Greedflation Was Real, Small, and Over Before You Heard the Word.

In early 2021, a curious thing showed up in the data: corporate profits were contributing as much as 60% of the inflation Americans were starting to feel.⁶ It was the kind of number that writes its own headline — proof, finally, that the price at the pump and the checkout was a story about greed. Then something inconvenient happened. By the second half of 2021, that contribution fell. And inflation kept climbing.² The smoking gun cooled off while the victim was still being shot.

The official story is that corporations exploited the chaos of the pandemic to gouge America — 'greedflation,' a word built to be repeated. It's a satisfying story and it survives mostly because almost no one reads the second half of the studies it's built on. The profit surge was real. The gouging, at the scale the word implies, mostly wasn't.

Here's the thesis a smart friend could repeat at dinner: greedflation was a sector story dressed up as an economy story. Pricing power in a few markets — vehicles, fuel, food — was genuine and durable. But the aggregate markup, the thing that would prove broad gouging, never went anywhere unusual. The word describes a macro crime that the macro data didn't commit.

The markup that refused to spike

If corporations across the economy were systematically widening the gap between cost and price, you'd see it in one number above all: the aggregate markup. It's the cleanest test there is. The San Francisco Fed ran it and found that markups across all sectors stayed essentially flat after the pandemic — not unusual compared with the recoveries of the previous three decades — and were not a main driver of either the inflation surge or the disinflation that followed.¹ That is the central, awkward fact the greedflation framing has to step around: the headline metric for economy-wide gouging simply didn't move the way the theory requires.

The Kansas City Fed gave the more precise picture of what actually happened in 2021. Markups did grow — 3.4% — and that was a major contributor to the 5.8% PCE inflation that year. But the pattern is the tell. Markups rose early, then fell in the back half of 2021 while inflation was still accelerating, a sequence that matches forward-looking, anticipatory pricing: firms raising prices in expectation of cost increases they could see coming, not extracting a steady stream of gouging.² A company that raises today because it knows freight, labor, and inputs are about to cost more is doing arithmetic, not malice. The data can't always tell the two apart — but the timing leans hard toward the arithmetic.

Why the profit numbers looked guiltier than they were

Profits did rise, and the rise was real. The profit share of net corporate-sector income averaged about 22.7% in the four quarters before the pandemic and climbed to 26.6% by Q2 2022.³ That is a genuine increase, and it is the kernel of truth the whole debate orbits. But two things complicate the gouging reading of it. First, the share has since partly reversed, slipping back to 24.3% by Q2 2024.³ Gouging that quietly unwinds itself is a strange kind of crime.

Second, and more damaging to the simple story: the Federal Reserve Board's own analysis traced much of the profit increase not to fatter margins won at the register, but to pandemic-era government subsidies, lower taxes, and monetary accommodation.⁵ When the government is mailing checks to firms and cutting their tax bills, profits can swell without a single price being gouged. The Board went further on the most-cited piece of greedflation evidence — the rising share of gross operating surplus in the national accounts — and called it 'not that informative about profits' in the sense the debate cares about.⁵ The number everyone pointed to was measuring something adjacent to the accusation, not the accusation itself.

And the surge had a short fuse. By the BEA's own books, profits from current production rose $285.9 billion in 2022 — then nearly stopped, growing just $49.3 billion in 2023.⁴ A pricing-power machine that abruptly downshifts the moment input costs ease looks far less like entrenched monopoly and far more like firms passing through a cost shock and then losing the ability to hold the line.

The honest case that it was real after all

The strongest counter doesn't come from a slogan; it comes from the Economic Policy Institute, and it deserves a straight answer. EPI's point is that the post-war norm is for profit shares to fall during economic upswings — so a profit share that rose after the pandemic is genuinely abnormal, and the most plausible explanation is that the chaos temporarily handed firms something close to monopoly power in key sectors.⁸ That is a real argument, and the sector-level evidence backs it: autos, energy, and food saw pricing power that was both genuine and, for a while, durable. The 'flat aggregate markup' can hide fierce gouging in a few markets while the rest of the economy stays normal — averages are good at hiding outliers.

But notice what EPI itself concedes: corporate concentration did not increase during the recovery.⁸ That is fatal to the strongest version of the structural story. If firms didn't get more dominant, then whatever pricing power they briefly enjoyed came from the moment — scarce inventory, snarled supply chains, demand that lurched from services to goods and back — not from a permanent grip on the market. Which is exactly the line between the two ideas in the title. Pricing power that evaporates when the shortage ends is the symptom of a disrupted market. Pricing power that persists because you own the choke point is the thing the word 'greedflation' is trying to name. The data describes the first and borrows the language of the second.

That 53% figure traveled the internet as if it were a Fed finding. It came from a progressive advocacy group, built on a decomposition that treats profit's share of value added as if it were the cause of inflation rather than one accounting slice of it.⁷ It is the kind of number that is technically derived from real Commerce Department data and analytically does almost none of the work the headline claims. The greedflation case isn't empty — but its most-quoted statistic and its most-careful research point in opposite directions, and the careful research is the one the slogan keeps quiet about.

So which was it — greedflation or pricing power? The answer is the least quotable one: a few industries got real, temporary leverage from a broken supply chain, charged what the moment allowed, and gave most of it back when the moment passed. The aggregate never confirmed the conspiracy because the conspiracy was never aggregate. 'Greedflation' is a true story about motor vehicles and petroleum wearing the costume of a true story about the whole economy. The word survived because it was useful. The data survived because it was checked — and the data, read past the comma, says the gouging was real, narrow, and already over before the country agreed on what to call it.