How large corporations make huge profits from hidden markups at the expense of consumers: Inflation, followed by poverty and social inequality are the most pressing issues worrying people around the world right now. Canada has not been immune from the rising cost of living and is still fighting an inflation rate above the two per cent target preferred by the Bank of Canada.
Statue of Scottish economist and philosopher Adam Smith on the Royal Mile in Edinburgh, Scotland.(Shutterstock)
Canada’s inflation rate hit 8.1 per cent in June — the highest it had been in over 40 years. While the rate has dropped slightly afterwards, it was still 6.8 per cent in November, easing to 6.3 per cent in December.
High prices funnel wealth from consumers to owners of large companies and widen the wage gap between CEOs and workers. My research
shows consumer prices are higher than they should be. This is even
without considering inflation, because of a less studied phenomenon:
compound markup.
Many economists rely on philosopher Adam Smith’s metaphor of the invisible hand
to understand how the market economy works. According to Smith, the
invisible hand is the natural force that drives individuals to
unknowingly make economic decisions that are best for society.