You’ve seen it at the grocery store, the gas station, and on your heating bill: prices have been rising. At the same time, you might hear news reports about major corporations posting record-high profits. It can be confusing and frustrating, leading many to ask a simple question: is the pain in our wallets directly fueling their record gains?

A new term has emerged to describe this suspicion: “greedflation.” It’s a contentious idea at the centre of a major economic debate, so prominent that it has been added to the dictionary. Is it a real phenomenon, or a simplistic explanation for more complex global forces? This is the full story on the “greedflation” debate.

Part 1: Defining “Greedflation”

At its core, “greedflation” is the theory that companies with market power are using the cover of general inflation—caused by external factors like supply chain disruptions—as an excuse to raise their prices even further than necessary to cover their own increased costs.

In this scenario, a company doesn’t just pass on its higher shipping and material costs; it adds an extra margin on top, thereby expanding its profitability. Proponents argue this isn’t just standard capitalism; it’s an opportunistic practice that accelerates inflation and hurts consumers. The core accusation is that corporate greed became a significant, independent driver of inflation.

Part 2: The Argument For Greedflation: A Profit-Price Spiral

The primary evidence for the greedflation theory comes directly from corporate financial statements. Proponents, including some politicians and progressive think tanks, point to two key indicators:

• Record Corporate Profits: The most cited piece of evidence is that during the post-pandemic recovery, U.S. corporate profits soared to their widest margins since 1950. In Canada, a similar trend was observed, with corporate profits increasing dramatically. The argument is that if companies were only passing on costs, their total profits would rise, but their profit *margins* (the percentage of profit on each dollar of sales) should remain stable, not expand to historic highs.
• The International Context: This isn’t just a North American phenomenon. A report from the International Monetary Fund (IMF) found that rising corporate profits were responsible for almost half of Europe’s inflation during 2022, lending significant credence to the theory on a global scale.

This strategy of maximizing profit per unit is also related to other subtle tactics consumers face, such as the “shrinkflation” of product sizes.

Part 3: The Counterargument: A Mainstream Economic View

Most mainstream economists and central banks, including the U.S. Federal Reserve, are skeptical of the “greedflation” theory. They don’t deny that profits were high, but they argue that this was a *symptom* of a unique economic environment, not the root cause of inflation.

• It’s a Story of High Demand: The traditional view is that widespread price hikes are only possible when demand is strong. Following the pandemic, government fiscal policy, such as stimulus cheques and enhanced benefits, massively increased household savings and spending power. When more people with more money are competing for a limited supply of goods, companies with pricing power can, and will, charge more.
• It’s a Story of Supply Chain Shocks: The pandemic caused unprecedented disruptions to global supply chains. This made it more expensive to produce and transport goods. With fewer goods available and high demand, prices naturally rise. From this perspective, focusing on corporate greed distracts from these more fundamental economic issues.
• Greed is Constant, Opportunity is Not: Critics of the greedflation theory, such as The Economist, argue that corporations are always “greedy” in the sense that they always aim to maximize profits. The unique factor in the 2021-2023 period was not a sudden increase in greed, but an economic environment that provided the *opportunity* to raise prices without losing customers.

The Verdict: A Complex Picture

So, is “greedflation” real? The answer is nuanced. The data is clear that corporate profits reached extraordinary levels, and that dominant firms with market power contributed significantly to price increases. However, it’s also clear that this happened during a “perfect storm” of constrained supply and supercharged demand.

The most balanced view is that while corporate pricing strategies certainly accelerated inflation and made it worse, they were likely not its root cause. The debate has, however, forced a necessary and important conversation about market power and antitrust enforcement. If a handful of companies have enough power to raise prices at will, it suggests a lack of healthy competition in the economy.

Ultimately, “greedflation” has become a powerful political term because it captures a real public sentiment of unfairness. While economists will continue to debate the precise weighting of each factor, the conversation has permanently changed how we talk about profits, prices, and power in our economy.