Biden's criticism of corporate "greedflation" is smart political messaging.

When people hear the word "inflation" they think "high prices", to win a second term Biden needs to point his finger at price gouging firms.

It's hard to claim victory on inflation when food prices are 30, 40, 50% higher than they were.

WASHINGTON, January 2023, “The economy is doing great, so why are people so down about the economy?”

I paraphrase, but this sums up a worry that’s plaguing political strategists in the Biden administration as the days tick down to the US general election.

Because while the dashboard of your average Whitehouse political strategist might look good (growth up, employment steady, inflation down) things read very different on the shelves in the Walmart grocery aisle. The problem is inflation, and inflation is a tricky communication problem because it’s both:

1. Unusually salient: as economic concepts go it’s both familiar and feared (people rarely chat about the composition of the FTSE 100 index, but they do talk about “the price of fish”), and
   

2. Confusing: the fact “inflation is lower” doesn't mean that prices are lower, it means prices are higher, just less high than they would have been if inflation had been higher (aaargh!!).

We can add to these the fact that when politicians say the word “inflation” what voters hear is “high prices.”

“…many Americans do not conceive of inflation as the rate at which prices go up, but rather as a byword for prices being too high. Thus, when they hear over and over that inflation is going down but groceries are still much higher than they were two years ago (and increasing), that message fails because it runs counter to their lived experience. Naturally, the messenger seems out of touch, or worse, dishonest.” (Private US briefing on inflation messaging)

Inflation might be down, but the salience of the issue is up

The table below is from my Campaign Salience's media monitoring dashboard that tracked mentions of “inflation” in US media. The Consumer Price Index (inflation) may well be down, but the salience of “inflation” in the news is as high as ever.

Inflation might be down, but news stories about inflation are on the up.

So what is a flailing president desperate for a second term and confronted by a populist opponent to do? Well before last weekend’s Super Bowl, Biden gave his answer:

“While you were Super Bowl shopping, did you notice smaller-than-usual products where the price stays the same?” Biden said in a video posted to social media. “Folks are calling it "shrinkflation" and it means companies are giving you less for every dollar you spend. I’m calling on the big consumer brands to put a stop to it.”

Recent months have seen the president’s tone become increasingly irritated when asked to comment on prices. At a January event he said, "there are still too many corporations in America ripping people off: price gouging, junk fees, greedflation, shrinkflation."

And with a recent YouGov poll finding that 60% of Americans blamed corporate profiteering for inflation, we can expect more of this rhetoric, it’s surely good politics.

But what if it’s not enough?

Brands like Heinz are gambling that customers who shun overpriced branded ketchup today, will return tomorrow. When they do, the brand stands to make a killing having set a “new normal” for items on the supermarket shelf.

This ability of corporates to consistently profit in during a crisis has been highlighted time and again by the German economist Isabella Weber (disclosure - I work with Isabella).Contrary to what some tried to claim the inflationary episode we’ve been living through was not driven by wages.

The strikes in the NHS, rail, and today among Deliveroo drivers are a response to a cost of living crisis that’s been driven by higher corporate margins in the shops and which have sometimes led to higher corporate profits, as this paper for the IMF shows.

Previous inflationary shocks in the 1970s saw workers enjoy far more success in protecting their wages. This time around and after decades of policy designed to curtail the power of workers, firms have made a killing.

“Talk is cheap” Mr President

The French were quick to cap the price of a basic basket of goods when the cost of living crisis exploded. Other countries including Spain and Greece also acted swiftly to ensure access to the basics. Biden could follow suit.

When rumours emerged that the UK was considering asking supermarkets to voluntarily cap some prices it was met with a barrage of horrified grocery chief execs and therefore came to nothing. Because the Conservative Party listens to supermarket CEOs, not their customers… the voting public.

If Biden threatened something similar he would have to be strong and ignore the wailing of Kraft Heinz’s CFO as he cries into his Capri Sun.

I jest, but this illustrates something important about who’s “in the room” when crises hit, a point made emphatically in this presentation by Isabella Weber (from 14:52 mins). It’s vital that companies like Heinz aren’t the sole, nor the most important, voice heard when the government needs to act.

Another, longer term policy Biden could consider is the creation of a strategic wheat reserve similar to the strategic oil reserve that’s seen America through recent crises.

But more generally we need real time systems in place to monitor what companies are doing. Chief Execs who choose to mark up their margins need to be accountable to parliaments and civil society. Their behaviour could be changed through harsher windfall taxes.