‘Mega-retailers are using inflation as a cover to raise prices and turn record profits’

Janine Jackson interviewed Groundwork Collaborative’s Rakeen Mabud about the supply chain breakdown for the February 11, 2022, episode of CounterSpin. This is a lightly edited transcript.

Janine Jackson: “Supply Chain Mayhem Will Likely Muck Up 2022” was a recent New York Times headline reporting that as havoc at ports shows no signs of abating, and prices for a range of goods are still rising, “the world” is absorbing the realization that time alone won’t solve the great supply chain disruption.

Any time a corporate media outlet tells you that the world is just now learning something that the world didn’t know heretofore, you should reach for, well, anything that isn’t a corporate media outlet. Because plenty of people around the world have been raising questions and concerns about whether the current system of producing and delivering goods to people really has the delivery of goods to people as its core organizing principle.

The pandemic, while it hasn’t created those concerns, has thrown them into high relief, and offered an opportunity to address them in a serious and not a stopgap way. But who’s going to lead that public discussion on that, beyond reporters who seem to be marveling at their inability to find their favorite brand of pickle on the shelf?

Our next guest has been thinking about these things. Rakeen Mabud is chief economist and managing director of policy and research at Groundwork Collaborative. She recently testified at a hearing on pandemic profiteering and price-gouging of the Committee on Energy and Commerce subcommittee on Consumer Protection & Commerce. Her article with David Dayen, “How We Broke the Supply Chain,” appears in the American Prospect magazine’s special issue on that topic. She joins us now by phone. Welcome to CounterSpin, Rakeen Mabud.

Rakeen Mabud: Thank you so much for having me. It’s great to be here.

JJ: Your essay explains how there have been key historical policy choices—not nature, not economic inevitability, but choices—that have created the conditions in which the pandemic happened, and which the pandemic has exacerbated. It’s a very illuminating history, I think, that might be shorthanded sometimes in media, but is rarely spelled out.

And then it’s virtually never spelled out from the point of view of workers or consumers in a substantive way. Both of those perspectives are sort of inserted or assumed, and they’re often pitted against one another, workers versus consumers. But the story isn’t told from our perspective as people who have to work and people who have to buy stuff, you know? And I feel that that’s what this helpful article does. So get us started on what we should understand as the roots of the “supply shock” that’s now in the headlines. Talk us through it.

RM: Sure. And this is actually a really timely conversation, because the CPI data came out today, which gave us a little bit more insight on what’s going on with prices and the economy. And so I think a lot of this conversation often starts with this idea of price increases, right? And we see that. We see it in the data, we see it at the grocery store. Certainly people are really feeling the pressure of higher prices on essential goods.

And what David and I really tried to do in the piece is to get under the hood a little bit. It’s not like prices are rising for no reason. Actually, the root cause here is a system that’s really been in the works for the last half a century. Fifty years of a series of policy decisions that has built a supply chain that was unable to handle a shock like the pandemic. And so when the pandemic hit, what we ended up seeing was massive shifts in demand, but also this extremely brittle system break down under those changes in demand. And so I’m happy to go into that, but eager to hear from you what you found interesting about the piece.

JJ: Let’s talk about that brittleness, because I think when reporters think about “news you can use,” they’re like, hey, prices are up. And so prices are up, that’s bad, we’re supposed to pick an enemy for that, or a cause or a reason. And I don’t know that that energy is directed in the right place. So if you could talk about what is it that made the supply chain fragile, what made it brittle in the first place?

RM: Sure. So we’ve essentially spent 50 years handing our supply chain over to mega corporations. These companies have built a system that works for them, right, it works for padding their own profits, jacking up their profits, all spurred on by Wall Street, who really demanded short-term profit increases over all else.

And so when you think about what a supply chain is for, usually most people would think, oh, it’s here to deliver goods and services. Well, that’s actually not what our supply chain was built to do. Our supply chain was built to really maximize what companies could get out of this, and the dividends that they can pay off to shareholders.

