The World Health Organization declared that the Covid emergency ended in mid-2023. Since then, the 500 Standard and Poor's companies (the benchmarks of US capitalism) have enjoyed a steady and significant increase in earnings growth. This remarkable growth persisted quarter after quarter, culminating in “more than 440 S&P 500 companies reporting second-quarter earnings so far [and] 86% have beaten analysts’ estimates, according to FactSet data” as reported in The Wall Street Journal. The WSJ further adds: “Companies are reporting earnings that are around 29% higher than those estimates, on track for a record earnings surprise in data going back to 2008.” [my italics]
So, US capitalism’s leading insider mouthpiece is surprised at the rising profit margins of the system’s leading monopoly corporations.
“These earnings are ridiculous,” said Phil Blancato, chief market strategist at Osaic. “These profit margins are incredible.”
Yes, they are. These outlandish profits are both ridiculous and incredible.
The WSJ author, Shradha Dinesh speculates that the mystery may lie in “skyrocketing energy prices from the Iran war.” Alternately, “AI remains a primary driver of profits across the other leading sectors.”
But the boost from the Iran war cannot account for the earlier steep climb in earnings growth, nor can the AI investment-driven boom, which really became a major factor only in 2025.
Even more striking than the profit explosion is the widely reported and worsening so-called “affordability crisis.” Inflationary tides have ripped through the customary standard of living of millions of US workers. Since 2021, in order to meet a wave of insidious price increases, workers have reset their purchasing regimen, borrowed from savings or lending institutions, or gone without.
Interestingly, the pundits and political operatives have either failed to notice the relationship between rising prices and exploding profits or chosen to simply ignore it. In fact, they are connected. The coronavirus epidemic attacked economic activity as well as killing millions. With earnings (profits) depressed, the US government provided $4.65 trillion in relief funds, resulting in a massive increase (and restoration) in S&P earnings in 2021 and unleashing crushing price increases in 2021 and 2022, as corporations exploited the profitability “crisis.” Both painful inflation and profit growth continued unabated for the next four years.
The lessons of the early years of Marxist thought are often forgotten, even by Marxists. Marx went to great lengths to warn against fetishizing social relations, especially economic relations. Economists of every stripe see inflation (and deflation) as a malady of an otherwise functional economy. They separate it from the logic of capitalism, from its incidence as a completely rational development of capitalism under specific conditions. Instead of recognizing inflation as a variant of the social relation between workers as consumers and employers as price setters, they insist that inflation is a separate phenomenon requiring a theory of inflation. Inflation-- in this view-- exists as an interloper on the regular course of a capitalist economy. This view is especially appealing to social democrats who hope to manage capitalism.
Lost in this fetishizing of inflation is the assuredly obvious fact that inflation is the work of some of the subjects of social relations. It is the CEOs, COOs, boards of directors, and owners of corporations and businesses that choose to raise prices. They do not make their decisions to keep up with their costs, to benefit the consumer, to appease their critics, or because God directs them. They make the decision in order to accumulate more capital.
That is why a shock like the oil crisis of the early 1970s or the pandemic of the early 2020s generates inflation. The opportunity to press price increases is not lost on the bourgeoisie. And they will pursue this competitive race until it fails to yield profit growth.
Some may dismiss this account of crisis-sparked inflation as a psychological explanation, an explanation based upon the contingent avarice or self-regard of capitalists. Far from it. Chronic inflation, as experienced in the 1970s and today, is best understood as a social phenomenon: the predictable response of a social class that seizes every opportunity to increase the rate of accumulation. In a capitalist society, shocks like pandemics, wars, and other catastrophes provide the trigger for aggressive and persistent price increases. Increases will continue until they negatively impact profits.
I have been frequently advocating this view of sticky, persistent inflation based on price-gouging since November of 2021, when mainstream economists were shrugging off inflation as a temporary result of supply chain disruptions.
I noted nearly five years ago:
In a revealing article, The Wall Street Journal exposes the real cause of escalating inflation. Inflation Helps Boost Profit Margins: Companies seize rare opportunity to increase prices and outrun their own rising costs [print edition] tells that “[n]early two out of three of the biggest U.S. publicly traded companies have reported fatter profit margins so far this year than they did over the same stretch of 2019… Nearly 100 of these giants have booked profit margins-- the share of each dollar of sales a company can pocket-- that are at least 50% above 2019 levels” [my emphasis]. The authors note: “Executives are seizing a once-in-a-generation opportunity to raise prices…”
They continue today to exploit this “once-in-a-generation opportunity,” creating a vicious human catastrophe that politicians only now-- after five years-- label an “affordability crisis.” They didn’t want to address it then, and they don’t want to acknowledge it now.
While economists search for a theory of inflation that will enable leaders to tame inflation, to manage the crisis that ensues, workers should recognize that the problem and its solution come from deep in the very logic of the capitalist system. They must understand that it is an axiom that capitalists will always exploit every opportunity to accumulate additional capital at the expense of the worker/consumer. The only way to eliminate that possibility is to eliminate capitalism.
Greg Godels
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