It is not "Zorban" but the greed of global multinationals that is behind inflation!
Why has inflation risen to a multi-year high almost everywhere in developed countries?
In short, largely because the global giants, which are holding their entire sectors under their control, have begun to realize extra profits unprecedented under the guise of the crisis through significant price increases.
This phenomenon has recently been pointed out by several renowned economists such as former U.S. Secretary of Labor Robert B. Reich, a researcher at Delft University of Technology Servaas Storm, or Matt Stoller, an American antitrust economist. Stoller estimates that 60 percent of higher U.S. inflation is due to rising corporate extra profits and can only be explained by 40 percent of generous government spending. The analyzes of the Magyar Nemzeti Bank are in line with this, which show that 80% of the higher domestic inflation is due to international factors and only 20% to domestic developments.
How can global giants raise prices artificially, in a way that is difficult to justify economically? Matt Stoller just mentioned identified 5 channels:
1️⃣ Monopolies have the ability to set prices and reduce supply, as there is no one in the market other than them.
2️⃣ Through artificial bottlenecks deliberately produced to exploit their market power. This means that companies deliberately design their products so that they are not as substitutable as possible, so that the entire value chain is dependent on their product and the supply they can influence.
3️⃣ Through the right to repair: in this case, large companies prevent companies and users from repairing the purchased product themselves.
4️⃣ Through their dominance: the producers of raw material monopolies (such as companies traditionally with energy resources (oil, gas), but in the age of Industry 4.0 can also include semiconductor manufacturing) have become dominant in the world.
5️⃣ Through economic discrimination, which allows giants to drive smaller players out of the market by selling essential products to their competitors at a higher price.
What did these processes lead to?
Globally, the profits of U.S. companies have risen to unprecedented levels since the COVID crisis, rising 70% (!) In a few months. As a result, however, inflation in families and businesses in all countries of the developed world has risen to a multi-year high.
There are several unique examples to support this:
👉 Procter & Gamble justified its price increase in April with rising commodity prices and shipping costs, but then, interestingly, reported a profit of 24.7 percent by the end of the third quarter. He also had $ 3 billion left to buy back his own shares.
👉 Coca-Cola and PepsiCo also raised prices citing rising costs, and in the end the increase went so well that PepsiCo also managed an operating profit of $ 3 billion. Coca-Cola raised its price similarly and over time, resulting in a profit margin of 28.9 percent.
Közep In the midst of the energy crisis, twenty-four leading U.S. oil and gas companies made $ 174 billion in profits, with Exxon making unprecedented profits in the third quarter last year. It is also due to this that energy prices have risen dramatically in recent months, which is playing a key role in raising inflation.
But what can the government of a small, open economy do in this situation like# Hungaryto protect its residents from inflation caused by global giants?
There are basically three things:
It is necessary to raise wages as much as possible in excess of inflation. Therefore, in this situation, the increase of the minimum wage to HUF 200 thousand and the guaranteed minimum wage to HUF 260 thousand, the wage increases affecting many sectors, as well as the increase of the pension and the 13-month pension are of paramount importance.
We maintain the overhead reduction introduced in 2013! While in other countries the overhead of families and small businesses has doubled in the past year and a half, in Hungary only energy providers can bill at a pre-crisis fixed price! This makes Hungary one of the lowest household overheads in the European Union.
It is necessary to limit the price increase of critical products discretionarily: that's why we introduced an official price of 480 forints for fuels, why we restricted the export of building materials, why we introduced an interest rate stop, and therefore introduced a food price stop for 6 basic foods from February 1.
We cannot completely stop the global processes - and thus the inflation from abroad - but we are working to make the effects of Hungarian families and businesses as little as possible.
Because Hungary has to go forward and not backwards!