Should we blame greed for inflation? If so, whose?

Are American businesses greedy?
That has been the Democrats’ line ever since it became apparent that Americans blamed the Biden administration for inflation. “Greedflation” is the word invented for this purpose. Stop the greedy ones. Kamala Harris has promised to address high prices on her first day in office, if she is elected.
This isn’t something unique to Democrats. Back in 2006, President George W. Bush ordered an investigation into the possibility that rising gas prices were being illegally manipulated. Top Republicans in Congress were throwing around the G-word, asking the Federal Trade Commission to investigate “gouging.”
Even Utah’s governor at the time, Jon Huntsman Jr., wanted to investigate gas gouging.
All was forgotten a little while later when prices fell.
Greed? As Nobel-prize-winning economist Milton Friedman once famously asked talk show host Phil Donahue, “Is there some society you know that doesn’t run on greed?” Friedman noted that the world runs on millions of people pursuing their own self-interests. And what’s wrong with that?
“Is it really nobler to pursue political self-interest than economic self-interest?” he asked. “Where in the world are we going to find these angels who are going to organize society for us?”
While politicians readily volunteer for the role of angel, those who seriously study the issue tend to arrive at just about the same place.
The latest example comes from National Public Radio. According to its own report, published earlier this month, it “crunched financial disclosures by a dozen of the largest grocery-item makers and sellers, including Walmart, Pepsi, Oreo-maker Mondelez and Procter & Gamble, which makes Pampers and Bounty.”
Almost all of them saw profit margins either fall or grow less than 1% between 2018 and 2023, despite high inflation.
“The Biden administration has been eager to blame corporate greed,” the report said. “But even a report that the White House put out this year acknowledged that store markups don’t fully explain food inflation.”
In other words, it’s complicated.
Or maybe not so much.
A study by the MIT Sloan School of Management in 2022 found that neither greed nor supply chains were primarily to blame for inflation. “Our research shows mathematically that the overwhelming driver of that burst of inflation in 2022 was federal spending,” Mark Kritzman, a senior lecturer at MIT Sloan, said on the school’s website.
It wasn’t even close. Federal spending accounted for 42% of inflation. The next highest contributor was “inflation expectations,” or the self-fulfilling expectations consumers have that prices will continue to rise, which came in at 17%.
In other words, the federal stimulus money intended to ease the economic blow of the COVID-19 pandemic was mainly to blame, and that stretched across both the Trump and Biden administrations.
As Kritzman noted, those stimulus checks and loans weren’t necessarily bad. However, politicians can’t escape consequences for their actions. “The more overstimulation there is, the more hawkish the Fed has to be to keep inflation under control,” he said.
If the temporary stimulus programs were the only inflation driver, this all could have a happy ending. But the biggest threat to inflation and economic stability is the nation’s rapidly rising national debt, fueled by annual budget deficits in the neighborhood of $2 trillion. Sooner or later, the interest payments on this debt, which now totals more than $35 trillion, will spur inflation that won’t be so easy to tame.
One could say the debt is fueled by spending designed to attract votes. One could define that as a form of greed, which brings us full circle.
For now, inflation seems to be mostly under control. The Federal Reserve announced a half-percent cut in interest rates on Wednesday. This good news isn’t likely to convince many voters who want prices to fall back to pre-COVID levels, however.
Years ago, during a spike in gas prices, I happened to be visiting California. I was stopped by a man in a grocery store parking lot who asked me to sign a petition to send to Washington, “so they can hear us” about high gas prices. When I pressed him as to who “they” were and how they could change things, he became agitated. They need to stop raising gas prices, he insisted, over and over.
You know. “They.” The greedy ones.