Democrat Senator Elizabeth Warren (MA) thinks that consolidation in the grocery store industry is why food prices are skyrocketing. She feels that corporate greed and the profit motive are the problems, not government largesse, corruption, incentives, control, over-regulation, and fearmongering.
Democrats believe that the lack of competition creates inflation. Warren thinks that stores have a monopoly on food. It is economically illiterate, and she claims to be a financial genius who taught at Harvard. Once again, you should be shocked at the stupidity endorsed by our higher education institutions and the media.
On Tuesday, Senator Elizabeth Warren gave Federal Reserve Chair Jerome Powell her Econ 101 lesson. She contended that the absence of competition was why food prices have increased over the last year. She thinks that because supermarket profits have grown, they must be gauging their customers.
As demand increases, revenues are driven up, and adaptive businesses can increase profits through the use of technology, i.e., self-checkouts, as their prices are supplemented by injections of loans like the PPP, laying off employees, and selective sales of higher profit margin items, i.e., cereal, drugs, cosmetics, and meats. Increased volume, with a similar labor force or especially with a reduced labor force, while maintaining overhead expenses, will increase profits.
Higher profits should lead to higher employment, more inventory, and more stores. The US economy experienced this as employment opportunities increased and port traffic rose in 2021. But the federal government is incentivizing people to avoid work with increased unemployment and vaccine mandates.
Competition between all retailers that sell groceries, such as Costco and Walmart, not just the big grocery store chains like Kroger and IGA, drives prices up. Businesses need more employees and inventory. Wholesalers see the same increased demand, and our supply chain is suffering.
A global research firm, IBISWorld, pointed out that 16% of products stocked in groceries are local. Therefore 84% of the products in stores are international and subject to the supply chain crisis created by Biden’s lack of leadership and folly.
Supermarkets compete on price because the products they sell are very similar. They offer sales on name brands or sell less expensive generic brands to drive volume. Grocery stores compete with Walmart, Sam’s Club, Costco, Bj’s, Target, 7-Eleven, Sheetz, Wawa, Walgreens, CVS, Rite Aid, Dollar General, and Dollar Tree, not to mention local and specialty supermarkets and cafés.
Last year, Democrat Senator Sherrod Brown (OH) blamed companies for increasing prices rather than cutting profits. The Harris-Biden maladministration has pinned rising gas costs on OPEC and a conspiracy plot by US refiners to reduce supply. But an investigation into collusion has come up dry. The anti-president is limiting fracking which has driven down fuel prices for the last five years.
Warren and Brown are threatening oil producers with lawsuits and bankrupting energy suppliers. It adds more risk to the industry and limits investments. Who wants to fight the government every day of the week?
The US economy is below capacity and is contracting. It has produced a need for employment opportunities and negotiating power for employees.
In 2019 stores were driven to cut prices and offer sales which helped them expand. But Warren wants you to believe that in 2021 they are motivated to move prices up with bare shelves to increase the profit to executives. It does not work that way, Senator.