Column: Profit and privilege

Jane Austen opens her 1813 novel Pride and Prejudice with the unforgettable declaration: “It is a truth universally acknowledged, that a single man in possession of a good fortune, must be in want of a wife. However little known the feelings or views of such a man may be on his first entering a neighbourhood, this truth is so well fixed in the minds of the surrounding families that he is considered as the rightful property of some one or other of their daughters.”

Now we fast forward 200 years, flick the switch from literature to economics, and the words read: “It is a truth universally acknowledged, that a business in possession of good sense, must be in want of a great profit. However little regarded the feelings or views may be of the consumer upon being driven to dire straits by inflation, this truth is so well fixed in the minds of the privileged businessmen, that great profit is claimed as their right, no matter what.”

Back in July 2021, I wrote a column about the etymology of profit. There probably hasn’t been a time in history when profit was not a hotly contested issue, though lately, our exasperation seems to have reached an incendiary level. The result is a situation in which we, the losers, are pumping the bellows of anger to increase our cries of resentment, with the winners (those making great profits) doing the same to increase their cries of innocence. Various measures are supposedly being taken to appease us – the consumers and taxpayers – but they’re not proving very effective.

Every time prices rise we always hear about the escalating costs of energy, raw materials and labour. But I suspect there’s a lot more to it. What makes me say that? Well, I’ve noticed that many thrift stores (my first port of call whenever I need to replace a common item of clothing or housewares) have raised their prices considerably over the last few years. Yet energy and labour costs don’t directly affect what they’re selling – so what’s behind this kind of increase?

When it comes to what we have to pay for groceries and household supplies, manufacturers use certain strategies to bamboozle us. A favourite tactic is to reduce the volume of products. Sometimes the size of the packaging is similar, sometimes it is a little bit smaller. It’s usually hard to detect unless both the older and newer versions are available for comparison. One of my first columns, from January 2012, dealt with this topic. It’s an old subterfuge (from the Latin subterfugere, to escape by stealth, evade). A few years ago, in 2009, the British economist Pippa Malgren adopted the term shrinkflation to refer to this phenomenon.

The point is that unless the privileged profit-makers are forced to shrink their margins, there will always be a wide gap between us and them. Striking for higher wages isn’t going to solve anything – when wages go up, prices go up, and inflation keeps growing. Nothing will have improved. It’s a vicious circle.

So how was Spain able to bring its inflation down to 2 per cent in 2022? It was through forceful management of the economy. “Spain capped energy prices …, lowered the cost of public transport, taxed excess profits and put in place limits on how much landlords can raise rents.”

On 7 August 2023, Italy, encouraged by Spain’s success, approved a 40 per cent windfall tax on banks for the fiscal year 2023. A day later, following a plunge in bank shares, it backtracked slightly and introduced a cap on payouts.

Will Canada stop shilly-shallying and heed the lessons of Spain and Italy?

Sabine Eiche is a local writer and art historian with a PhD from Princeton University. She is passionately involved in preserving the environment and protecting nature. Her columns deal with a broad range of topics and often include the history (etymology) of words in order to shed extra light on the subject.