Corporations always raise prices when they can. The question is why they are able to raise prices now to levels they couldn't before, and as always the answer is a mix of government-created moats and monetary inflation.
>The question is why they are able to raise prices now to levels they couldn't before, and as always the answer is a mix of government-created moats and monetary inflation.
The study authors have a different answer about why than you do, though. What they are claiming is that in concentrated markets (like most markets are), shocks like the pandemic allow for firms to raise prices beyond their increased costs, and so increase profits. They have a very interesting graph of after tax profit margins showing that firms in the US are more profitable now than they have been for 70 years, in fact.
They point out a correlation. But would all companies (or enough to drive global inflation) have been able to raise prices beyond their increased costs without the massive monetary expansion? Seems unlikely, at least to the extent they have.
It's because companies had an excuse ready and people were desperate. Normally when companies jack up prices too fast people get offended and stop paying, but the pandemic left people needing for things to feel normal and they were desperate for the things they had been denied. That combined with the supply chain problems, which gave companies their first excuse, meant that people spent themselves into record amounts of household debit, but they didn't blame the higher prices on the companies.
Then as inflation increased, companies used that as an excuse too. "We have to raise prices because of inflation! It's not our fault your wages aren't keeping up!" and people believed it even as companies were making money hand over fist and pulling in record profits.
I'd add "a lack of harm to their business when they did raise prices". Before, I believe there was a fear of backlash from the public if prices (and profits) went up too much.
But when Covid lockdowns forced temporary price increases, companies didn't see the backlash. And so they just continue to do it, knowing the average consumer has no choice in many cases.
The "explanation" confuses correlation with causation. It is true that during the pandemic, with two stimulus checks from Trump and one from Biden, average savings increased, and many companies saw that as an excuse to raise prices to try to drain that savings. But that savings was not evenly distributed, and the timeline doesn't quite work. It's a word-association fallacy.
The study authors have a different answer about why than you do, though. What they are claiming is that in concentrated markets (like most markets are), shocks like the pandemic allow for firms to raise prices beyond their increased costs, and so increase profits. They have a very interesting graph of after tax profit margins showing that firms in the US are more profitable now than they have been for 70 years, in fact.