https://mattstoller.substack.com/p/why-are-judges-encouragin…
With first Covid and now the war in Ukraine, supply and demand shocks abound in our economy, driving up prices and increasing volatility in general. I’ve been tracing the effect of consolidation for years, and one of the consequences of consolidation is that these kinds of shocks more often lead to price spikes, volatility, and shortages. It’s not just that supply chains are more brittle, but firms simply have pricing power, and now have an excuse to use it even when they aren’t threatened by supply chain disruptions. Visa and Mastercard, for instance, who have control of the payments system, are raising the fee they take from merchants for accepting credit cards. There’s no reason for this price hike; both firms are highly profitable, and there’s really no increase in input costs to justify it. They are raising prices simply because they can, and doing so in what looks like a coordinated manner.
Other examples are offered by Stoller in the article.
Back in December, I did a back of the envelope calculation that 60% of the inflationary increases are a result of pricing power.
https://mattstoller.substack.com/p/corporate-profits-drive-6…
Business consolidation in the majority of business sectors has led oligarchical pricing power. Plus planned product obsolescence adds even more profit & sales.
Now it appears the corporate power is aided by judiciary.
In the 1970s the Federal Trade Commission and judges considered that exchanging information while moving prices in concert was an illegal method of fixing prices.
But for years, courts have been loosening antitrust law, including those against price-fixing. In 2017, for instance, the Third Circuit Court of Appeals, in a case called Valspar Corp. v. E.I. Du Pont De Nemours & Co, not only found that tacit collusion was legal, but that in the case of a concentrated industry, it’s rational. And so they wouldn’t even let it get to a jury.
Last week, however, the Ninth Circuit handled down another bad decision along the same lines. In this case, memory chip makers Samsung, Micron, and SK Hynix - who control 96% of the market for such chips - were being sued for price fixing. Until 2016, prices of memory chips had been dropping as these firms competed for market share. Then, Samsung unilaterally began producing less, and announced it would keep production lower as long as other industry participants did so. Micron and SK hynix followed suit, and prices of chips, as well as the cartel’s profits, skyrocketed. These firms also cut their investment in factories in unprecedented ways to reduce output, lost money by deliberately withdrawing supply from the market, publicly encouraged each other to engage in supply cuts, and exchanged information relating to future supply and demand.
I suppose campaign contributions to governors & presidential candidates lead to corporate friendly judicial nominations & approvals.
The professional class manages to maintain their standard of living via stock purchases from their well paid positions. The working class not so much. Most decent working class jobs have been automated or off shored. Higher education costs are sky high resulting debt ridden graduates. And those without the intellectual horsepower to gain entry to an university. Well eff’em. They are just flotsam in the new economic system. There IS a fly in the ointment though. They can still vote. That can lead to more 2016 election results.
Brave New World out thar.