Moral Policy Is Good Economics. featuring The Groundwork Collaborative

It's Kairos Time! Moral Policy Is Good Economics features a conversation between Dr. Rakeen Mabud, Chief Economist and Managing Director of Policy and Research with The Groundwork Collaborative and  Shailly Gupta Barnes, Policy Director of The Kairos Center. We are joined by musical guest Jamel Coy Hudson.

Transcript

 A Kairos moment is a time when crisis and opportunity collide and the possibility of something new emerges. We are so glad you're joining us for this new biweekly series of 30 minute talks and chats with partners, collaborators, and move movement builders where we discuss what's happening and what we're doing to respond in this kairos moment.

Today our conversation is gonna zero in on the inflationary crisis we're in right now, where it came from, how the Fed is responding, and if there, if there was any other way we could have responded and to walk us through this, I'm thrilled to bring on and be in conversation with Dr. Quin Maud, chief Economist, or Groundwork collaborative, uh, groundwork's Mission is committed to advancing a vision for a strong, broadly shared prosperity and opportunity for all.

And Quin has led groundwork in their research and analysis of the economy, corporate profiteering and inflation, paying special attention to how these economics, how these economic trends impact people's lives. She's testified at congressional hearings, has been pub, has been published prolifically, and is widely respected for her work.

Quin, thank you so much for joining us, uh, on it's kairos time today. Thank you so much for having me. I'm super excited about this conversation, so I wanna really get into it because, um, because this is really on so many people's minds right now. Um, as you know, um, and as the Poor People's campaign has pointed out repeatedly before the pandemic, there were 140 million people who were poor or one emergency away from economic ruin.

And some of the pandemic support programs, um, offered, you know, really important critical support for these families and households. During, during a crisis, it actually brought those numbers down significantly in 2021, from 40% of Americans to about one in three Americans. But now those supports have expired and at the same time they've exp.

Fired. We see these costs of living going up, the cost of basic needs going up, and, and poor and low income households are facing really hard times. And the reason that's being given to them is that somehow that support was the reason, um, that, that now the prices of, of things that they need every day, that we need every day are going up.

And we know this can't be right, especially when we see other things happening in the economy with corpora corporate profits and. You know, you know, CEOs making many more times their workers. Can you just break down what is happening here and you know, what's happening around inflation and, and how is that being explained to us?

Yeah, absolutely. And I think the first thing to be said here is that the economy has been broken for many, many people for a really long time, right? The crises that we're facing right now with the cost of living, going up with housing and rents becoming absolutely unaffordable with food prices, you know, really, really high.

These are. You know, on, on their surface they're new problems, but at the end of the day, they're not new problems. Right. And I think the fact that you really lifted up the, you know, the policy choices that we did make to reduce poverty over the course of the pandemic as a response to the pandemic shows us and makes really clear that.

You know, poverty is a policy choice, and we have a choice, all of us, to build an economy that works for everyone, especially the poor, especially the dispossessed. And we're not going to have a healthy economy until all of us, especially those who have been historically left behind. Are, are thriving, not just surviving.

Thriving. So the inflation crisis is definitely something that's in the headlines, but I think it's really important to note that it's not a new problem. Right? This is, um, you know, the cost of living has been going up for a really long time, and it's been unreportable and unsustainable for a really long, long time.

However, you know, there is something new going on here. What we're seeing is that. Prices are rising really quickly, um, especially on essential goods. Um, housing, um, for example, was made up sort of half the price increases that we saw last month, more than half impact. Mm-hmm. Um, and we are also seeing corporate profits at Sky High levels.

Right. Which basically means that big companies are getting really, really, really rich, as rich as they can possibly get, Al richer than, you know, than the Audrey are, which is wild. And people are struggling and struggling to get by. Um, and that's not unconnected. Right? Those are, those are directly related and I'm happy to kind of go into that as we, as we keep talking.

Yeah, please do. I, I think this is, this is really why, you know, it's so important to hear from you is to, why is it that, um, this is happening right now, and how is it that, you know, the explanations are not looking at this rise in corporate profits and, and more targeting, um, The, these government support programs that that actually were necessary before the pandemic and then were critical through it.

Yeah, so I often like to think about this as, you know, every crime needs means, motive and opportunity, right? The opportunity here is clear. Corporations have a profit motive. They're always trying to make a lot of money. That's kind of been true for a really long time. Um, but the means are deeply baked, right?

And in our economy, we have an economy that is really, um, characterized by a lot of really big corporations. That can kind of throw their weight around in the market. So what does that mean in practice? It means that they can rise, raise prices indiscriminately just because they can. Right? I mean, and my organization, the Groundwork Collaborative, has listened in on a ton of earnings calls.

