Price spiral – The Green Amsterdammer

Refueling has become significantly more expensive

Robin Utrecht / Dutch Height / ANP

Sometimes a well-kept secret and an open door are close together. Come now: Profits for companies in the Netherlands increased by no less than ten percent last year compared to 2019. And just for the sake of memory, 2019 was a fantastic year no one had heard of corona yet. That increase in profits can hardly come as a surprise (hence the open door), because in the news about the companies’ year numbers, billions of profits spill over onto each other. But it still feels like a well-kept secret. Because corona, inflation, war: companies are having a hard time. However?

After the financial crash of 2008, it took a long time for all of us to realize that while society struggled for years, profits were quickly back to normal. It would be helpful if we could do it faster this time.

For those who are curious about the amounts: In 2021, a profit of 297.7 billion euros was achieved against 270 billion in 2019. These are companies, the largest part of business; financial companies are not covered by this, they are in a separate category. If you add that, and also the profit from foreign subsidiaries, the profit in 2021 will be 130 billion higher.

It is a pity that with money we have not taken as nicely a goal from life as with earth surface. When it comes to large surfaces, the football field offers a solution. Two hectares? There are three football pitches – and everyone gets it. Half of the Amazon rainforest felled? X million football fields, you see it and get a stomach ache.

Corona, inflation, war: companies are having a hard time. However?

If only we had such a football field. For almost three hundred billion in profits, is that a lot? Tax is still to be paid off (approximately 31 billion). According to the textbooks, profits are also invested, but these days it is done with borrowed money, which is more tax efficient. Let’s keep it at 250 billion net profit.

The UN is seeking $ 4.4 billion to fight the famine among millions of people in East Africa. So far in vain. Then 250 billion euros is quite a lot. But that comparison is a bit flat. Hence a comparison closer to home. For example, in relation to national income: that which serves everyone and everything in the Netherlands. That was about 855 billion in 2021. Compared to this, 250 billion in net profit is also quite a lot. Corporate profits rose more than twice as fast as national income in the period between 2019 and 2021, according to figures from Statistics Holland. Keep that in mind when talking about taxing businesses a little more in the near future. And no, not all companies are doing well. But they do not have to pay more tax either, it is after all profit tax. A millionaire should also not get away with ‘yes, but there are also people who do not feel so good, you know’.

Recently, the news of the high profits has been accompanied by the warning that high inflation will put them under pressure. Ahold Delhaize is struggling with high inflation despite a profit of 2.2 billion (de Volkskrant) and ‘ING does good business but suffers from inflation’ (Telegraph). There’s something funny about it, or rather sad. For how did the high inflation or inflation spiral start again? Due to rising energy prices. For example, the price of gasoline. For example, from Shell. And who are the biggest profit makers right now?

Exact. Shell’s surplus, which was already at a record high last year, has risen further in recent months, thanks to the war in Ukraine (6.7 billion euros in the first quarter). To pump up oil and gas costs no more than before the war, but companies can charge more for it, thanks to the somewhat mysterious ‘world trade price’.

Current inflation is largely profit-driven. Not a wage-price-spiral, but a profit-price-spiral. Shell, as well as grain retailers and supermarkets, could also choose not to raise their prices. They may be able to prevent a recession. The aforementioned headline could also have read: ‘Ahold Delhaize earns high profits and drives inflation’.

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