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IMF Says Corporate Profiteering Caused Nearly Half of Europe’s Recent Inflation Surge

COMMON DREAMS, Jake Johnson, June 27, 2023 

“Companies increased prices by more than spiking costs of imported energy,” said economists with the International Monetary Fund.

Economists with the International Monetary Fund on Monday echoed what progressive experts and campaigners around the world have been arguing for more than a year: Corporate profiteering has been a key driver of the recent inflation surge.

In a blog post on Monday, the IMF’s Niels-Jakob Hansen, Frederik Toscani, and Jing Zhou wrote that “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.”

If inflation is to return to the European Central Bank’s 2% target, the trio argued that “companies may have to accept a smaller profit share” as workers demand “pay rises to recoup lost purchasing power.”

The economists referenced a working paper they released last week that shows corporate profits are responsible for just under 45% of the inflation spike during the coronavirus pandemic.

As the paper explains, companies have hiked prices beyond what was necessary to cover the rising prices of energy and other materials, passing greater costs onto consumers and fueling a cost-of-living crisis across Europe while padding their bottom lines.

The London-based oil giant Shell, for example, saw its profits more than double to a record $40 billion last year.

“Europe’s businesses have so far been shielded more than workers from the adverse cost shock,” the economists wrote in their blog post. “Profits (adjusted for inflation) were about 1% above their pre-pandemic level in the first quarter of this year. Meanwhile, compensation of employees (also adjusted) was about 2% below trend.”

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