Since inflation reared its head in 2021, workers and consumers have been attacked on multiple fronts. On average, workers have seen their real purchasing power eroded by prices outpacing wage growth. Meanwhile, the response to inflation from the Bank of Canada has in many ways exacerbated the cost-of-living crisis. Although interest rate hikes haven’t engineered the levels of unemployment many anticipated, they have nevertheless added cost pressures in the form of higher payments on debt, including mortgages.

Governments have largely failed to meaningfully act to cushion the blow of rising prices, let alone address the sources of the problem. This inaction has been all the more maddening in the face of what many have characterized as either “profit-push” or “cost-push” inflation. To put it simply, critics on the left have demonstrated throughout the inflationary crisis that corporations were imposing higher prices on workers and consumers. Some firms, moreover, were using inflation as an opportunity to increase profits.

Over the past couple of years, this argument has travelled from the fringe to the center of mainstream commentary. In July, we received additional confirmation that the “inflationary profits” explanation was largely correct.