And what that means is that they’ve essentially built this system that has no redundancy. It has no flexibility for changes in an economy, such as a pandemic or even something like a climate shock, right, which we’re unfortunately likely to see more of over the coming years and decades. And so there is what we call a just-in-time supply system, right? This is a supply system that is expected to deliver exactly the number of goods that are needed at exactly the moment that they’re needed.

But with something like a pandemic, all of those predictions about what goods will be needed, when, go out the window. And that’s when you end up with supply shortages, that’s when you end up with bottlenecks.

The consolidation piece of this is also really important. We have three ocean shipping alliances that carry 80% of the world’s cargo.  So there, if one of them goes down, you can see how that massively destructs our global supply chain, but you can also see how that might jack up prices.

JJ: So where do workers fit in there? What is the role of the employees that are obviously a piece of this? What does labor policy do?

RM: Yeah, I’m really, really glad you asked that, because I think, when people think of the supply chain, they have the sort of vague images of trains and maybe a big ship, right?

JJ: Yeah.

RM: But those big ships and those cranes are operated by people. And I think the effect on workers is made most clear through the example of trucking. About 80% of port truckers are misclassified as independent contractors. That means that they don’t get good wages. They don’t have predictable hours. They don’t get benefits. Some of them can’t even use the bathroom at the ports, because they’re not technically considered employees.

And that erosion of labor, we see that throughout, right, we see that on these giant ships that are waiting offshore to unload their goods, there are people on those ships who are not being paid very well. In fact, a lot of these ships fly with what’s called flags of convenience, which are the flags of countries that have really, really low labor standards, so they don’t have to adhere to higher standards on the ships.

So across our supply chain, we basically have an incredible reliance on precarious labor. And what that means is that people are being harmed. And part of the reason we’ve ended up in this position of incredible reliance on precarious labor is that companies have tried to profit maximize, right? They don’t want to pay those benefits, they don’t want to pay good wages. They want to make sure that they can squeeze as much out of a worker as they can, with paying them as little as possible.

So I’m really glad you asked that question, because bad labor practices and our reliance on precarious labor is a real liability in our supply chain as a whole.

JJ: And this brings me to media coverage, which is where a lot of folks look to have this explained to them. And in the media, we often see workers pitted against consumers, as though they weren’t the same people, you know? So we see articles say, you might want to pay farmers more, or do fair trade, but do you really want to pay another two dollars for your coffee? And it sounds as though those of us who work are opposed to, or not the same people as, those of us who buy coffee or buy cars or buy ovens, and it just seems a bizarre dissection that media do. That doesn’t make sense, right?

RM: It doesn’t make sense at all. As you say, quite rightly, workers and consumers are the same. We are all—I’m at a job right now, right? I’m also a consumer. I’ll probably buy some groceries later. I would add small businesses to that mix too. Small businesses are getting crushed in this moment.

JJ: Yep.

RM: And my team and I have combed through hundreds and hundreds and hundreds of corporate earning calls. And you really don’t have to take my word for it. There’s obviously a big, deep story here. But on these corporate earnings calls, what we hear CEOs and CFOs saying, in sector after sector, in company after company, is we can use the cover of inflation to jack up prices on consumers, and rake in the profits for ourselves, and pay out some good dividends for our shareholders.

Embedded within that is also, let’s cut back on pay for workers. You saw Kroger do this, right? Kroger cut back on hazard pay, jacked up its prices, and then issued a bunch of stock buybacks.

And so the issues facing workers and consumers, as well as these small businesses who aren’t able to negotiate better prices for the inputs that they’re selling in their stores, and are being hit by pandemic profiteering higher up the supply chain. These are all part of the same system, and it’s all rooted in what is essentially, in short, corporate greed.

JJ: Let me ask you just to expand a little bit about that. What is corporate greed? What’s the role that that’s playing here?

