Claims that inflation is driven by corporate greed have been a staple of left-wing political rhetoric since inflation hit a decades-high 9.1 percent in June 2022. Prominent progressive politicians like Bernie Sanders have pushed the argument in defense of Democratic policies, and the belief has found increasing purchase among American voters. According to a February 2024 poll by progressive research firm Navigator, 59 percent of registered voters surveyed agreed that “corporations being greedy” is a “major case” of inflation, up from 44 percent in January 2022.
A recent Facebook post by The Other 98% with more than 19,000 likes typifies the claim.
This claim is incorrect. The graphic used by The Other 98% uses inaccurate and inconsistent financial data to make its point, and its central claim that corporate profits drive inflation is not supported by economic research.
Incorrect numbers.
While the graphic appears to rely on net income as its measure of company profits, it references this measure haphazardly and often uses inaccurate figures. For example, the $8.973 billion cited as profits for multinational food company Kraft Heinz appears nowhere in the company’s 2023 financial reports and is more than three times higher than its reported net income. The graphic claims that Amazon had profits of $9.9 billion in 2023 when the corporation actually recorded a net income of more than $30 billion. It also dramatically overstates Verizon’s income—the communications company had a net income of $12.1 billion in 2023, not $78.6 billion. One of the companies listed, ExxonMobil, even saw significant declines in profit during the year. The oil and natural gas giant reported total earnings of only $36 billion in 2023, down from more than $55 billion in 2022.
Corporate greed.
The claim that corporate profits have caused recent inflation is also incorrect. “It is simple factors contributing to the surge in inflation,” Desmond Lachman, an economist at the American Enterprise Institute and a former deputy director at the International Monetary Fund, told The Dispatch Fact Check. These factors fall into two buckets: supply and demand.
According to Lachman, the two most significant supply factors that contributed to high inflation were the COVID-19 pandemic, which disrupted supply chains worldwide, and the Russian invasion of Ukraine, which caused an increase in food and energy prices. On the demand side, Lachman believes that loose monetary policy—such as cutting interest rates and implementing quantitative easing—and massive stimulus packages lead to a broad increase in the money supply, ultimately resulting in too many dollars chasing too few goods. “I don’t think that corporate greed has had much to do with the inflation that we have seen the last few years,” Lachman concluded.
Lachman isn’t the only economist who doesn’t attribute pandemic-era inflation to corporate greed; his views align with the general economic consensus. In a 2023 paper, economists Ben Bernanke—former chairman of the Federal Reserve under Presidents George W. Bush and Barack Obama—and Oliver Blanchard, former chief economist at the International Monetary Fund, reached a similar conclusion. They found that supply shocks to food and energy were the main contributors to inflation early in the COVID-19 pandemic and that an increase in demand for durable goods drove price rises later on. “Ultimately, as many have recognized, the inflation reflected strong aggregate demand, the product of easy fiscal and monetary policies, excess savings accumulated during the pandemic, and the reopening of locked-down economies,” the paper explains.
A 2023 paper published in Review, the research journal of the Federal Reserve Bank of St. Louis, by two Federal Reserve economists also found that supply and demand imbalances were at the root of pandemic-era price rises. “We show that generous fiscal support is associated with an increase in the demand for consumption goods during the pandemic, but industrial production did not adjust quickly enough to meet the sharp increase in demand,” the paper explains. “This imbalance between supply and demand across countries contributed to high inflation.”
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