Is greedflation to blame? – Debate Over “Greedflation” and Its Role in Inflation | 13 October 2023 | UPSC Daily Editorial Analysis

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What's the article about?

  • It talks about the issue of Greedflation in the present economic scenario.


  • GS3: Indian Economy and issues relating to Planning, Mobilization of Resources, Growth, Development and Employment
  • Prelims


  • Inflation rates have been on the rise in several countries during the Covid/post-Covid era. The article discusses the main causes of inflation and the debate over the role of “greedflation” in driving up prices.


  • Greedflation is a term used to describe the phenomenon of companies raising the prices of their goods beyond what is needed to cover higher costs, in order to maximize profits.
  • It is a growing theory that inflation, once considered a result of rising wages, is actually due to a sort of “price-price” spiral in which companies mark up goods notably higher than needed to offset rising production costs.
  • Some examples of greedflation:
    • Eggs: Egg prices jumped 60% in 2022, despite falling in recent months.
    • Cars: The automobile industry is another prime example of greedflation. According to an Edmunds press release from last year, 82% of car buyers paid more than MSRP in January 2022, compared to only 3% in 2021 and almost 0% in January 2020.
    • Energy: Companies such as Centrica, the company that owns British gas, have posted record profits of £3.3bn for 2022, more than tripling its results in 2021.
  • While there is some debate over whether greedflation is a real phenomenon or not, it is clear that corporate profits have driven at least half of inflation in developed nations.


  • Causes of Inflation:
    • The economic disruption brought on by the pandemic, supply-chain disruptions, and the fiscal and monetary stimulus measures taken by many governments and central banks in reaction to the pandemic may very easily be cited as the main causes of this inflation.
    • Then, in early 2022, Russia invaded Ukraine, which had an additional impact on the world’s supply chain. A worsening of the situation was caused by rising global prices for food, fertiliser, natural gas, oil, and other commodities.
  • Role of “Greedflation”:
    • In late December 2021, German economist and UMass Amherst economics professor Isabella M Weber published an article in The Guardian, in which she argued that “sellers’ inflation,” which is caused by businesses taking advantage of supply shocks and disruptions to raise prices, is a significant factor in the present price rises.
    • The portmanteau “greedflation”, similar to “sellers’ inflation”, is a somewhat outlandish notion that, in many ways, doesn’t align with the macroeconomic framework that economists frequently consider.
    • Initially, many experts in economics opposed Weber’s idea. However, as prices didn’t fall when the situation began to improve, the Biden administration worked to lower oil prices, and Europe attempted to impose price caps.
  • Debate Over “Greedflation”:
    • Some economists have questioned the veracity of the claim that corporate thirst for higher profits is what drives inflation.
    • Some academics feel that a better phrase should be “profit-driven inflation.” And some claim that greedflation simply isn’t a coherent explanation for inflation. Leading publications entered the debate with conflicting viewpoints on the greedflation idea.
    • According to Catherine Rampell in a Washington Post article from June 2022, “Today, companies’ revenues are still rising—but their costs (labor, fuel, materials) are rising even faster.”
    • “What actually seems to be happening is that families and businesses are sharing the spoils of the post-pandemic economy,” The Economist stated in its investigation of greedflationists’ claims in April 2023. In addition, it stated in July 2023 that “inflation is the result of economic policy mistakes and war, not corporate avarice.”

Way Forward:

  • The ongoing debate over the role of “greedflation” in driving up prices continues. While some economists believe that it is a real phenomenon, others question its veracity.

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