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Profits, Not Wages, Have Driven Canadian Inflation
Every January, the Globe and Mail newspaper publishes a fascinating set of charts (curated by journalist Jason Kirby) prepared by Canadian economists, with their insights into economic trends likely to shape the following year. Centre for Future Work Director Jim Stanford was invited again to participate in the collection. He submitted the following chart and text, highlighting the dramatic increases in corporate profits in Canada that have been the dominant distributional outcome of recent inflation. In recent months, the Bank of Canada has focused on the labour market as the main culprit behind higher inflation: The unemployment rate is too low, wages are rising too fast and this so-called “overheating”…
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CBC Podcast on Power, Profits, and Inflation
CBC’s top-rated podcast series, Front Burner, recently featured a 30-minute interview with Centre for Future Work Director Jim Stanford on the continuing debate about whether corporate profits have contributed to recent Canadian inflation. The interview responds to recent claims of supermarket CEOs (in their appearance before a Parliamentary inquiry) that their profit margins on sales are modest and stable. In fact, compared to pre-pandemic norms, profit margins have grown by about three-quarters – and the mass of after-tax profits collected in the food retail sector has more than doubled. The podcast also considered the role of record profits in driving painful price increases in other sectors of the economy, too:…
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Yes, Virginia, Supermarket Profits HAVE Increased
The following commentary was first published by Centre for Future Work Director Jim Stanford at the Progressive Economics Forum’s blog site, and then republished by Heterodox Economics Blogs and covered by rabble.ca. Supermarket executives were up on Parliament Hill last week, appearing before the Standing Committee on Agriculture and Agri-Food’s inquiry into food inflation grocery chain profits. They repeated the now-familiar argument that supermarkets have not caused food inflation, they have merely passed along higher input costs to their customers; their profit margins have been stable, it is claimed. Don’t believe them. Here are a few data points on the argument that the chains haven’t actually profited from inflation, since their…
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Saying the Quiet Bits Out Loud: Bank of Canada Aims to Raise Unemployment
It will seem irrational to most Canadians, but the surprising truth is that the Bank of Canada is explicitly trying to increase unemployment. The Bank’s Governor Tiff Macklem recently claimed that the unemployment rate in Canada was too low: “unsustainable,” in his words, and must be increased by using high interest rates to slow down economic activity and reduce employment. This idea – of using unemployment as a deliberate tool to undermine wages and protect business profit margins – has been implicit within orthodox monetary policy for many years. But it’s both rare and angering to hear that made explicit as the goal of economic policy. In this commentary, originally…
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Webinar on Inflation, Recession … or Both!
Centre for Future Work Director Jim Stanford recently presented a keynote lecture to a webinar on Canada’s uncertain macroeconomic outlook, hosted by the B.C. office of the Canadian Centre for Policy Alternatives. The presentation covered the causes and consequences of the recent acceleration of inflation in Canada – stressing that higher prices cannot be blamed on rising wages or ‘overheated’ labour markets. Instead, a combination of supply disruptions, international pressures, and record profit-taking by Canadian businesses are the main forces driving faster inflation. Unfortunately, the conventional response to higher inflation (quickly hiking interest rates to reduce employment and overall spending) will make things worse. Most economists now expect a recession…
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CBC’s The Current Looks at Inflation and Food Prices
The sharp acceleration of food prices (up over 11% in the last 12 months) has sparked anger and hardship in Canadian families struggling to pay the bills of day-to-day life. It has also raised troubling questions about the corporate power of the major supermarket chains, which control a dominant share of the overall food retail industry. Centre for Future Work Director Jim Stanford recently joined Matt Galloway, host of CBC’s national radio program The Current, for an in-depth conversation about food prices, why they’re so high, the role of corporate profits in driving up prices for food and other necessities – and, most important, what we can do about it.…
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Who Wins, Who Loses in the Fight Against Inflation
The Centre for Future Work recently co-published with the Canadian Labour Congress a major new report on inflation: its causes, consequences, and how it could be tackled in a more balanced and fair manner (rather than throwing the whole economy into recession, which seems the inevitable outcome of the Bank of Canada’s current strategy). The report has generated considerable attention in print, broadcast, and social media. CBC’s daily political podcast, Front Burner, published a feature-length interview with report author Jim Stanford (Director of the Centre for Future Work) on why the Bank of Canada’s current approach is punishing workers for inflation they clearly did not cause. He discusses the options…
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Orthodox Cure for Inflation Will Be Worse than the Disease
Evidence is growing that Canada’s economy, and most other OECD nations, is heading into recession. Dramatic increases in interest rates around the world, motivated by a desire to clamp down inflation that broke out after the COVID pandemic, is undermining investment, job creation, and household spending power. The Centre for Future Work has jointly released a major new report with the Canadian Labour Congress documenting the flaws in the Bank of Canada’s diagnosis of current inflation, and the risks in its one-sided approach to solving the problem. The report, titled A Cure Worse than the Disease? Toward a More Balanced Understanding of Inflation and What to Do About It, was…
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Podcast: Inflation, Recession, and Fairness
Centre for Future Work Director Jim Stanford recently joined renowned political analyst and opinion researcher David Herle, on his Herle Burly podcast, to discuss the rising risk of recession in Canada, why the Bank of Canada is raising interest rates so aggressively, and whether there is a fairer way to manage post-COVID inflationary pressures. Stanford warned of the dangers of applying 1970s-vintage inflation theories and remedies to the unique combination of supply disruptions, energy price shocks, and oligopolistic market power than explain the current upsurge in inflation. He also emphasized that governments have ample fiscal room (given rapidly shrinking deficits) to support jobs and economic activity in months if the…
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Slowing Economy Should Give Bank of Canada Pause … But It Won’t
New GDP data released last week confirm that higher interest rates and other headwinds have already slowed economic growth in Canada to a crawl. This should give the Bank of Canada pause to reconsider its schedule of aggressive interest rate hikes. That inflation was never attributable to overheated domestic economic conditions. Instead, statistical evidence indicates that current inflation is mostly the result of several unique post-pandemic factors: supply chain disruptions, higher energy prices, and a catch-up of consumer spending from depressed pandemic levels. Moreover, those largely temporary forces are already abating: several key global price indicators have fallen substantially in recent months (including petroleum, food, and shipping costs). By undercutting…