By Scott Thomas Anderson
When a global strategist for one of the oldest lending institutions in Europe announces that corporate greed has reached such “unprecedented” levels that it’s sailing us toward social upheaval, maybe policy-makers in the West should take notice. The economist Albert Edwards from Société Générale recently made this observation in Global Strategy Weekly about a trend known as “Greedflation,” which involves American and British companies using post-COVID supply chain glitches and the bloody clash in Ukraine as regulatory camouflage to engage in the worst consumer price-gouging in modern history. And Mr. Edwards isn’t just some suit-wearing rando – no ordinary money man from another bank down the street. As journalist Will Daniel just pointed out in Fortune, the institution that Edwards works for is “one of the select banks considered to be ‘systemically important’ by the Financial Stability Board, the G20’s international body dedicated to safeguarding the global financial system.” Daniel bolstered Edwards’ point within his own story by adding, “a January study from the Federal Reserve Bank of Kansas City found that ‘markup growth’ —the increase in the ratio between the price a firm charges and its cost of production—was a far more important factor driving inflation in 2021 than it has been throughout economic history.”
Sacramento saw a tiny piece of this saga play out in dramatic fashion last week at the Starbucks at 7th and K streets when its baristas decided to form a union in a landslide vote. Their move came on the heels of Starbucks refusing to provide on-site security in response to the many well-documented employee assaults that have happened there. Starbucks has also been reportedly slashing employees’ hours at that café, and doing so in such a way as to endanger or eliminate their health benefits – all while using a staffing strategy that undoubtedly over-works the entire crew. “It’s a rough economy and business is business,” one might say. Wrong. Starbucks is a $123 billion corporation that just posted its best year of profits ever in 2022, thanks in no small part to – you guessed it – raising its prices during the biggest inflation squeeze in a generation. The story that just played out in Downtown Sacramento is a window through which to look at the broader costs of Greedflation: Starbucks makes more money than its ever made during the same year that its customers pay more than they’ve ever paid, and its employees work fewer hours than they’ve ever worked to pay their bills – and the company manages to squeeze a few pennies more into its bottom-line by eliminating more baristas’ health insurance expenditures along the way. This is obscene; but if you are someone who’s worried about working people, there is no point in boycotting Starbucks because it would just result in more employees losing hours and benefits overnight.
The answer is in federal and state leadership. But don’t hold your breath. While there’s no reason to believe the Republican party would do anything but cheer unlimited corporate profits, the Biden Administration has been astoundingly flat-footed on the issue of Greedflation. But is that really a surprise when its longtime advisor is Larry Summers, one of the world’s all-star corporate apologists? Similar to recent revelations about the IRS harassing independent journalists under Biden, legacy media groups seem completely unconcerned about the Greedflation trend or the influence-peddlers who carry water for it. In fact, the only hardball interview that Summers or his ilk have faced came from comedian Jon Stewart recently, after he dismantled the Harvard economist on his podcast last month. The exchange begins with Summers regurgitating the Ruling Class’s talking-points about why ordinary Americans should be resigned to getting crushed to death by inflation.
“We had massive stimulus and an economy that could only produce so much – we had huge levels of demand,” Summers muttered. “Ultimately, you put too much water in the bathtub and the water overflows.”
The deadened expression on Stewart’s face as he listens is priceless.
“But the San Francisco Fed says that demand is maybe 30% to 35% of inflation; wages are really around 20% of the inflation – there’s a huge corporate profit aspect to it,” Stewart calmly counters, pointing out that the U.S. Fed, under Biden, is hurting workers and small businesses with its monetary policy rather than tackling massive corporate price hikes.”
“There’s certain sickness you can have, where there’s a drug and it has side effects, and everybody hates the side effects” Summers shoots back. “And no doctor wants their patient to suffer the side effects. But if you don’t address the sickness, you’re going to have a bigger problem down the road.”
Stewart’s face is stone-still as he absorbs the rehearsed metaphor coming at him.
“But the stock market has gone up %150 percent – CEO pay has gone up 1,500%,” Stewart replies, “workers’ wages haven’t gone up at all. I think you’re misdiagnosing the sickness.”
There is a sickness setting in, but most national and state leaders seem determined to not be the doctors, but rather the undertakers. Governor Gavin Newsom’s recent successful move to cap windfall oil profits in California is one of the few instances when an executive has taken action – and proven that it can be done. But given that Newsom’s measure is currently a total outlier, it’s more important than ever that Sacramento’s housing choice voucher system – formerly known as Section 8 Housing – is functioning the way that it’s supposed to. It is quite literally one of the few tools that keep very low-income wage earners from becoming homeless as rent prices skyrocket. It’s also one of the main avenues to get unsheltered individuals back into housing. It’s damn important. But, as SN&R has been reporting since 2016, the system has experienced ongoing problems, some of which have spilled into the spotlight during city and county meetings. This week, reporter Graham Womack brings us one of the most comprehensive deep-dives in years into the state of Sacramento’s Housing Choice Voucher program. It’s an example of the kind of work that fewer and fewer journalists are doing on the local level these days. That’s mostly because it requires a fair bit of institutional knowledge, a solid understanding of governmental mechanisms and a willingness to contact everyone from Washington D.C. to obscure regional offices. Please make sure to read his piece, “When it comes to finding landlords for affordable housing in Sacramento, the struggle continues.”