When in doubt, blame corporate greed for everything that ails the economy. Legendary economist Murray Rothbard averred that there is nothing wrong with being unknowledgeable about economics, but it would be “totally irresponsible to have a loud and vociferous opinion on economic subjects while remaining in this state of ignorance.” Unfortunately, there is a growing chorus of economists espousing vexing opinions that expose a blatant disregard for facts and markets. The latest renowned individual possessing an affrontery to elementary economics is none other than Robert Reich, who believes corporations have conspired to create the nation’s latest costly headache: eggflation.
Corporate Greed Made Eggflation
Former Labor Secretary Robert Reich thought it would be wise to tweet about eggs. A year ago, it might not have been a worthy subject. Today, however, it is all that consumers are talking about – and for a good reason. Over the past twelve months, egg prices have soared 60%, with shoppers now paying as much as $7 or $8 for a dozen eggs. But observers should forget the chief contributors to this dramatic increase, such as the highly pathogenic avian influenza, surging diesel costs, rising animal feed, and labor shortages. Instead, it is corporate greed, says Reich.
“Cal-Maine, the largest egg producer in the US, is raking record profits — $198 million in its latest quarter,” he tweeted on Jan. 23. “That’s a 65% increase from a year ago.”
This tweet suggests Cal-Maine has purposely raised egg prices to pad its bottom line, conspiring with every chicken farmer and supermarket worldwide. If this breaking news were real, it would reveal that these corporations’ greed is ostensibly cyclical. Gene Epstein, one of today’s greatest economists, responded to Reich’s tweet and pointed to the Bureau of Labor Statistics (BLS) data on egg prices since 2000. The numbers essentially highlighted an ebb and flow pattern in egg prices. For example, as recently as April 2021, egg prices had tumbled nearly 9% after rising about 18% in the early days of the coronavirus pandemic.
Reich writes, tweets, and utters plenty of falsehoods to advance the leftist cause. While a response would be warranted any time he speaks, the classic quote from seminal conservative thinker William F. Buckley might spring to mind: “I won’t insult your intelligence by suggesting that you really believe what you just said.” Although Reich’s comments might deserve nothing more than a passive hand wave and the dismissive “bah,” this progressive thinking is transferred to the pre-frontal cortex of media talking heads and public policymakers, resulting in the holy trinity of politics: demagoguing, taxing, and ruling.
Case in point: For the last two years, President Joe Biden, his administration, and prominent Democrats on Capitol Hill have routinely blamed corporate greed for various price hikes, be it food or gasoline. This belief has prompted legislative proposals to impose new taxes, raise existing ones, or launch a public inquiry to determine if businesses are selectively price-gouging the consuming public. So, here is the $4.25 question: Are they?
Eggstatic About Avocado Economics
Let’s say there is a Central American man named Julio Gonzalez. He has spent most of his adult life producing and selling avocados. When Gonzalez started this business in the 1990s, it was a struggle because export demand was not immense. The US only consumed 360 million pounds per year. However, once millennials graduated college and went out into the workforce, the nation started marching in the streets for avocado on toast, resulting in annual consumption of 1.3 billion pounds in 2010. By 2018, the country annually imbibed roughly 2.5 billion pounds of avocados. He and his fellow avocado growers struck it big after years of perseverance. But did they manipulate the market and purposely raise prices? Not at all.
(Photo by I RYU/VCG via Getty Images)
So, what does this have to do with eggflation and higher energy prices? First, companies generally do not control prices. The fundamental laws of supply and demand influence how much these products go for in the marketplace. Second, just because a business is succeeding when prices are rising, it does not mean it is engaging in price fixing. Instead, the organization enjoys profits because the product it specializes in is in high demand, and shoppers are willing to endure the inflationary penalty. Third, what about when prices crater and the firm posts record losses? This happened at the onset of the COVID-19 public health crisis: Oil prices crashed below zero, and Big Oil lost big dollars. Where was the corporate greed? Finally, why is there no other corporation trying to undercut its competitors to obtain a greater market share?
Ultimately, businesses entrenched in commodities will witness highs and lows because there is typically always a variable in how they – agricultural, energy, or metals – perform in any given year. As a result, higher scarcity will typically mean higher prices – and vice versa.
Wishing Something Were True
Did President Biden’s policies result in higher egg prices? Although Bidenomics has been a disaster for things like diesel, the White House’s actions are not the sole reason for the enormous spike in eggflation. So, why would Robert Reich want to use corporate greed as a scapegoat for rampant inflation? Perhaps it is to bolster the progressive cause – but there is another possibility. As Napoleon Bonaparte famously said, “Never ascribe to malice that which is adequately explained by incompetence.”