RM: Essentially, the supply chain dynamics that I was talking about earlier, it’s set up a system where in a moment of crisis, companies, especially really big companies who hold a lot of the market, can jack up prices on consumers and get away with it.

And I think Procter & Gamble is a really good example. They have a real chokehold on diaper production, which is an essential good, right? If you have a kid, that kid is going to need diapers, however much it costs.

JJ: Yup.

RM: And so what Procter & Gamble has been doing is really pushing up the prices on diapers and other goods that they sell, such as household cleaning products, knowing that their consumers have nowhere else to go, because they hold so many of those different brands; they hold so much of that market share. And at the same time, literally, really celebrating on these investor calls, saying, Look at how much profit we have. And, by the way, we can use this idea that everyone’s worried about right now, inflation, as cover for the fact that we’re jacking up prices on consumers.

So it’s very simple when you look at it; and then when you dig into these earnings reports, which are publicly available, they’re really, actually saying the quiet part out loud. And I’m really glad that you’re tying these two ideas together, because this corporate greed that we’re seeing in this moment wouldn’t be possible without the decades of policy choices that we’ve made along the way.

And so the good thing is, we can take on the greed aspect, right? We can enable the FCC to ensure that we have competitive markets. We can take on price-gouging. The Biden administration has started doing some of that. And we need to address the deeper problems, which fundamentally are rooted in long-term disinvestment in our supply chain and in the rest of our economy.

And the good news is, there’s at least one big piece of legislation on the table that would be an important downpayment in making sure that we have a healthy economy, a healthy labor force, healthy supply chain. But that’s just a first step, because, as I said, these are issues that have been decades in the making, and unfortunately will take more than one piece of legislation to undo.

JJ: I’m going to ask you about that. But I have to say the story that we get, and I’m not being facetious, the story that we get from the media about capitalism is that it takes advantage of certain situations, but not that it’s cruel, you know? Not that when people are sick, you jack up the prices of medicine. I feel like in most peoples’ brains, that’s what a horrible person does; that’s not what a system does. And yet, that is incentivized by certain systems in this country. I’m not sure that people really grok that. But it’s true.

RM: Yes. Yeah. I have a good example for that, which is in their Q4 2021 earnings call, Johnson & Johnson, which is a pretty familiar brand, I think, to many people, announced that they had raised prices on their consumer health products and about 29 of the prescription drugs last year. And on that earnings call, the CEO told investors that there’s a “strong underlying demand for medical care,” and all there is to do to address “suffering and death” caused by differing diseases, is part of their company’s optimism and opportunity for future performance.

This is out in the public, right? This is not said behind a closed door. They’re literally celebrating the fact that there’s a long way to go before a lot of people are healthy again, and how that helps them raise money. Long story short, these mega-retailers are just using inflation as a cover to raise prices and turn record profits, all in the midst of an unprecedented health crisis.

And that’s not morally acceptable, but I think, importantly, it’s also really, really not good for our economy. Because when you have this much inequality, that is not what makes a healthy economy. A healthy economy is one where workers and consumers and small businesses and smaller players in the market can really have a fighting chance, and that’s just not the system we’re living in right now.

JJ: I’m going to ask you a question about media in a minute. But let me first bring you back to, you had a statement about legislation being something, but not sufficient. What is the state of legislative response to the problems that you’re outlining?

RM: I testified last week in front of the Consumer Protection Subcommittee about a piece of legislation that would directly empower both state attorney generals as well as the FTC to go after price gougers, so that’s a really good first step. That addresses the topline problem of price-gouging that we’re seeing right now.

But like I said before, getting under the hood and undoing a lot of bad policy, and creating a system that actually works, will require concerted effort. And I think it’s really, really critical that we make the long overdue, large-scale investments in our supply chain and in our labor force that we’ve needed for so long, that are currently on the table, right, with the Build Back Better agenda. That’s the first step. I’m not saying it’s going to fix everything. It’s just a critical step.

