Inflation is not a simple story about greedy corporations

THE word "Bidenflation" appeared in the news last summer, politicising inflation and assigning blame for it. By December, the Consumer Price Index had risen 7 per cent from a year earlier, the largest annual increase since the end of the Great Inflation, the period of entrenched inflation from 1965 to 1982.

On Dec 14, when asked about the drivers of the recent inflation, Jen Psaki, President Biden's press secretary, answered with an example: "The president, the secretary of agriculture have both spoken to what we've seen as the greed of meat conglomerates."

Her answer lent support to the idea that the United States is about to enter a "wage-price spiral", an economic theory that posits a greed-enabled vicious feedback loop between consumer price inflation and cost increases: Greedy businesses raise prices to increase profits, which causes greedy unions to demand higher wages, which causes businesses to raise prices again, and so on. We are now seeing reports of newly assertive union members demanding higher wages, and of greedy corporate price setters charging too much.