Private Enterprise Is the Victim, Not the Perpetrator, of Inflation

Commentary

Down the street, there was a charming deli I had never visited, so I decided to drop by casually. This local favorite had been serving the community for many decades.

Upon looking for a menu, I found printed ones with prices scratched out. The owner directed my attention to a chalkboard where daily prices were listed. The old printed menus from 18 months ago had sandwiches priced at $9, but that day, the chalkboard showed prices at $15 and higher.

When I mentioned the difference to the owner, I noticed a hint of distress in his expression. He explained that reprinting menus was not feasible, so the chalkboard was the only way to adjust to the rising costs. Despite his remorse, raising prices was necessary to keep the business profitable. Due to soaring expenses in ingredients, transportation, utilities, rent, labor, insurance, and repairs, margins were tight.

This situation was heartbreaking. The owner wasn’t joyous about increasing prices to consumers; it was a tough decision borne out of necessity. In the customer-facing food industry, where people are sensitive to price changes, such adjustments were challenging.

This struggle wasn’t unique to this deli. Across the entire production chain, from retailers to wholesalers, businesses were grappling with escalating costs. They attempted to mask price hikes through fees and portion reductions, but these were temporary fixes in light of worsening inflation. Producer prices had been on the rise all year, challenging every retailer.

Commodities weren’t the only ones affected; services, labor, and insurance costs were also increasing. The root of this issue could be traced back to the Federal Reserve’s massive purchases of government debt, leading to widespread inflation.

In contrast to the 1970s, private enterprise wasn’t solely blamed for the inflation chaos this time. People seemed to understand that government policies played a significant role in the current economic turmoil.

However, some Democrats were attempting to shift the blame onto producers, accusing them of price gouging and unfair practices. This tactic, though familiar, seemed less effective this time due to low public trust in government.

Small businesses, already struggling from the pandemic’s impact, now faced the additional challenge of inflation. The uncertainty caused by fluctuating prices made planning and accounting a daunting task for merchants.

Inflation had accelerated this year, eroding the value of the dollar and disrupting businesses’ long-term planning. The future remained uncertain, with no clear indication of what the next year might bring.