The inflationary impact of wealth concentration

The concentration of wealth and decision-making power causes devastating consequences on humanity and the planet, it also generates strong inflationary tensions. That is why anti-inflationary measures end up being ineffective when they are not part of programs aimed at dismantling concentration. Eliminating or significantly reducing inflation is an achievable goal as long as one understands how it originates and reproduces. The inflationary process does not arise by chance in an inexplicable vacuum, but rather it results from impositions that prevail between groups of different power and that need to be removed.

The concentration of wealth has devastating effects on the progress of humanity and the care of the planet. Billions of harshly punished people coexist with a narrow minority living in opulence, alienated in senseless and meaningless greed. Concentrating process generates social, economic, and geopolitical instability, compromising world peace. Punishment and frustration of huge majorities accumulates tensions of uncertain outcomes, while the attacked planet unleashes forces of unusual destructive hardness.

To establish their hegemony, those who profit from concentration subdue public opinion, dumb down freewill, impose values of greed and selfishness, skew education, health, justice, security in their favor. They are not results that appear by chance, they are caused by a dynamic established by those who subjugate humanity. This same dynamic generates strong inflationary tensions; some of them are raised below.

Productive concentration enervates markets and generates inflationary tensions.

Concentration of wealth materializes through various modalities of appropriation of value, that is, by imposing expropriating mechanisms of operation. One of the most important are the oligopolies that control most markets. Large corporations absorb certain competitors and suffocate others until they are annihilated. They manage to compact the productive supply and, with it, the ability to impose prices and marketing conditions. The purpose that guides them (their organizing criteria) is to maximize their profit at all costs. They then play with the situations of the economy without considering the social damages they generate. Thus, when they face increases in demand instead of accompanying them by increasing their production in that proportion, they do so at a slower pace or even freezing the level of production. In this way, they are able to remark prices and tighten marketing conditions. Typical strategy of oligopolistic companies that operate without risk of being displaced by a competition that they took care of cornering or eliminating.

They thus generate inflationary tensions that enable higher levels of concentration at the expense of the rest of society. The serious thing is that, if the concentrating process is not stopped, inflationary tensions cease to be occasional and become structural conditions for economic functioning.

Solving inflation

If economic concentration brings with it inflationary pressures, it is not possible to think of fundamental solutions to stop inflationary processes that do not include measures aimed at dismantling such concentration. What is the value of efforts that address the effects caused by inflation without attacking the main causes that generate it?

Where to move forward? What measures are needed to stop or significantly reduce inflation?

By making explicit that concentration generates inflation, it is necessary to delve into the value chains that are led by large oligopolistic corporations. In these chains, oligopolies abuse their market power to appropriate the results that the entire chain produces. This harms the other participants, whether they are producers who supply inputs (goods or services), whether they are consumers or other companies that use their products or, even, the State itself, which is deprived of genuine income through tax evasion or elusion practiced by large corporations.

Sometimes attempts have been made to control or regulate market power abuses, but the strength of oligopolies is such that they always manage to circumvent these eventual restrictions. In any case, markets cannot be abandoned to the concentrating power of oligopolies. Regulatory efforts will have to be sustained, but to be effective, they will have to advance at the same time in countering oligopolistic power. This requires expanding the productive offer based on a double aspect of efforts: (i) restructuring existing chains  to curb the abuses made by their leading enterprises and (ii) promoting the emergence of other chains based on equity among their participants and firm conditions of competitiveness with oligopolies. These are active policies both in terms of credit (firm support for the new chains) and fiscal (transforming the tax structure and eliminating the enormous tax evasion and elusion), as well as strengthening agencies capable of assisting the promoted actors regarding their organization and management.

With inflation there is a tremendous distributive struggle expressed in a hard confrontation between powerful minorities launched to accumulate without limit as much as they are allowed to, against the middle and popular sectors that regress in living conditions. The resolution of this struggle is not resolved in favor of society as a whole because of the “free” rigged functioning that prevails in oligopolistic markets. Answers can only emerge from outside the economic system, in the field of politics where coalitions of social forces confront the dominators to establish a fair and equitable way of functioning. Political coalitions capable of winning elections and managing effectively according to the mandates received.

Two paradigmatic examples

We refer to the food industry and the one that produces cleaning supplies that, when they become oligopolies, affect the income and health of popular and middle sectors in decline. Like any oligopoly, their productive strategies seek to maximize their profit without considering the needs of the population. If they have the power to remark prices to increase profits instead of investing to expand their offering, they do it. Oligopolistic prices generate inflation, and the constant remarking aggravates it.

However, it is possible to establish new value chains in both industries to compete with oligopolies. Chains with leading enterprises made up of all participants, producers, stockpilers, transporters, and traders. In this way, the results are distributed with justice capitalizing all those who make them possible with the participation of the State in its double role: on the one hand, by facilitating the necessary credit support to make the operations viable and, on the other, by collecting taxes that are not evaded or eluded.

These new value chains can take advantage of successful experiences of diversification of the supply of food and cleaning products carried out through cooperative, family production, small businesses that operate in proximity to medium and large cities.

Unmasked covert causes lead to ineffective solutions

It is true that inflation responds to several causes, but if main causes are concealed and cascades of causalities that start from the concentrating process are not explained, we end up adopting measures incapable of resolving inflationary dynamics. Responses based on variables, relationships, and consequences disconnected from what actually happens not only fail to resolve inflation but also end up reinforcing the concentrating process.

It is worth clarifying that eliminating or significantly reducing inflation is an achievable objective, provided that we understand its genesis and reproduction. The inflationary process does not arise by chance in an inexplicable vacuum, but rather it results from impositions that  prevail between groups of different power and that need to be removed.

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