That's when corporate executives tell their investors what happened last quarter and what's gonna happen in the following quarter. And what we hear really clearly is, They are excited about, about the fact that they can raise prices, um, and they're going to do that. And the, the thing that has changed in this moment really is that opportunity piece, right?

Because what we're hearing on this earn these earnings calls is these, um, corporate executives are saying, you know what? Inflation itself is actually kind of great for business. I mean, that's a direct quote. Inflation is really good for business, a little bit of inflation. And what they mean by that is when prices in general are starting to go up, they have a lot more information about what parts of their input costs, right?

What the, the sort of things that they need to buy in order to make the widget that they're selling you. How much of that those prices are rising, but consumers don't necessarily know that, and so what that gives them is an opportunity to skim a little extra off the top. And that's exactly what we're seeing.

Right? In 2021, we saw record corporate profit margins, which basically means, you know, Not just corporate profits, but you know that that extra that they're making and bringing in, and they're doing that on and saying, telling us on their earnings calls like, we're doing this because we can raise prices.

Um, and I think it's especially notable in essentials, right? So this is not like, I mean, if the price of Rolexes went up, who cares? But what we're not, we're not seeing that. What we're actually seeing is the price of diapers going up. Right? Right. So, so take, take the Diaper example. They're two big companies in the US that make diapers.

I mean, it looks like a lot of choice on the store shelf, right? You have loves, you have Pampers, you have Huggies, you have a ton of those brands. But actually all of those brands basically slot into two big companies, Johnson and Johnson. Kimberly Clark. And so if you're a, if you're a parent and you need to put diapers on your kid, you're gonna do everything you can to put diapers on your kid, right?

If that box of diapers is $10, if that box of diapers is $50, You're gonna try to afford that at the grocery store and you're gonna pay as much as you possibly can. And that's exactly what these big companies are exploiting, right? They're exploiting the fact that you have no choice but to buy one of two big companies diapers, and they're gonna raise that price as much as you.

They've cut and say, actually it's not us. It's inflation. Right? But it's not inflation. This is a, this is a choice. And there's a lot of things that policymakers can do to start to, to tamp down this, these prices and to tamp down these bad, this bad behavior. So alongside, um, alongside this kind of corporate consolidation that allows for.

Uh, the, you know, them to raise prices indiscriminately, um, into their own benefit. Um, I think it, you know, could you also speak to us kind of about the effects of the war in Ukraine, um, and how that has contributed? Again, not, you know, as you said, inflation isn't new or the cost of living, kind of being on the rise isn't new, but something different has, you know, is taking place right now.

And how, how does this war, um, also play into what we're experiencing right now? So I talked a little bit about inflation as a smokescreen that these companies hide behind. Another thing that they hide behind is a supply chain crisis, right? They say, well, oh, there's not enough goods in the supply chain, so we have to raise prices.

I'm so sorry. Um, they usually don't say the sorry part, but we have to raise prices. Isn't that great for business? Um, And, and the war in Ukraine has contributed to a supply chain crisis. Um, and it's also contributed to raising the price of oil, which is an input into a lot of other things that we make in our economy, right?

So when the cost of oil goes up, that sort of filters down across, throughout our economy. Again, these companies are using that crisis, using those, those so, so-called input costs going up to, to say, well actually this is an opportunity to take a little bit extra. And that's exactly what's happening. Um, you know, my organization has done a lot of work digging into supply chains and, um, the role that our broken supply chain, um, plays in this, in this.

Crisis that we're in the midst of. And I think there's, there's one basic question, right? So in, in the beginning of the pandemic, people are saying, you know, there's a supply chain crisis. Of course prices are going up. And the question we asked is, why do we have a supply chain that can't handle that?

Right? We have a, we have a really big thriving, you know, global economy. Why haven't we built a supply chain that can actually handle a little bit of shift in demand, right? If people are staying home and maybe they're buying more goods rather than buying services like a haircut, because you know, you're of Covid, you may not wanna go out and get a haircut.

Um, why can't our supply chain handle that? And when we dug into it, what we found is that that same corporate consolidation that gives these companies pricing power, Also has given them over the course of decades, the ability to build a system that really works for them. So what they have done is built a supply chain that's really brittle, so they don't hold a lot back in inventory.

So there's not a lot of fail safes or backups that they can, you know, tap into if, you know, demand for, I don't know, say couches goes up, um, you know, there aren't a lot of couches. In, in stock for them to say, okay, we can just put a little, couple more on the floor in those store shelves. Um, they have to, everything gets backed up.

Right? And the reason that they don't like keeping those fail safes and those backups is because it's expensive. And what they've been asked to do over the course of many, many years is to maximize their short-term profits. So at the end of every quarter, they have to sit down with their investors and say, here's the money we brought in for you.

