Trickle-Down Economics

Recent events prompted this musing on trickle-down economics, and the effects subscribing to this way of thinking has had on society under capitalism.

The words I use in the recording may not match the words in the transcript.

Transcript

Trickle Down Economics


Recent events--especially FIFA World Cup events in Canada--have got me thinking about 'trickle down economics': the idea that ensuring that the wealthy get wealthier will mean job creation and other economic benefits, and thus the middle class and the poor will eventually get their respective pieces of the pie.

But, now as in history, things simply aren't materializing that way; in fact, the gap between rich and poor is widening, and, for the middle class and the working poor, getting ahead--even getting by--is getting increasingly difficult to do. In fact, the Wikipedia article on trickle down economics defines it as 'a term used to describe government economic policies that disproportionately favor the upper tier of the economic spectrum (wealthy individuals and large corporations)' and states that: 'The term has been used broadly by critics of supply-side economics to refer to taxing and spending policies by governments that, intentionally or not, result in widening income inequality; it has also been used in critical references to neoliberalism. These critics reject the notion that spending by this elite group would "trickle down" to those who are less fortunate and lead to economic growth that will eventually benefit the economy as a whole.' The website humanact.org states that: 'According to the policy makers and its advocates, the trickle-down policy is supposed to benefit every member of the society in the long run, while privileging the rich with the instant profit. But the reality is that it never truly helps reduce income inequality and would never stop the widening gap between the rich and the poor. And if it does, its effects are not tangible among the poorer majority. The fact is the (sic) trickle-down economics has not provided the economic gains it promised. Instead of enriching the society by allowing the wealth to trickle down, critics contend that the wealthy use tax shelters to become wealthier instead of investing funds in wage increases or employment. It has been proven through research that tax cuts at the upper levels of society will result in higher saving rates among the elite rather than investment in new business or consumption.' I can observe the truth of these statements in my own backyard--I've seen people living in the streets of Vancouver, the line forming outside of the city's homelessness-outreach office, and the construction of condominium complexes that only the wealthy can afford to buy. Sure, Canadian citizens who were eligible recently got a top-up of our quarterly tax benefit in June, but that's just a drop in the ocean compared to the money going to land developers and other wealthy elites and being spent on the World Cup and the military--it's definitely not enough to get the vast majority of us ahead.

According to theconversation.com: 'Of course, everybody has not won. Since the advent of the global neoliberal experiment in the 1980s, the world has become increasingly divided into rich and poor. Economic inequality has soared to new heights'; 'Things have got so bad globally that the World Bank declared 2023 “the year of inequality”. The losses people have suffered as a result of COVID-19, climate change, political conflict and inflation have fuelled the fire of raging inequality. Political populism around the world fans that flame'; and 'Among the G20 countries, the highest tax rates have fallen by around a third over the past 40 years. Meanwhile, the share of national income sequestered by the wealthiest 1% has grown by 45%. The systemic changes made to global economies since the heyday of trickle-down economics have created a world increasingly ruled by billionaires. These billionaires like to take credit for their wealth as “self-made men” (most of them are male). It is not so. Macho hubris aside, today’s billionaires are a consequence of devastating errors in government policy that were made decades ago and are still being prosecuted today.' Ignoring for a moment that most millionaires and billionaires were born into generational wealth (thus torpedoing their claims about being "self-made"), them continuing to hog the majority of the world's wealth for themselves--while blaming and shaming those less fortunate for being in the positions they're in--causes society at large to, at best, stagnate.

Humanact.org says that, 'The more important propeller of economic growth, according to the critics is spending more on public services and goods, i.e., public works, education, and medical care. They believe that it would be much more beneficial if instead of enriching the wealthy, it would be better to strengthen the middle and lower classes by increasing the minimum wage and expanding social programs. If the workers are paid more, they have more to spend, which stimulates demand and economic growth from the bottom up rather than waiting for the wealth to trickle down from the top.' Earlier this year, in The Guardian, Olivier de Schutter, Belgian scholar and UN special rapporteur of extreme poverty and human rights, declared that--and it's even in the article's headline--the 'global economy must stop pandering to ‘frivolous desires of ultra-rich'--especially seeing as continuing to do so isn't improving society at large, or the planet we live on. However, at this point in history, governments won't spend more on public goods and services, chiefly because their corporate sponsors won't let them do anything that won't benefit themselves, even--especially--in the short-term, because, as the late Assata Shakur once pointed out, the wealthy will never vote away their wealth (and I'll add, with it, their power--simply because corporate sponsors are very myopic, especially when it comes to their wealth and access thereto). After all, according to French philosopher Nicole Orseme (as quoted in the article on theconversation.com), 'Wealth is not just about economic inequality but also about political inequality'--because, within capitalism, money comes with power.

The long and the short of this situation is that trickle down economics is yet another illusion that the powers that be under capitalism use to trick society at all socioeconomic levels into believing in, and going along with, the capitalist project and not even contemplating, much less agitating for, something better that will actually benefit everyone at every level--never mind that if the 1% lost three-quarters of their wealth right now, they would still be wealthy. The trick is getting the wealthiest people in the world to understand that they will not lose their importance along with a huge portion of their wealth and shared their power, even with those who have historically been marginalized--but, right now, we are a long way off from living in that world.

Sources:

https://en.wikipedia.org/wiki/Trickle-down_economics

https://theconversation.com/everybody-has-not-won-trickle-down-economics-was-an-idiotic-idea-how-do-we-fix-the-inequality-it-causes-223296

https://humanact.org/what-is-trickle-down/

https://www.theguardian.com/environment/2026/mar/03/un-de-schutter-outlines-plan-for-redistributive-global-economy