You’ve felt it at the grocery store checkout. You’ve seen it on your heating bill. Even as headlines report that the national inflation rate is “cooling,” the prices for everyday necessities remain stubbornly high, stretching family budgets to their limits.
In the middle of this frustration, a new and controversial term has entered the conversation: “Greedflation.”
The word is used by politicians and appears in news reports, suggesting that the real reason for high prices isn’t just supply chains or global events, but corporate greed. Is this the full story, or is it a simplistic answer to a much more complicated problem? To understand what’s really happening to your wallet, we need to break down all the ingredients that have cooked up our current economic climate.
The Classic Recipe for Inflation
Before we get to the new buzzword, it’s important to understand the traditional drivers of inflation, which the Bank of Canada monitors closely. Generally, prices rise for two main reasons:
- Demand-Pull Inflation: This happens when there is too much money chasing too few goods. Think of the post-pandemic era, when many people had built up savings and government support payments were flowing into the economy. This surge in demand for everything from cars to home renovations, at a time when factories were still struggling, pulled prices up.
- Cost-Push Inflation: This occurs when the cost to produce goods increases. The war in Ukraine driving up global energy prices, or broken supply chains making it more expensive to ship parts, are perfect examples. These increased costs are inevitably passed on to the consumer.
For the last few years, Canada has been hit by a powerful combination of both.
The New Ingredient: What is “Greedflation”?
“Greedflation” is the theory that corporations have been using the cover of these traditional inflationary pressures to raise their prices beyond what is necessary to cover their own increased costs.
The core argument is that when everyone—consumers, media, politicians—is already talking about inflation, companies have a unique window of opportunity. They can increase their prices more aggressively than they normally would, because customers are already expecting prices to go up. In doing so, they don’t just pass on their costs; they expand their profit margins, making inflation worse and last longer than it otherwise would have.
The Debate: Is It Real?
This is where the story gets complicated, with compelling arguments on both sides.
- The Case For Greedflation: Proponents, like those from the Canadian Centre for Policy Alternatives, point to data showing that corporate profits in key sectors like oil and gas and food retail soared to record highs during the peak of the inflationary period. They argue this is clear evidence that companies were taking advantage of the situation, and that these excess profits were a significant contributor to the inflation felt by consumers.
- The Case Against Greedflation: Many mainstream economists and central bankers offer a different perspective. They argue that high profits are a normal symptom of high demand and supply shocks, not the root cause of inflation. A Bank of Canada analysis, for example, has shown that while some firms did increase markups, it wasn’t a broad-based driver of the initial inflation spike. They worry that focusing on “greedflation” distracts from the real, underlying economic causes and could lead to ineffective policy solutions.
The Full Story
The truth, as it so often is, is likely not a simple case of either/or. The recent inflation was almost certainly sparked by the classic recipe: a perfect storm of global supply shocks and massive government and consumer spending.
However, this chaotic environment created the ideal conditions for some companies to exercise their market power and raise prices to protect and expand their profits. So while corporate greed may not have lit the initial fire, it may have acted as an accelerant, making the fire hotter and harder to put out. The debate is therefore not just about economics; it’s a fundamental conversation about corporate power, market fairness, and who ultimately bears the cost when the economy goes haywire.