Samin Yasar l Session: 2020-21 l Department of Human Resource Management
A new theory of inflation has emerged: Greedflation. It suggests that inflation is driven by corporate greed instead of classic economic factors. This concept is a buzz among world leaders and economists, specifically in the rise of the world inflation crisis that peaked in 2022.
Understanding Greedflation
Inflation started to increase in the world during
2022, reaching nearly 11% in the Eurozone and exceeding 9% in the U.S.
Traditional explanations pointed to supply chain disruptions caused by
excessive demand during the COVID-19 pandemic, which was worsened by Russia’s
invasion of Ukraine. Soaring energy cost, increased vehicle costs, and lack of
supply all are responsible for inflation.
However, recent research suggests that corporate
profiteering has played a significant role in sustaining inflationary
pressures. According to a study of 1,350 firms across the U.S. and U.K.,
Company profits in Europe, Brazil, and South Africa rose by 30% from 2019 to
2022. outpacing inflation and production cost hikes.
Major companies, particularly in the energy and food
sectors, have been the biggest beneficiaries. Energy giants such as Shell,
Exxon Mobil, and Chevron enjoyed record-breaking profits as global demand
shifted away from Russian oil and gas. Similarly, food producers like Kraft
Heinz capitalized on supply disruptions to justify significant price increases.
In the U.K., 90% of profit increases were concentrated among just 11% of
publicly listed firms, while in the U.S., a third of public companies accounted
for the bulk of profit gains.
The International Monetary Fund (IMF) found that in
2022, 45% of Eurozone inflation was driven by profit hikes rather than
increased production costs. Many CEOs blamed inflation for their price
increases, yet investigations suggest that many companies took advantage of the
situation to maximize profits.
Economist Albert Edwards from 'Société Générale' has described current company pricing strategies as ridiculous, warning that unchecked Greedflation could crumble the very pillars of capitalism.
Impact of Greedflation in Bangladesh
Bangladesh has not been immune to this phenomenon.
Essential commodity prices have risen disproportionately to production costs,
with potatoes, eggs, chicken, and onions seeing price hikes ranging from 25% to
over 100% in the past year.
According to The Financial Express, despite global
inflation easing, Bangladesh’s inflation rate remains stubbornly high. While
the Eurozone recorded a two-year low of 4.3%, Bangladesh’s inflation rate
averaged 9.8% in the first two months of the fiscal year, exceeding the annual
target by 3.8 percentage points.
Key Examples of Greedflation in Bangladesh
· Potatoes: Despite a production cost of Tk 19 per kilogram, retail prices have soared to Tk 55 per kilogram, marking a 100% price increase.
· Eggs and Chickens: The cost of producing an egg is approximately Tk 10.30, yet retail prices range between Tk 12.5 and Tk 13. Chicken feed costs have surged by 45% for broilers and 60% for layers, further driving up market prices.
· Festive Season Price Hikes: Prices of daily commodities often double during religious and national festivals due to market manipulation by syndicates.
· Unilever Bangladesh Price Hikes (2022): The company faced allegations of excessive price increases for everyday products like soap and toothpaste. For example, the price of Surf Excel rose by Tk 70-75. Unilever defended the hikes, citing increased global raw material costs, freight charges, and currency depreciation.
Conclusion
Economists are terrified of Greedflation and how it
can become a sustaining issue in Bangladesh, further pressuring household
expenses and worsening economic inequality. Greedflation is no longer just a
Western economic theory—it is a grave matter for Bangladesh’s economy. If left
as it is, it will continue to diminish consumer buying capacity, worsen income
inequality, and slow economic growth. Policymakers, businesses, and consumers
must come together to take measures that promote a just and transparent market
environment.
