Almost from the beginning of his administration, Joe Biden has taken a tougher stance on competition policy than any U.S. president in living memory.he put antitrust advocate The Federal Trade Commission, the Justice Department, and the White House all have. Last July, he issued an executive order addressing corporate concentration, Contains 72 different provisions Designed to curb the influence of big corporations.

Much of Biden’s fight is about improving the status of workers in the U.S. economy and creating a more level playing field for small and mid-sized innovators. But the government is also starting to make a case for the link between inflation, now at a 40-year high, and corporate power.

In July 2021, the White House asked the Federal Maritime Commission to investigate price hikes by major shipping companies. In December, it told the U.S. Department of Agriculture to investigate whether large meat processors were driving up food prices, created a portal for producers to report unfair trade practices and committed $1 billion from a U.S. rescue package to help Smaller independent producers.

Most recently, Senator Elizabeth Warren bake Federal Reserve Chairman Jay Powell talks about the role companies play in inflation. “Market concentration allows big companies to hide behind talk of increased costs in order to improve profit margins,” she said at a second-term nomination hearing last week. Biden himself took aim at the meatpacking industry, saying: “These companies can use their position as middlemen to overcharge grocery stores and ultimately households.”

This is a simple case. In recent decades, meatpacking in particular, but big agriculture in general, has become highly concentrated, by Wall Street and USDA’s own mission is to keep food prices low (a policy hold during the Great Depression). Covid has highlighted how an industry purported to be driven by efficiency has created two separate supply chains, one for grocery stores and one for restaurants – part of the reason people are queuing in stores, even as farmers have to throw away their wares, Food prices will also rise.

Supply chain disruptions, not just in food but in many industries, are fueling inflation. But a direct causal relationship between firm concentration and inflation is more difficult to prove. Academics including Steven Salop and Fiona Scott Morton have done some good research showing how consolidation can lead to disruption during times of stress, leading to shortages and price spikes. That’s exactly what we’ve seen over the past two years. But there are many other counter-trends, such as the deflationary impact of big tech platforms like Amazon (though you might argue that, like me, monopoly power and lower prices can coexist).

I wonder if the Biden administration is really considering something more complex than the dynamics of inflation when it comes to the relationship between today’s price pressures and the impact of big corporations – namely, the globalization of the past half century has been beaten messy way.

As Steven Blitz, chief U.S. economist at TS Lombard, wrote in a note last week: “It can be argued that current commodity price inflation is the unfortunate result of high demand meeting supply constraints, but This argument pushes aside the fundamental problem the Fed is eager to address. Tightening — restoring middle-income wage growth, keeping commodity prices high, which in turn leads to headline inflation.”

As Blitz rightly points out, this group has suffered in recent decades as a strong dollar combined with investment in technology has made “offshore production of goods and services possible and profitable, and reduced domestic production. labor input”. This in turn has led to government policies supporting a larger domestic workforce, greater union power and decoupling. In some companies, more regionalization, localization and even vertical integration of the supply chain is taking place.

“We have anti-worker policies in the name of low inflation,” Blitz said. The problem is that changing this practice — which is exactly what Biden wants, with a bust of workers’ rights activist Cesar Chavez in his office — could create some sort of shock in the short to medium term. inflation. Many economists and business leaders expect strong wage growth in 2022, which could create more demand and push up prices.

Some inflation will subside as the Covid supply chain dislocation ends.But for various reasons, from China-US decoupling From the transition to a low-carbon economy to the rise of decentralized technologies like 3D printing, we won’t go back to the 1990s, when zero inflation offset rising housing costs and education and health care.

Neither side of the political spectrum wants to declare war on wage increases. So we’re probably looking more at price and what the company is doing to drive it up.

Business concentration and inflation can be correlated, especially when demand greatly exceeds supply.have amazing profit Reported in some of the industries most vulnerable to bottlenecks, Including freight and semiconductor.

But there is a bigger change here: the end of neoliberal globalization. Its effects on businesses, workers and inflation are just beginning to be felt.

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