Pacific Standard magazine tracked down the origin of the “trickle down economics” concept popularised by Ronald Reagan in the 1980s and curiously (consistency principle?) still supported by many.
Apparently, the phrase was actually coined by American humorist Will Rogers, who (80 years ago now) mocked President Herbert Hoover’s Depression-era recovery efforts, saying that “money was all appropriated for the top in the hopes it would trickle down to the needy.”
A new report from the International Monetary Fund has declared the idea of “trickle-down” economics to be as much a joke as Rogers imagined.
“Income distribution matters for growth,” the economist authors of the IMF report write. “Specifically, if the income share of the top 20 percent increases, then GDP growth actually declined over the medium term, suggesting that the benefits do not trickle down.”
The study results suggest that raising incomes for the poor and middle class yields measurable improvements to the national economy.
So why aren’t (more) countries taking this approach? Sounds to me like typical political short-sightedness. It’s clear that in the long run, everybody is better off (and that includes the wealthy), while with “trickle down” nonsense the longer term outlook for the wealthy is not that good. Unsurprising, really. The heirs of the wealthy might want to consider this, as it’s their future.
(original article at http://www.psmag.com/business-economics/trickle-down-economics-is-indeed-a-joke)
“GDP per capita in the UK is lower than it was before the crisis. That is not a success.”
Nobel prize-winner Joseph Stiglitz is the world’s foremost critic of economic and political inequality. He thinks the lessons of the global crash are being ignored, and he’s not much taken with the UK’s recovery either…
Prof.Steve Keen writes & talks:
At a talk entitled “The Age of Entitlement is Over?” at the [Sydney] Northside Forum, after recommending George Monbiot’s excellent article on grouse I used the Open Source program Minsky to model what can happen when a government runs a permanent surplus. The result is not what advocates of government surpluses expect. (you can download the model Prof.Keen used in Minsky).
In a nutshell, country economics don’t work on exactly the same basis as companies or households. Pretending that they are all the same is a really bad idea.
The Spanish are doing an interesting experiment: In Spain They Swap Money for Time, essentially allowing time-banks.
While the article (IMHO incorrectly) wonders whether there is anything anti-capitalist about the ideas (I don’t think they are), there is nothing intrinsically wrong with using a different currency to money. The problem typically lies with governments, which rely on
- skimming economic value-add activity (sales tax, GST, VAT, BTW, MwS, etc) to raise revenue;
- applying monetary controls, usually exerted by an independent central bank.
So the actual issues that need to be resolved are really quite funky. Of course you can give and charge interest on time, and you can tax it – but the taxing does not immediately translate into government revenue. If you wish to maintain a form of sales tax, then either people will have to owe the government a fraction of their time, or there needs to be a conversion to money.
If the government were a participant in the same time-economy, it could use the “time revenue” it raises to get things done, either directly (same people doing part-time work for the community) or indirectly (time “spent” through other companies in the system).
While money is not a necessity for an economy to work, it is a convenience – a convertable/neutral common currency. Having multiple currencies is generally not liked by governments as it affects their control, regardless of the merits. Just think of countries where the USD or EUR is the effective currency because the local one has become worthless (with huge inflation problems). Either that, or barter-style trade tends to pop up when countries are in tough economic times. People do what is practical to get by. But if authorities choose to actively allow/promote this activity and adjust the government processes to work with it, I think it can be made to work.