Inflation: The Untold Story

Stewart McGill
February 12, 2024
5 min read
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Follow the Profit


Financial Discipline?

One of the many profound insights of Marx was that capitalism is driven by the imperative to accumulate more capital. It's all about the drive for profits: if you want to understand how the capitalist economy works, you need to view it through the prism of that central imperative. This may seem obvious to many of you, but it is less so to those who manage our economy. The Bank of England's response to an inflation provoked largely by corporate price gouging, is to increase interest rates, thereby exerting more pressure on poorer people that have had to go into debt to keep their heads above water and enjoy any quality of life. 

UK personal debt rose by one-third in 2022, with overtwo-thirds of UK adults (68%) saying they felt stressed due to the cost-of-living's impact on their finances in 2023, with almost half (46%) in debt due to the crisis.

In April this year, Citizens Advice said Britain was facing a debt time bomb: they were having to help increasing numbers of people with a negative budget, i.e. their income is not enough to cover the essential expenses, making debt "unavoidable" for millions of people during the cost of living crisis. According to its recent statistics, 51% of those it helps with debt are in a negative budget, compared with 36% in 2019. The average debt client now has £0 left over each month, compared with more than £15 in 2019.

"The maths speaks for itself – a household debt crisis is coming and we have a choice about whether to prepare.", Matthew Upton, the director of policy at Citizens Advice, rightly said.

Interest rate increases are blunt, misdirected, and more about disciplining labour through fear and impoverishment than fixing inflation.

All this despite the plethora of evidence that inflation has been driven by profiteering and not just by the usual suspects in the highstreets and the predatory energy sector: commodity speculators and trader soperate balefully behind the scenes and get away with social murder.

The Recent Evidence

In April 2022, The Economic Policy Institute in the United States showed that since mid-2020, 54% of price rises had been attributable tofatter profit margins, with only 8% to increased labour costs. At the end of 2012, Bloomberg noted that US corporate profit margins were at a 70-year high and had risen 37% in the past year. A Unite the Union report showed that even removing energy companies from the tally, average UK profit margins still jumped an astonishing 52% in 2021. The jump in UK-wide company profits was responsible for 58.7% of inflation in the previous half year – as opposed to just 8.3% due to labour costs.

Even the IMF recently pointed out the role of profiteering in the cost-of-living crisis. Citing research by Isabella Weber at the University of Massachusetts on the IMF blog, the organisation stated in June 2023:

"Rising corporate profits account for almost half the increase in Europe's inflation over the past two years as companies increased prices by more than spiking costs of imported energy"
A recent report from the IPPR and Common Wealth found that business profits rose by 30% among UK-listed firms, driven by just 11% of firms that made super-profits through their ability to push through significant price increases. Researchers said the energy companies such as Shell, mining firms Glencore and Rio Tinto, and food and commodities businesses Kraft Heinz, Archer-Daniels-Midland and Bunge all saw their profits far outpace inflation.

The report said,

"Because energy and food prices feed so significantly into costs acrossall sectors of the wider economy, this exacerbated the initial price shock –contributing to inflation peaking higher and lasting longer than had there been less market power"

Even the Bank of England's own researchers confirmed this trend in September 2023. The report examined how a broad spectrum of businesses planned to cope throughto the end of 2023 and into 2024. 45% of companies surveyed say they planned to increase their profit margins in the coming 12 months. Almost a third (32%) expected "no material change" to margins, and only 23% expected a fall. Further, the top 10% of profitable businesses had successfully driven their margins to approach 30% and would make further progress towards this target over the next year. This led the researchers to conclude with classic understatement: "Margin rebuilding could make somecontribution to inflation persistence".

Despite this, the Bank of England sticks to a policy of interest rate increases to tame inflation. This is causing some people severe hardship and, as the 0.3% fall in UK GDP in October has just shown, is squeezing the economy. But, like we said above, it's more about disciplining labour through fear than fixing the root causes of inflation.

Food's Robber Barons

In the middle of 2023, the French government showed signs of understanding the issue, and even the European Central Bank began to realisethe true nature of the problem. 

French food prices rose 14.1 per cent in the year to May,close to the eurozone average, and had overtaken energy as the region'smost significant driver of inflation. The French finance minister announced onFriday 9 June that 75 food producers had pledged to lower prices by Julyfollowing weeks of pressure from the government for companies to stabilise foodprices. 

