and tech sectors. Whether these measures can truly dismantle the architecture of corporate state capture remains to be seen.
Do you believe corporate profiteering was the primary driver of the recent inflation crisis, or was it an inevitable result of global supply shocks? Share your thoughts in the comments below.
Disclaimer: This article is provided for informational purposes only and does not constitute financial, investment, or legal advice.