JJ: Right.

RM: The administration has the power to use executive orders to help promote competition. We’ve seen them do that with meatpacking and other sectors, and I’d like to see more of that. Because this is not a problem that we can—there’s no one-shot solution. It’s really going to take all the tools in our toolbox to start to address the different factors that have gone into this knot. Because it is a knotty problem, right, and undoing a knot takes time. Undoing a knot also requires us to trace every piece of string back from its end, right? You can’t just pull on one and expect that it’s all going to come apart.

JJ: Right. That’s funny that you mention that; that’s very much the image that was in my mind, in terms of what would be important strings to pull on. And we know that it’s a multilevel effort.

Given that the people who craft policy, we understand, are not, as a rule, those at the sharp end of policy: In theory, that’s where journalism should play a role. That’s where reporters should step in to be a voice, specifically, for the powerless, for those outside of policy-making, and specifically as a conscience for the powerful.

And so I would ask you, finally, what would you ask of reporters who are now tasked with explaining current conditions? First of all, inflation—that’s in every headline I read today, but I don’t necessarily understand what it means for me. But just in general, in terms of the questions that you’re focused on, is there something that you would like to see reporters do more of or less of to help bring it home for regular folks?

RM: Yeah, I’ve been really actually excited to see how the story about corporate greed has started to take off.

JJ: Mmhm.

RM: And I think it’s taking off because it’s true, right? Again, you don’t have to take my word for it. It is in these earnings calls. The public, you can look at them yourself, you can google them yourself. And I think it’s really heartening to see journalists and others starting to take into account data sources that we didn’t used to think of as data sources, right? Like, most economists don’t look at profit data when they think about inflation. But it’s a really important piece of the puzzle, and I’m really glad to see that journalists and others are starting to take that on and work that into the analysis that they’re thinking about.

JJ: And connect those two things together. I mean, part of the problem with journalists is not that they lie. It’s just that they don’t connect this story with that story, in a way that shows the meaning.

RM: Right. And it’s a complicated story. I think that’s also important to note. The long arc of how we got here is a complicated story, and that’s part of why David Dayen and I worked on that piece in the American Prospect. And I’m eager to see more of that from all sorts of folks, and luckily I think we are starting to see more of that teasing out of the complication of the story, the nuance of the story, across the landscape.

JJ: Not to draw you out on it, but, again, it’s not so much that the story is complicated, which it is, it’s whose perspective it’s being told from. And so when I hear inflation and the Fed is a problem for Biden, I’m like, yeah, you know what? I’m not worried about Biden. Biden’s going to be fine. I’m concerned about how this is affecting folks who get up every day and go to their minimum wage or their just-above-minimum wage work.

And so what I’m asking you about media is, if journalists were trying to say, here’s what it means for you, here’s how we could translate it to what it means for a regular working person, is there anything that you think they would add or subtract from that coverage?

RM: Yeah, I really love that framing, because I think a lot of the coverage on inflation is devoid of people, right? We talk about inflation like it’s this thing that we have to deal with, but we care about inflation because we care about how it affects people. I really like that frame, and I hope more take it on. I think we’re starting to see a shift, and I think shows like yours are certainly pushing everyone to put the focus back where it needs to be, which is real people’s lives. Because at the end of the third year of the pandemic, if we’re not focused on people and what they’re doing, we’re not focused on the economy, because we’re the economy, right? So I’m really excited to see more of that framing going forward.

JJ: We’ve been speaking with Rakeen Mabud. She’s chief economist and managing director of policy and research at Groundwork Collaborative. They’re online at GroundworkCollaborative.org. And her co-authored piece with David Dayen on the supply chain can be found at Prospect.org. Thank you so much, Rakeen Mabud, for joining us this week on CounterSpin.

RM: Thank you for having me.