The ‘Greedflation’ Narrative Doesn’t Hold Up Under Scrutiny

Politicians like Jagmeet Singh pushed for inflationary policies, and then sought to blame the consequences of those policies on Canadian businesses.

Years ago, when governments were simultaneously restricting economy activity through lockdowns and throwing tremendous amounts of money around, there were many warnings that this would lead to inflation.

Before becoming the Leader of the Conservative Party of Canada, Pierre Poilievre repeatedly spoke in the House of Commons and warned that excessive money printing and ongoing federal deficits would erode the purchasing power of Canadians.

At the time – and still to this day – those policies were supported by Jagmeet Singh and the NDP. Singh has never shown concern for the amount of federal spending or ongoing budget deficits, regardless of the impact on Canadians.

Singh can’t claim he wasn’t warned about what the impact of those policies. Here’s a video from over two years ago, showing Poilievre chastising the NDP for supporting inflationary spending:

Here’s another video – also from over two years ago – in which Pierre Poilievre warns that inflationary spending will raise the cost of living:

Of course, those warnings were largely dismissed by politicians like Jagmeet Singh and Justin Trudeau.

But then, it turned out that Poilievre was indeed correct.

Inflationary spending and excessive deficits – combined with policies that discourage investment and real growth – have had a severe impact on the finances of Canadians. Our economy is stagnating, housing is increasingly unaffordable, the debt burden is rising, and people are finding it tougher to make ends meet.

So, in response to seeing Poilievre’s warnings pan out, did Jagmeet Singh take a moment to reflect on the policies he supported?


Instead, he pivoted to blaming grocery story chains for inflation.

Singh started trotting out the ‘greedflation’ narrative, culminating in what he thought would be his big moment: A faceoff against Galen Weston, who Singh had been building up into a villain for months.

As you can see in the video below, it didn’t work out well for Singh, who was completely outmatched and lacked even a basic grasp of economic reality:

This didn’t stop Singh from relentlessly pushing the ‘greedflation’ narrative, and many people eagerly bought into it. After all, it’s simple, has a catchy name, and pins blame on ‘big corporations’ that are already viewed suspiciously by much of the population.

However, a look at the evidence shows the greedflation narrative doesn’t hold up. Ironically, the information is from a Bank of Canada working paper that investigated whether increased inflation was driven by firms marking up prices.

As you can see in the chart below, markups were lower than inflation until pandemic lockdowns began, at a time when inflation dropped even lower. Then, as markups started to decline, inflation rose:

Here’s how the working paper explains it:

“The timing suggests that while changes in markups may have contributed to the initial rise of inflation in 2021, their contribution dissipated by the end of 2021 and growth in marginal costs was the driving force of peak inflation. Comparing the inflation rate with the growth in markups during 2021 (Chart 1, the lines at 2022) shows that the contribution of markup growth to inflation was positive but mild—inflation during 2021 was 5.1%, whereas markup growth was only 0.44% over the same period (less than onetenth the rate of inflation). And when inflation peaked in 2022, growth in markups was near zero and negative.

The decline in markup growth in the period after 2021 suggests that the rise and peak in inflation was not fuelled by a steady increase in monopoly power and demand-driven growth in firms’ markups.

The low inflation during the peaks of markup growth meant this markup growth was non-inflationary and primarily cost-driven (we explore the decomposition of measured markups below and find this to be the case).”

Businesses have costs too

The ‘greedflation’ narrative always rested upon a willful dismissal of the fact that businesses have their own costs. That is, a grocery store is impacted by inflation just as everyone else is. They have to pay more for labour, transportation, storage, security, insurance, heating/cooling, and all other costs associated with running a business. Those increased costs must be passed on to the consumer, or the business isn’t viable.

As noted in the Bank of Canada working paper, businesses were responding to concerns about impending growth in costs:

“The evolution of markups and inflation does not align with the explanation that the recent episode of inflation was fuelled by firms leveraging their market power to raise markups and prices. Rather, the data can be understood in the context of economic theory about firms’ expectations and their price-setting behaviour. That is, the dynamics of markups, costs and inflation are consistent with an explanation that firms increased their prices (and, therefore, markups) in anticipation of future increases in both their prices and their marginal costs. This behaviour reflects their desire to smooth price increases over time rather than abruptly raising prices when higher prices and marginal costs are realized.

As the economy began to reopen in 2021, firms started to increase prices in anticipation of the growing demand and the expected increase in their marginal costs associated with meeting that demand. This forward-looking behaviour meant that inflation started to rise in 2021 and coincided with markup growth fuelled by firms’ raising prices above current costs—a foreshadowing of the subsequent rise in prices and costs. By 2022, increases in costs caught up to growing demand, and growth in markups declined and became negative once growth in costs surpassed growth in sales. These dynamics in inflation and markups are consistent with the price-setting behaviour of forward-looking firms.”

Follow the evidence, rather than ideology

To address problems, a country must have leaders who follow the evidence, rather than trying to fit the evidence to meet a predetermined ideological view.

Allowing ideology to supersede evidence means the fixes for problems will not actually fix anything. If – as Singh and others demanded – higher taxes/price controls were imposed on grocery stores, the result wouldn’t have been reduced inflation, it would have been a combination of reduced product availability, job losses, and higher prices as an increased tax burden was passed on.

The fact is that ‘greedflation’ was not the cause of inflation, and we must move beyond dishonest & economically illiterate slogans if we are to actually start getting this country back on the right track.

Spencer Fernando

Photo – YouTube


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