In a recent paper, Weber writes that the chip shortage [from the pandemic] established a “temporary monopoly” that allowed automakers to “raise prices without having to fear a loss in market share.” And it wasn’t just chips. Analyzing transcripts of company earnings calls, Weber concludes that firms in a variety of industries knew they could get away with gouging customers, who were already primed by the chaos of the pandemic to expect price hikes. Crucially, firms weren’t worried about losing customers to competitors; because of the supply bottlenecks, competitors would also be raising prices.
Weber calls this dynamic “sellers’ inflation,” in contrast with the traditional model of inflation, in which an excess of consumer purchasing power is to blame.
[Using WW2 as a model:]
The traditional inflation-control tactic—jacking up interest rates—would have reduced employment and industrial activity, making it harder for the military to obtain the supplies that it needed to fight. Industry-specific price controls contained consumer costs while encouraging companies to boost profits through higher sales volume. The initiative worked. During the First World War, inflation had run rampant. During much of the Second, it was close to two per cent. And yet factories were operating at peak levels.
If contemporary policymakers could do the same thing, Weber argued, they could limit inflation without inducing layoffs and wage cuts.
No comments:
Post a Comment