The language of the market performs a social function to obscure economic encounters. In this inflationary era, it’s worth noting that the “invisible hand” of the economy has not put up prices all at once. It is firms, free from government curbs, deciding that they can do that. In free markets, companies are meant to compete and undercut each other, driving prices and profits down. Yet this has been failing to happen. Instead, a new report from the trade union Unite reveals, company profits last year rose while real wages fell steeply. Workers are warned that they risk sparking a wage-price spiral if they demand pay rises to match living costs. In fact, Britain seems to be facing a profit-price spiral.
Unite’s argument is that UK plc has been able to charge more, with much of the higher prices juicing profits. From the trade union’s perspective, corporate greed has been the primary driver of high inflation. Its 165-page report makes a compelling case that firms, and their investors, are “profiteering” on the back of a crisis hitting workers hard. Even within key industries, there is talk of “price gouging”. When Sainsbury’s reported a doubling of profits last year to £730m, the supermarket insisted it wasn’t ramping up prices. But it accused its competitors of doing so.