Right? That is not necessarily how it has to be. We can build a supply chain that's resilient. We can build a, an economy that's resilient, right? Um, and a big part of how we do that is to invest in our economy, both in a supply chain that actually functions, but also in the people who make up our economy every single day.

You know, if. You and I and everyone who's listening has enough money, um, you know, to put food on the table, to make decisions about their lives, like to, to leave a job because it's, they have a terrible boss. Or because the schedule doesn't work to pay for childcare, that makes our economy stronger. And so the fact, I mean, we started this conversation with you sort of laying out the myth that, you know, public investments and investments in people and the, the supports that we've offered people have been at the root of this crisis.

But it's actually exactly the opposite, right? It's when we invest in people, that's when we have an economy that's strong. That's when we have an economy that really thrives. Yeah, you're exactly right. I mean, what we say often in, in our work is that moral policies that center, you know, meaning policies that center those who have been excluded and marginalized in our economy.

When you have policies that center those people, um, those 140 million people and, and millions more, that's actually good economics. It's good for the whole of our economy. Absolutely. And yet, I don't think that's the response that we're seeing, um, especially when you look at what the Federal Reserve is doing and raising interest rates.

Could you, could you break that down for us? Um, sure. What does it mean for the Fed to be raising interest rates and what impact is that? Is that having and will have? Yeah, absolutely. And I'm so glad you asked me about this because I think conversations around the Federal Reserve are often, you know, kind of.

Talked about in a lot of jargon, right? And it's, it's purposeful. They wanna lock people outta these conversations. But the truth is basically really simple. The Fed, um, has one tool, right? They can raise or lower interest rates, which is the cost of borrowing. And the way that tool works is when you raise interest rates, the cost of borrowing goes up.

And eventually they raise unemployment, right? Because people stop investing in their business. They stop hiring. And so essentially they put a bunch of people out of work. You can think of that as sort of two ends of a seesaw. Interest rates go up. Um, I guess it's not quite a seesaw, but you know, interest rates go up and unemployment rises as well.

Um, And, and that's exactly what they've been doing. Right. We've seen six consecutive interest rate hikes over the last year. Mm-hmm. Um, this is, this is a crisis that Jerome Powell is orchestrating. Right. And the, and the, the logic here, the sort of basic economics of it is, okay, well if this is a. You know, inflation is in the standard story in too much inflation comes from too much demand from all of us chasing too few goods.

Right. So this is, it's because that we have too much money in our pockets that the prices are rising. But as we've just talked about, it's not because we have too much demand in our pocket or too much money in our pockets, it's because we don't have enough goods in the table. Right? Right. Because we have this broken supply chain.

And so what the Fed does is that they use the one tool that they have interest rates and, and raising unemployment to try to bring down prices. But the problem is if that's not the thing that's driving up prices, which it's not today, right? Um, then that, that, um, tool is not gonna work. All that tool is gonna do is going to throw a ton of people out of work, and it's going to slow down wage growth, which basically means people won't get the wage, the raises they deserve.

Um, and it's gonna tank our economy. So, You know, I think what has been really telling for me in this moment is we, we, you know, policymakers, the news, everyone likes to go straight to the fed when they talk about inflation, right? Um, but the truth of the matter is there's a lot that we can do, uh, you know, on from congress, from the administration, from regulators to bring down prices in a way that doesn't actually harm the people who are bearing the brunt of higher prices in the first place.

You know, if you are, if you're struggling to get by, Putting you out of a job is not gonna help the economy. Right. And it's not, also not gonna help bring down prices because it's not your fault that prices are higher, it's these big companies. Um, so I think it's really critical that we start to like, think really expansively about what it is that's causing higher prices today and the tools that we have available to, to solve this crisis.

Yeah, that's, I mean, I think that's really the heart of this conversation is that, you know, where do we, you know, what, uh, what solutions are an offer right now? And is, you know, why do we have to accept that, you know, hundreds of thousands or millions of people maybe now pushed out of work because of this specific solution that's on offer to, to this, to the inflationary crisis, which as you said, has its roots and other, you know, and other things that are going on in the economy that, that the Fed can't fix.

Um, and so what are, what are some of these other, what are some of the other options that are on the table? Um, I think this is where also we don't, um, you know, it, it, it's important for us, we say often, not just to curse the darkness, but to bring the light. Right. What are some of the other policies that, that we could have pursued, um, if not to address inflation, but then for this broader, you know, the broader, um, the broader economic trends that we've been.

You know, that have been evolving over the past decade or more. Yeah. No, I think, I think I love the, I love that quote. I think it's beautiful and absolutely captures exactly the moment we're in, in this mo, in this policymaking moment. Right. The good, the good news is that we have a lot of tools on the table.