In April, the European Central Bank observed that althoughcommodity prices were "falling steeply", the prices paid by consumersfor food "remainedvery sticky, suggesting that expanding profit margins were preventing inflationfrom falling."

The problems in the food industry run deep, but we can'tblame it all on the supermarkets ripping people off. 

The big food companies have been cashing in from the cost ofliving crisis that followed COVID, just like the Energy companies. The lattertend to be well known, Shell, BP, British Gas and other predators; the names ofthe businesses pulling the strings of the food industry - Cargill, Louis Dreyfus et al - are less well-knownand scrutinised.

 As Nick Dearden, director of NGO Global Justice Now said,

"You've gota bunch of corporations that are growing more and more and more powerful all the time, gaining more control over different aspects of the food system and massively profiteering."

According to a recent report by Oxfam titled "Profiting from Pain", food billionaires have seen their collective wealth grow by an estimated 45% over the past two years - a total of £328 billion added to their profits. In the same period, 62 new billionaires were created as companies inflated their profits by capitalising on the COVID pandemic and the cost of living crisis. 

Moreover in the issue, Mapping Corporate Power in Big Food, the ETC Group identified "just four to six" dominant firms that control every aspect of the food industry, from agriculture machinery to animal pharmaceuticals. 

Cargill is owned by the 11th richest family in the world and one of the world's largest private companies. In 2017, according to Oxfam, the company was reported among the four oligarchs controlling over 70% of the global market for agricultural commodities. Since 2020, the Cargill family's collective wealth has grown by 65%, with four members joining the Forbes list of the wealthiest 500 people in the world.

Once again Nick Dearden sums it up nicely: the food industry is,

"in a tiny number of hands and effectively controlled onthe basis of how much profit those companies can make rather than preventing people from being hungry."

We need to understand how this market works so we can argue against the individuals who blame inflation on "natural causes" and the idiots who blame it on workers trying to secure pay increases that prevent them from sinking further into debt-ridden poverty. We also need to understand that if we want real change and to take control of the commanding heights of the economy, the power of these global giants must be broken, and the entirety of the food production and distribution network needs to be transformed; this is also fundamental to saving the environment. 

Diesel's Fast and Furious Profits

Even though we've focused on food stuffs, no analysis of inflation would be complete without a note on fuel profiteering. RAC analysis in the middle of 2023 showed that retailers, including supermarkets, quickened the pace of cutting the price of diesel after the Competition and Markets Authority(CMA) expressed concern about weakening competition in the market. Over the two weeks after 15 May - when the CMA issued its road fuel market study update saying average supermarket margins in 2022 had increased compared to 2019 -  the average price of a litre of diesel at supermarkets fell by 7.44p, from 151.02p to 143.58p. They did this to look better and appear more reasonable in the face of further CMA investigation and exposure of their naked profiteering.  

This hiking up of the price of diesel has a knock-on effect and exacerbates price pressures in the rest of the economy; combined with theincreased price of food provoked by the rapine of monopoly capitalism, this causes wholesale misery. According to astudy by the New Economics Foundation, 30 million people in the UK will beunable to afford what the public considers to be a decent standard of living bythe time the current parliament ends in 2024. This will be due to rising prices, below-inflation increases in earnings and projected increases in unemployment. 43% of households will lack the resources to put food on the table, buy new clothes or treat themselves and their families – a 12 percentage point rise compared with 2019.


The idea that companies'pursuit of profit maximisation will work to the greater benefit of allby means of an invisible hand is one of the stupidest and most dishonest inhistory. Marx had it right about the way capitalism really works:

"It establishes an accumulation of misery, corresponding withaccumulation of capital. Accumulation of wealth at one pole is, therefore, atthe same time accumulation of misery, agony of toil slavery, ignorance,brutality, mental degradation, at the opposite pole..."
- Karl Marx, Das Kapital Vol 1


Stewart McGill, used to work for the financial sector. He was young and needed the money. He now writes on political economy and football. He is author of The Roaring Red Front - The World’s Top Left-Wing Football Clubs, The Top Ten Economic Myths and Socialism or Extinction.

All thoughts and views are solely of the author

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