WASHINGTON (Reuters) – U.S. President Joe Biden ordered his administration last year to boost the domestic economy by cracking down on what it sees as a lack of competition in sectors from agriculture to drugs and labor.
As inflation hits a 40-year high, keeping prices down is a key political issue, too. November midterm elections will determine whether Biden and Democrats can maintain slim control of Congress, and the economy is the top issue voters care about, Reuters polling shows.
In an interview as year-end corporate earnings roll in, Bharat Ramamurti, the Deputy Director of the White House’s National Economic Council, told Reuters that the administration is looking closely at whether higher profits are due to lack of competition.
Questions and answers have been edited for clarity and brevity.
REUTERS: The White House continues to take aim at ‘profiteering,’ particularly in the meat-packing industry. How do you define this and do you see this as a worsening problem? Is it related to the pandemic?
RAMAMURTI: Corporations by design are trying to maximize the amount of profit that they’re making. I don’t think anything has changed on that front just because of the pandemic. They do that by, if they can, raising prices in the face of higher demand.
There’s higher demand for certain products, including certain food products. But also, this is a very concentrated industry – the meat processing industry.
The top four meat packers in the beef space, for example, control about 80% of the industry. And what we’ve seen is that, in a market that’s highly concentrated like that, the ability of corporations to raise prices more quickly and to a higher level – and to keep them there for longer – exists.
Introducing more competition into that space could eventually help bring down those price levels.
REUTERS: How much of a role is a lack of competition playing in the inflation we’re seeing now?
RAMAMURTI: There are a number of reasons why we are looking at a higher rate of inflation now. The main one is that we are emerging from a pandemic. The United States is not alone in facing higher inflation. It’s all related to problems in supply.
In industries that are marked by high levels of concentration, there can be a more severe effect.
REUTERS: Do you expect that you’ll look at other industries?
RAMAMURTI: We’ve tried to be very data-driven about this. We haven’t done that level of deep dive into any of these other industries so far.
But there are other examples of companies with higher profits and higher margins, which indicates that they have the ability to not just pass along any cost increases that they’re facing in their supply chain to consumers – there’s an additional step where they’re able to raise the price even beyond that, which is reflected in the higher margin.
Part of that, of course, is higher demand, but there may be other factors at play as well. And what we want to do is use every available tool that the president has to go right at these price increases. He knows that they are pinching family budgets.
We’ll put out more analysis once we’ve done it.
[A few days after this interview was conducted, the White House said it was investigating competition in the defense industry.]
REUTERS: What would you say to someone who says charging more for goods when demand is high is ‘just how capitalism works?’
RAMAMURTI: I would say what the president said, which is that capitalism without competition isn’t really capitalism. It’s exploitation.
If you can introduce more competition into those industries, you have more companies fighting for your business. And one of the ways they are doing that is by offering a lower price than their competitors, that’s going to have a downward effect on prices over time.
That’s the kind of economy that we want to build.
(Reporting by Trevor Hunnicutt; Editing by Heather Timmons and Nick Zieminski)