Great economic ideas explained, No 1: The trickle-down effect

trickle-down effect
The trickle-down effect asserts that wealth cascade down from the top of society to the bottom. Yes, like a waterfall. No, it doesn’t work…

The trickle-down effect, sometimes referred to as ‘trickle-down economics’, is a concept used frequently by Conservative politicians and business leaders to explain why yawning wealth disparities are actually a good thing.

 

The scenario: 

Imagine a small group of fabulously rich people. And I mean really fabulously rich – riches beyond your wildest dreams. They’ve got everything they need – artworks, luxury boats, fast cars, a private jet and a string of big houses across the world … and, of course, loads of cash squirrelled away in the Cayman Islands or some other tax haven.

Now imagine a load of people who are not fabulously rich at all (I know it’s a stretch, but just try); people who might be feeling the pinch. They might be ‘hardworking families’, or the so-called ‘working poor’. They might be unemployed, under-employed or just have to work long hours on low wages just to make ends meet.

So, the question is: how do we get more cash in circulation so the not-so-fabulously rich have a bit of money in their pockets? Well, you might be surprised by the answer.

 

How it works: 

To start with, we don’t need governments getting in the way. Oh no. We don’t want or need any increases in public spending nonsense or anything approaching a redistributive tax regime or public welfare system. Remember, governments can only destroy wealth; they don’t help to create it in any way whatsoever. Got that?

So, the only way to spread the cash is by giving shedloads of it – through incentives, tax breaks, corporate welfare and conducive labour laws etc etc – to the fabulously rich. Yes, that’s right. What we have to do is give the fabulously rich obscene amounts of additional money so that they physically have no choice but to offload their unbearably heavy burden of cash onto the real economy.

That’s the trickle-down effect in action. You know it makes sense.

 

Is it bollocks?

Yes.

 

In conclusion… 

So, don’t feel jealous or angry about the fabulously rich being treated favourably by our political leaders. Because it’s actually in our interests that they are having a really great time. Because if they have more money than they will ever know what to do with, one day, at some point in the future, a little bit of that magic might make its way to you. If you’re good.

Crumbs of comfort? You’ve got it.

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peterbatt

Peter a journalist with 30 years experience of freelance writing, UK national newspaper and magazine production roles, and business development. In 2007, he developed and launched a mainstream-style green consumer magazine in the UK, called GreenerLiving, as a means of promoting sustainable change ‘within the system’. GreenerLiving closed during the post-crash recession, but Peter went on to become managing editor of the international ethical business title, Ethical Performance. However, Peter felt that the CSR sector has not succeeded in changing corporate priorities anywhere near fast enough, and so I decided to leave the treadmill of corporate employment and debt accumulation to focus on my own projects. Now poorer but a billion million times happier, he writes on political, economic and social issues – usually seriously, but sometimes as satire. He's currently writing Psychopath Economics, a book about the logic of social and economic power, belief systems, and the rise and fall of societies. Peter is convinced that ordinary people must educate themselves and exercise their economic leverage if we are to avoid social and environmental destruction.

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