Um, there's a lot that Congress can do. Um, so there, you know, you can, there are. Three quarters of us states have price gouging laws on the books, right? In the same way that you can't charge $10 a bottle, um, for a bottle of water after a hurricane. You know, you can tank that tamp down on profiteering.

That's happening in a moment of a pandemic or crisis. So we could do that on the federal level, right? Um, we can also make really critical investments. I mean, the things that really put a burden on people's. Budgets, household budgets are housing and childcare, right? We can invest in more housing, we can invest in a care, um, care economy that actually supports people and allows people to take care of their families.

Um, we can tax these big corporations, right? I mean, president Biden just, um, You know, said that he, he was really excited about an excess profits tax, which would tax, um, oil and gas companies in particular, and the, the rampant profits that they're bringing in. We could do that more broadly and really try to encourage productive investment.

Right? Because what's happening right now is these companies are making a lot of money. But they're not actually putting that back into their workers' pockets. No, they're not making improvements to the, the thing that they're creating. They're just pocketing the returns and passing a lot of that off to their shareholders.

Um, so we can discourage that sort of, you know, what, what economists called markups. You know that, that. That profit that they're just pocketing and ask them to actually put that back in the business, um, through tax policy. So there's a lot that we can do. We can, we can take on these big corporations and break them up when necessary.

Right? That's something that we're seeing play out. Um, In a lot of different ways right now. And, and the, and the good news is, you know, we also have regulators who are, their whole task is to go after bad corporate behavior. And we can encourage them to do that and, and give them even stronger powers to do that, right?

So I think the, the good news is that there's a lot of room and a lot of, um, Tools on the table to address this crisis. The bad news is this is a really entrenched crisis, right? I often talk about this inflation moment as kind of the tip of the iceberg, that we made a lot of different policy decisions over the course of decades that allowed us to get to this point where corporations have so much power that they can take advantage of what they're seeing around them.

The war in Ukraine, the, you know, the pandemic inflation more generally, and so brazenly. Take money off the top and, and enrich themselves, um, and undoing that is gonna take time. But it is really, um, you know, it's really investing in, in our economy, investing in people that's going to lead us to a healthy economy and we should not get sidetracked from that.

Um, you know, as we're trying to fix this particular manifestation of the problem that we've been seeing for so long. Yeah, I think that's exactly right. I mean, the fact that this is a long. You know, a crisis that's been building and it'll take more than one set of policies, one congressional, you know, kind of agenda, one legislative period to, to address it.

It, it really calls for long-term, you know, a long-term vision that's oriented around, you know, these root causes and then where, where we need to be headed. Um, and it seems to me that out, out of these most recent elections, the political will is actually there. It seems like ballot measures. Across the country supported, um, more affordable rent, even, you know, ballot measures that really tackled inequality, uh, whether it was through taxation or speculation and housing.

Um, those were, those were popular even in states, um, that you may not have expected them to be popular. And so do you see the, that there is kind of wider support than, than we may, and that we may expect or hear that there is for these kinds of policies? No, absolutely. I mean, I think where we saw, you know, progressive economic agendas on the ballot, they won and they won, as you say, in places that are not necessarily the places you would think.

Right. Um, and that is really due to the incredible activism of so many people around the country. Um, I, I, I think it's also, you know, important to note that in addition to ballot measures, candidates who really championed, you know, this idea that we have to go after price scheduling, we have to go after corporate profiteers, we have to invest in people.

They also did really well, right? They also won. And so the, this agenda that we're talking about, one that centers people, especially people who have been left behind for way too long, it's not just popular, it's not just right. It's also good economics. Right. And I think the, the tagline of this event I've seen pop up a couple of times is, you know, a moral economy is a good economy or something to that effect.

And that's exactly right. Right. Well, there we go. Moral policy is good economics. I mean, it's. It, it's, it's both, right? And it is also good for our economy. And I think sometimes, you know, those who have the interests of the wealthy and powerful, you know, in, in, you know, those who hold that interest, like to pit these things against each other, like, oh, isn't that cute?

Like, that's really nice, but it's just not good for the economy. But the truth of the matter is, you know, and, and we've said it a bunch of times over this conversation, like I. If you don't have the foundation of a healthy, thriving economy in all of us and the people who keep this economy going, our demand, our work, our labor, you know, our care.

What we don't have an economy at all. Right? So there's no distinction there. And I, and I think it's really important that we just hold firm to that even when people are trying to tell us otherwise. Well, thank you so much, uh, Quin, for your work and your time. You know, you remind me of. The earlier kind of economists and philosophers who always kept, you know, economics and economics and morality side by side.

These weren't always separate disciplines. And I think the work that you've been doing, um, and the groundwork does and that we we're doing together, um, is, is making sure that we maintain that connection, um, because. Moral policy is good. Economics