“Greedflation” is a nonsense idea

Inflation is high,IMF and the search is on for the culprit. The latest in the frame in Europe is profiteering businesses. The idea that greedy companies were to blame has taken a knock in America, where corporate profits are falling even as consumer prices continue to rise too fast. But that has not stopped the notion taking hold across the Atlantic. The has found that higher profits “account for almost half the increase” in the euro zone’s inflation and Christine Lagarde, the president of the European Central Bank, has at times seemed sympathetic to the argument. In Britain the government has asked regulators to look for evidence of price gouging; on July 3rd the competition watchdog added fuel to the fire with a finding that supermarkets had increased their margins on petrol between 2019 and 2022.The “greedflation” thesis is in part a reaction against another common explanation for : that it is driven by fast-growing wages. Central bankers live in fear of wage-price spirals. Last year Andrew Bailey, governor of the Bank of England, asked workers to “think and reflect” before asking for pay rises. The remark was incendiary because the inflation that has since 2021 has largely left workers worse off. Wages have not driven prices up but lagged behind them.