The Federal Reserve Board has voted to increase interest rates by 50 basis points in an attempt to curb price inflation. The monetary policy move does not address the main reason for increased food prices: how big food companies, exploiting their market leverage, have passed costs onto consumers and reaped excessive profits.

The food at home index rose 10% over the last 12 months, led by meat, poultry, fish and egg increases of over 13% and beef increases of 16%. Commodity prices are seeing their sharpest rise since the 1970’s due to Russian and Ukrainian supply disruptions, sky high gasoline prices and unregulated grain market speculation. Avian influenza culls are spiking poultry and egg prices. And all grocery categories, except for fresh vegetables, are expected to rise another 3-4% in the coming months.

These price increases have been driven by food companies passing their costs onto consumers, subsequently generating windfall profits. 2021 was the most profitable year for big corporations since 1950, with pre-tax profits rising to $2.5 trillion and after-tax profits surging 35%, enabling the 1% to finally overtake the middle class in share of overall wealth.

Tyson, one of the “Big 4” meat and poultry conglomerates whose price increases have been scrutinized by the Biden Administration, posted over $1 billion in profit in Q1’22, up 48% from the previous year as beef prices surged over 23%. Cargill, at the heart of the speculation-heavy global commodities trade, topped $5 Billion in profits on $134 Billion in revenue in 2021. And omnichannel monopoly Amazon increased net income by $12 billion and allocated $10 billion in buybacks, while raising the price of its annual Prime subscription from $119 to $139 and paying their CEO over $212 million annually.

In the supermarket sector, for the 5 weeks ending April 2, U.S. grocery sales grew 6.4% in dollars but declined 4.1% in units, as higher prices pushed downstream by retailers started to impact consumer demand. Albertsons, the nation’s fifth largest grocery chain, reported identical sales growth of 7.5% for the three months ending Feb. 26, up nearly 20% from two years ago. Quarterly profits rose to $455.1 million, compared with a $144.2 million loss a year ago. And Kroger, which accounts for over 10% of all grocery sales nationwide, reported identical sales and profits up as well.

Recent research illustrates these inflationary-profit trends, in particular busting the myth of a wage-price spiral driven by increased worker incomes. Over 53% of price increases in the last two years have been driven by profit margin gains, while wage increases were responsible for less than 8%. This is a big turnaround from the trends of the last 40 years, when profits contributed just 11% to price increases while labor contributed over 61%. And a Morgan Stanley analysis concluded likewise, even as news broke of declining worker productivity during the pandemic, that "real wages systematically undershot productivity growth for most of the last two decades, and the labor share of income fell notably as a consequence. Corporate profit margins were the prime beneficiaries of the falling labor share."

According to economist Isabella Weber , “Outsize price hikes are at least partially responsible for inflation. Companies have bragged about how they have managed to be ahead of the inflation curve, how they have managed to jack up prices more than their costs and as a result have delivered these record profits.” And during a recent congressional hearing on inflation, House Energy and Commerce Committee Chairman Rep. Frank Pallone (D-N.J.) said “Corporate greed is motivating large companies to use the pandemic and supply-chain issues as an excuse to raise prices simply because they can.”

This profiteering trend stood out in the food industry in particular. Food company profits far outpaced worker wage growth, led by Albertson’s (671%), Amazon (333%), beverage/snack conglomerate Keurig-Dr.Pepper (83%) and commodity giant ADM (55%). And profit gains outpaced topline revenue growth, such as at Albertson’s (by 17 times), Kroger (4.5 times) and Target (3.5 times). CEO pay at these companies averaged over $22 million apiece, nearly 1000 times the average employee annual earnings. Not surprisingly, many of these same food companies pay much of their workforce far less than a living wage including Kroger, Target, Walmart, Dollar General, Starbucks, CVS, Walgreens, Dollar Tree and Albertsons. So much for stakeholder capitalism.

And shareholders were the main beneficiary of this trend. Stock buybacks as a percent of profit were through the roof at Walmart (38%), Target (52%), Dollar General (117%) and Kroger (50%). If such profits had been given back to employees, it would have meant annual pay raises for every employee at Dollar General of 112%, Target, 50%, Walmart, 18%, and Kroger, 12%.

This dynamic essentially redistributed vast amounts of wealth upwards. Shareholder wealth grew by 57 times as much as worker wages. The labor share of national income fell back to pre-pandemic levels. While employee compensation rose 11%, real wage growth decreased 2.6% from a year ago, undermining the argument that labor costs are driving inflation. Meanwhile, hundreds of thousands of food industry workers are food and housing insecure and depend on public assistance to survive.

If Walmart, the largest private sector employer, were to give all of its employees a living wage, it would only have taken 2/3rd of the company’s profits posted in the 12 months prior to Q3 2021. Walmart’s reticence is not just from the executive suite, but also driven by investor pressures. Institutional shareholders tend to view worker pay increases skeptically, consistently tanking share prices when raises are announced and insisting that labor costs be kept at the absolute minimum so as not to lower their returns.

But it doesn’t have to be this way. Instead of relying on higher interest rates, there are policy remedies that could be implemented to slow down and reverse price inflation, while building a more fair and just food system in the process.

· Empower workers and make it easier to organize unions, such as by passing key elements of the PRO-Act. Worker-led organizations, such as trade unions, workers’ centers and worker cooperatives provide a necessary counterweight to unrestrained corporate power and influence. This should also include worker representation on corporate boards, which is not as radical as it sounds.

· Enforce antitrust laws, such as the Robinson-Patman Act, to curtail retailer market leverage. The pandemic has proven that excessive consolidation in grocery retail enables price inflation. The vast majority of grocery categories are controlled by fewer than 5 companies and just a half dozen retailers control more than half the grocery market share. These oligopolies dominate supply chains and pass costs onto consumers without fear of being undersold by smaller competitors who can’t keep up. A&P was split up when it was less than half the market share of Walmart, so the industry is way past due for some disaggregation.

· Price controls. They may sound far-fetched, but they are as American as cherry pie. Price controls were implemented during World War Two to hold down consumer prices on key items and commodities, and again in the early 1970’s for a brief time. . But when it comes to basic foods and necessities, emergency strategic pricing power should be in the public sector until the crisis subsides.

· Congress should pass the Ending Corporate Greed Act, which would impose a 95% tax on the windfall profits of large corporations, particularly the oligopolies and quasi-monopolies that make up much of the food industry. Similar taxes were imposed during World War Two and the Korean War to prevent wartime profiteering, so there is precedent.

· Regulate commodity speculation to prevent raw material price spikes. Grain pricing, which contributes to increased meat, dairy and CPG costs, should not be treated as long-only investment vehicles by institutional investors and hedge funds. Wheat pricing should not subject to Bitcoin-like volatility. Commodity markets were deregulated over 20 years ago and it is time to look at price parity and stronger public oversight of such critical food infrastructure .

These policy fixes prioritize the needs of workers and consumers. Higher interest rates will decrease the amount of money people can spend on food, leading to greater food and nutrition insecurity. Grocers are already indicating that consumers, particularly low-income shoppers, are buying less as prices go up. While over 83% of Americans think that food should be a human right , 47% of Americans are already worried about feeding their families and over 35% cannot afford enough healthy food. And if history is any indication, higher interest rates may also be a sign that the financial sector has grown weary of working people asserting themselves, quitting their jobs en masse and organizing unions.

Raising interest rates is just a diversion from dealing with the true source of food price inflation- profiteering by industry oligopolies. As the supply chain crisis enters its third year, the priorities should instead be to rein in big business and build a food system that works for everyone.