AUGUSTA, MAINE — Prices are rising and Mainers are feeling the pinch. At the same time, some of the world’s largest corporations are reporting record profits.
This mismatch is the result of choices made by policymakers over time, particularly at the federal level, that have given corporations greater power over people to set prices and control the flow of goods and services. Now, corporations are using this power to extract even larger profits under the cover of current global supply chain disruptions.
In Feeling the Pinch: Inflation and corporate consolidation, MECEP policy analysts James Myall and Arthur Phillips explore the role of corporate power in high costs, and what policymakers can do to reduce corporate consolidation while also protecting Mainers against ongoing price increases.
Findings and recommendations from the report include:
- Price increases are greatest where corporations have the most power. Increased competition helps reduce inflation, and concentration of market power among just a few firms increases it. Over the past three decades, there has been a consistent consolidation of market power, with a small number of corporations controlling most of the market for a particular product. While some amount of consolidation can bring benefits to consumers, as larger companies are able to achieve savings through efficiency of scale, excessive consolidation reduces competition and makes it easier for companies to charge excessive prices.
- Corporations are reporting record profits — and still raising prices. In 2021, corporate profits were the highest they’ve been since the late 1940s. Despite the adversity being faced by hardworking families as a result of the economic disruption caused by COVID-19 and other global events, corporations continue to extract greater profits. Examining sectors where prices most significantly impact household costs shows how firms in consolidated industries have operated during this period of heightened inflation. For example, consolidated firms in the food processing and energy sectors have dramatically raised their prices while reaping historic profit margins.
- Policymakers can reign in corporate power and reduce the pain caused by rising prices.
- By taking a new approach to antitrust laws, federal and state regulators can play a key role in preventing excessive concentration of market power — which allows for higher prices and lack of competition.
- Policymakers can tackle corporate ‘profiteering’ — the leveraging of circumstances to raise excessive profits — head-on. Maine law allows the governor to prevent price gouging during a period of “abnormal market disruption” for a specified commodity.
- With the adoption of a one-time “excess profits” or “windfall” tax, businesses would pay a special high rate of tax on any additional profits above their 2019 levels — redirecting profits to struggling Mainers.
- Strengthening existing safety net programs including the Supplemental Nutrition Assistance Program (SNAP), Temporary Assistance for Needy Families (TANF), and Low Income Home Energy Assistance Program (LIHEAP) would help ensure the most vulnerable Mainers are protected from the impacts of rising prices.
- Long-term investments in supports including health care, child care, and housing are needed to curb future price increases.
Click here to read Feeling the Pinch: Inflation and corporate consolidation.
A PDF of the report is available here.
Dan D’Ippolito: firstname.lastname@example.org