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IMF estimates – the increase in unit profits of companies corresponds to 45 percent. for rising inflation in the euro area. Wojciech Warski and Paweł Śliwowski comment

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The International Monetary Fund has reported that nearly half of inflation is the increase in unit profits of companies. This sparked numerous comments on social media. – This is a crude theory – assessed Dr. Wojciech Warski, entrepreneur, Team Europe expert in the “Tak jest” program, referring to the opinion that “bad, bad capitalist companies that milk society are responsible for inflation”. – We saw not so much the cause of inflation as the effect of inflation – explained Paweł Śliwowski from the Polish Economic Institute.

The guests of the “Tak jest” program were Dr. Wojciech Warski, entrepreneur, Team Europe expert, head of the Economic Council of the Polish-PSL Coalition and Paweł Śliwowski from the Polish Economic Institute. They commented on the estimates of economists from the International Monetary Fund, which show that for 45 percent. increase in inflation in euro area higher corporate profits over the last two years.

“We saw not so much the cause of inflation as the effect of inflation”

Paweł Śliwowski from the Polish Economic Institute said that it is worth starting with a correction, “because the chart and this study of the International Monetary Fund made a sensation yesterday”.

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“Unfortunately, most of the discussion is not about the real conclusions of this study. First, the authors of this study state that this is not a cause and effect study. Nowhere do they claim that they have shown that the increase in margins, the increase in profits of companies is responsible inflation. They only showed how much of the price increase was the company’s profits – he noted.

He emphasized that “the conclusions explicitly state that we do not have any signs of increased profitability of business operations.”

– They indicate that we actually observed an increase in prices, which was partly caused by external factors, i.e. an increase, for example energy prices. And that companies simply adapted to this price increase faster by raising prices – he explained.

According to him, “we have seen not so much the cause of inflation as the effect of inflation.”

– On the basis of this study, quoting its authors, one cannot draw such a conclusion that the increase in the profitability of companies caused inflation. Companies alone cannot cause such high inflation. For companies, the ceiling in raising prices is always how much consumers are willing to pay for certain goods, emphasized Śliwowski.

A crude theory

Dr. Wojciech Warski was of a similar opinion. He estimated that yesterday and today there was a “rude theory” on Twitter. – That inflation is the responsibility of bad, bad capitalist companies that milk society. Of course, that’s not true, he said.

He decided that “the statement that it is the result of inflation, and not its cause, is crucial in all this.”

– At the time of the outbreak of the pandemic, the increase in inflation was mainly due to the sharp rise in labor costs. Going further, if we look at the passage of time, then the profits of the companies declined sharply, they were strangled below zero. Which means that companies added to their functioning in order to survive. And then they were able to quickly react to the inflationary price increase by increasing their prices – explained Dr. Wojciech Warski.

Inflation in PolandPAP

Read also: Massive price increases. Economists point to the reasons

Main photo source: Raketir/Shutterstock

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