You’re not imagining the rising cost of groceries and how much it costs to fill up your car’s tank. Inflation is currently at a 40-year high, with the cost of groceries, gas, utilities, and housing rising by nearly 8% in the past year. To describe inflation simply, items cost more than they used to, and your dollars can buy less than they previously could. Many factors contribute to these recent examples of inflation, including the COVID-19 pandemic, resulting supply chain shortages, corporate greed, and governmental policy.
The supply chain
The pandemic has directly impacted the supply chain, meaning businesses have to jump through additional hoops to get items to consumers and buyers, and the supplies are facing delivery delays. These are the result of labor shortages, partly because some workers are fed up with mistreatment and exploitation and have left workplaces for new fields or self-employment; others are unable to work after suffering from COVID-19 and long-term effects of the virus. Internationally shipped goods have been facing bottlenecks within the supply chain with backlogs at various U.S. ports increasing shortages of certain items, and the demand for goods has been growing, causing prices to go up. For example, the demand for used cars has been escalating, resulting in the price of a used car rising about 45% compared to a year ago.
COVID-19 and inflation exacerbated existing inequalities, with inflation disproportionately affecting low-income workers and communities of color. Overall, Black, Indigenous, and people of color have less income and wealth while white people are more likely to benefit from more resources, better loan rates, and generational wealth. Throughout the pandemic, people of color were more likely to be hired last and fired first, and while BIPOC and low-income workers were severely affected, economists noted the “K-shaped recovery” for those who already had resources and wealth (and often the ability to keep their jobs remotely) allowing them to bounce back financially with some becoming wealthier than ever before.
Dedrick Asante-Muhammad, the chief of membership, policy, and equity at the National Community Reinvestment Coalition, said the rising costs are hitting people who have lower incomes the hardest.
“If you’re having greater increase in your groceries and greater increase in your gas, and the upcoming greater increase in your rent, that can financially break households that are living paycheck to paycheck with very little flexibility,” Asante-Muhammad said.
Not only are costs rising, but supports for many households like increased unemployment benefits, eviction moratoriums, and the child tax credit have also ended.
“We have pulled away a lot of the investments that were occurring into working-class families, ” Asante-Muhammad said. “It seems to me that a lot of the economic discussion is leading us into ways that we’re going to continue the ongoing racial wealth divide [and the] deep racial economic inequality which results in ongoing economic insecurity for most households of color.”
Corporate greed has been a driver of inflation for decades. While the cost of items like food and diapers goes up for the average person, some corporations have made record profits and given their CEOs and other executives record raises and bonuses. Meanwhile, workers’ wages have stagnated, and efforts to increase the minimum wage have yet to be established in every state. Last year, many corporations had the highest profit margins since the 1950s; however, the gap between worker and CEO pay widened. In 2021, two-thirds of the biggest publicly traded companies in the country had higher profits than before the pandemic.
What may seem like naturally rising prices due to factors out of business’ control is often actually price gouging by corporations.
After Procter & Gamble increased its prices in 2021, its revenue went up by 6% to $21 billion. Their CEO received a significant bonus, and the company bought billions of its own stocks. Stock buybacks are when a company uses its profits to buy its stock, which drives up the price and enriches executives. There have recently been record stock buybacks by large corporations across multiple sectors.
Tyson Foods exemplifies many of these practices. Executives openly stated that consumers should pay for inflation and drove up the cost of their beef by 31%. The heir to the Tyson fortune, John Tyson, saw his wealth go up by more than 70% during the pandemic, increasing to nearly $2.6 billion. The Tyson Foods leadership team received significant raises and bonuses, while the company made record profits, and the price of their shares climbed to an all-time high.
“Corporations decide what prices they want to charge consumers, and they base that on a lot of different factors. One is: How many competitors do I have out there?” said Lauren Melodia, the deputy director of macroeconomic analysis at the Roosevelt Institute. “So the more consolidated our economy is with fewer businesses there are, the fewer options there are for Americans to get their needs met, the more leverage corporations have to take advantage of the situation and raise prices even if they don’t have to.”
Governmental actions also affect inflation; creating more money, changing interest rates, and setting foreign and domestic policy affect the price and cost of resources like oil while also impacting inflation.
One of the Federal Reserve’s primary ways to control inflation is by raising and lowering interest rates. Higher rates typically discourage economic activity and drive down demand, theoretically bringing prices down. The Federal Reserve, the central banking system of the U.S., can also create more money, which experts believe can drive inflation. At the beginning of the pandemic, the Federal Reserve printed new money at an unprecedented rate, an emergency measure they saw as necessary to keep the economy going. Those who believe that the Federal Reserve creating more money causes inflation say this because they believe that if there’s more money in circulation, consumers will spend more, causing demand to rise, and when those items become scarce, the prices rise. Others disagree, saying that the connection between money being printed and inflation isn’t as strong as claimed, as they saw printing more money as a necessary step to counter the economic effects of the pandemic.
Additionally, international and domestic policies impact the rising gas prices. Even before the Russian invasion of Ukraine in March, the global price of oil was going up. At the beginning of the pandemic, as many hunkered down under lockdowns, the demand for gas dropped, which led oil companies to scale back their production. As vaccination rates increased and lockdowns ended, the oil demand went back up, but because the oil companies had scaled back, the oil demand was more than the supply available, causing prices to rise.
Many politicians have driven a narrative that the economic support for working people during the pandemic, like stimulus checks, is what is driving inflation. This argument has been used as an excuse to not pass progressive policies; for example, Sen. Joe Manchin cited inflation as a main concern for his opposition to the Build Back Better package.
“There’s been so much attention on inflation by the media, by Republicans who have been trying to block … important domestic policy from getting passed,” Melodia said. “There’s been all this emphasis on it, all this hysteria over the past year that inflation is happening and we’ve seen corporations lean into it, like, ‘Oh well if gas prices are rising because of inflation’—they can use it as a cover or excuse to jack up their prices whether or not they need to.”
One thing that is clear is that the rich got richer and the poor and got poorer during the pandemic, with billionaires getting 54% more wealthy during the pandemic, while globally millions of people slipped into poverty.