Pretending Monopoly Has Nothing to Do With Inflation

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Relevant excerpt: > But for argument’s sake, let’s say that the Post and the economists are right—that predatory pricing by oligopolistic firms isn’t driving the current inflation, but rather, “supply chain hiccups” as the Post editors say, brought on by pandemic induced labor shortages and high demand. The question is, why were the supply chains so fragile in the first place? > The answer is monopoly—in particular, the hollowing out of capacity as a result of industry consolidation and Wall Street’s demand for short term profits. Consider the case of semiconductors—crucial components in most of the products we use. As recently as a decade ago, America was producing vast numbers of cutting-edge semiconductors right here on our shores. Since then, as Garphil Julien recently explained in the Washington Monthly, the federal government has allowed the biggest domestic manufacturer, Intel, to buy up or drive out most of its U.S. competitors. The firm then offshored or sold off its U.S. manufacturing capacity to reduce costs. That boosted Intel’s stock price and delighted investors. But it left the company with scant domestic capacity to increase supply when COVID-19 shut down Asian semiconductor factories. The falloff in semiconductor supply has led, in turn, to shortages of, and higher prices for, everything from cars to cell phones. > Or consider the cargo ships that haven’t been able to get products into and out of U.S. ports. That, too, is a problem exacerbated by monopoly. Ocean shipping was a highly regulated industry until a quarter century ago, when Washington loosened the rules, notes The American Prospect‘s David Dayen. That led to three vast carrier alliances, all foreign owned, gaining control of 80 percent of the ocean shipping market. These alliances then built super-sized cargo ships that can only dock in a few ports, like the ones in Los Angeles and Long Beach, which now service 40 percent of all U.S. traffic. This highly consolidated system kept shipping prices, and hence overall inflation, low for years. Now, its brittleness is contributing to inflation. > Once supplies do land in U.S. ports, there are not enough trucks and truck drivers to deliver products to our warehouses and stores. In the recent past, however, many of those goods were delivered by freight rail. Why aren’t those goods now moving on trains? Because, as Phil Longman has reported, the federal government allowed the railroad industry to monopolize. And the Wall Street hedge funds that control those monopolies have more recently demanded that they rip up tracks, mothball rail cars, and lay off seasoned union employees to get costs down and stock prices up. Now our freight rail system doesn’t have the capacity to take up the slack. > The failure of establishment voices like the Washington Post editorial board and the economists they rely on to grasp how monopolization and financialization have hollowed out our supply chains is no small thing. After all, if you misdiagnose the source of a problem, you’re likely to advocate the wrong solution.

discodropper

This is a bad take that’s understanding the data poorly. The overwhelming share of inflation has been in food and fuel. The underlying conditions on fuel have absolutely been tied to pandemic issues, namely the massive decline and then surge in demand resulting in underinvestment. Cargo shipping being foreign flagged and owned is not a result of US deregulation somehow killing domestic industry, the Jones Act (ie regulation), has mostly done that. On semiconductors…the shortage is global. There’s a demand side issue in some GPUs and a general surge in semiconductors demand with the increase in smart and connected devices. All in all, what we’ve seen is completely unsurprising given that there’s been a massive shift in demand from services to goods, restrictions in global transit, and a surge in domestic money supply. Increased industry concentration is just a fun bogeyman for this author.

theexile14

“It’s because of monopolies!” Only has examples of clearly NOT monopolies. The difference between 1 company in a market and 5 is huge. Intel is not a monopoly (global market with half a dozen players). ocean shipping is not a monopoly. Port overcrowding is not a train monopoly problem. How is not enough truck drivers a monopoly driven problem? Trucking is not a monopoly. This article is odd.

EquitiesFIRE

Convenient that monopolies are to blame such as big oil when inflation is high but not when oil was trading a -$30 a barrel. A lot of cherry picking and confirmation bias going on.

joedaman55

Lol the money supply increase in the far and away number one reason for inflation. And for those that don’t realize it actually plays a role in the supply chain issues that are being blamed. Don’t get me wrong COVID definitely played a role in the supply side issues, but it’s downright dishonest to say that anything but the 40% money supply expansion is to blame. When you inflate the money supply you have more money bidding for the exact same amount of goods, leading to increased buy pressure. Companies can’t keep up with the buy pressure so they either increase prices to reduce demand or or they sell out at lower prices leaving less of the good available. It’s not as complicated as everyone wants to make it out to be. Now are their some companies who are probably exploiting this for their own profit because they know they can get away with it right now? Hell yes. But are they the cause of inflation? No. They’re opportunist and they’re being made the scapegoat. Don’t get me wrong I have no love for the people taking advantage of the situation right now, it’s pretty scummy. But it’s also a flagrant lie to say they’re the cause, they’re a symptom if anything.

schmelf