Trickle down has to be one of the most discredited of all neoliberal ideas. The claim is simple. It is that if the rich get richer then their spending will pull everyone along behind them as their wealth trickles down via their spending.
As excuses go trickle down is fantastic. Personal greed is excused as being socially beneficial.
There's just one problem. Wealth doesn't trickle down. The wealthy just get wealthier and more get left behind. Trickle down has not just been rumbled. It's been derided. And quite appropriately too.
This, however, has not been noticed in Trumpland. As Vox reported yesterday:
Top White House economic adviser Gary Cohn's background as a Goldman Sachs executive leaves him more experienced in the art of talking to really rich people than communicating with the public. That ends up making this interview with CNBC's John Harwood, published this morning, an extraordinary document, because when Harwood pushes him on a few points, Cohn ends up basically surrendering and admitting the plain truth about the Republican tax plan: that it's a bonanza for big businesses and the rich, whose main benefit for normal people is a vague hope that prosperity will trickle down from those at the top.
And as they added:
Cohn has been deeply involved in crafting the plan from the White House end, and the regressive nature of the plan both fits Cohn's background as a rich business guy and the sincere convictions of conservative tax wonks. But experienced political operatives know you're supposed to say your plans are all about the middle class.
Cohn instead told the truth. Trump's plan is all about the rich getting richer.
But maybe Cohn would deny that trickle down does not work. But that says one of three things. The first is that he should know it does not, and so he's not suited to the job. The second is that he's lying. And that means he's also not suited to the job. The third is he knows and does not care. That also disqualifies him.
Except in Trumpland. Where no doubt it is fake news that trickle down has failed.
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You only have to look at the UK housing market to shatter the myth of trickle down economics.
Those with assets are able to increase their wealth through purchasing and renting out property; which in turn is paid for by those without assets who cannot get onto the property ladder. This is a vicious circle, both inflating the purchase values of properties, putting them out of reach of more of the poor, and increasing the costs of rents.
The poor in the UK are subsidising the wealthy in their retirement through paying rip off private rents.
The Government should be providing high standard social housing for all that want it. They are abandoning their duties in this area and leaving people to the whims of the market, and then subsidising private landlords with housing benefit.
If ever there was a bigger and more preventable scandal. It makes me absolutely furious.
This is not capitalism or entrepreneurialism, this is just a rentier economy.
Agreed
The problem is people actually believe this tripe. Not just its perpetrators but also its victims. The Neo-liberal / Washington consensus agenda has been an unprecedented political ‘success’ story. And because of its prevalence, should any of its advocates have a Pauline conversion, they daren’t admit it, thus inflicting ever more socio-economic pain. As Michael Hudson wrote – the parasite is eating the host. And there’s no readily available anti-dote.
Never mind ‘trickle’ – there has been a flood of wealth that has moved sideways to offshore and political funding to reserve the status quo – certainly not down from what I can see.
So the fact that rich idiots spent £1000+ on mobile telephones in the 1980s has not resulted in me being able to buy a mobile phone with a couple of magnitudes more features for £10 today?
“So the fact that rich idiots spent £1000+ on mobile telephones in the 1980s has not resulted in me being able to buy a mobile phone with a couple of magnitudes more features for £10 today?”
Small sample fallacy. Cherry picking.
No. Jonathan it doesn’t .
To begin with your suggestion shows no understanding of what “trickle-down” is (despite it being explained art the top of this post). Furthermore your point describes a standard historic example of product development. There are plenty of similar examples (cars, TV’s etc.) and most of them pre-date “trickle-down”.
The only remaining issue that your example relates to is inter-temporal price discrimination (Google it) which also has little or nothing to do with this topic.
It is the reverse of the bumble bee, isn’t it. A plausible case can be made for how trickle down might work in theory, but clearly it does not in practice.*
[*Yes, I know the idea that scientists proved that bumble bees cannot fly is also an urban myth, a bit like the urban myth of trickle down economics. Bush 41 nailed it in 1980 as “voodoo economics”.]
Why give the rich and corporations more tax cuts because it creates more jobs and more wealth they claim but ask this one simple question, why can’t the rich, large corporations and multinationals create jobs and wealth with the tens of trillions they already have at their disposal and have had for decades.
JK Galbraith repeats the analogy (I suspect it was one of Keynes’) that Trickle down works like feeding sparrows by giving oats to a horse in such excessive quantities that some pass through the horse undigested and the birds can forage for them in the droppings on the road.
It’s a bit selective I think to single-out Mr Trump for believing in trickle down when for the past decade the entire Western Economy has practiced QE which cannot possibly work unless trickle down works.
QE, to follow the horse analogy, is tantamount to shoving the oats up the horses arse with a ramrod. Causing a chronic case of constipation.
The sparrows go hungry and the horse does no work.
It seems very simple to me. If you don’t own property or money, you pay rent and interest to those that do. Trickle or gush, the money goes upwards.
The Left/ right political spectrum is about whether you want to reverse/mitigate/slow the process or accelerate the tendency of capital to concentrate
American ‘Late Show’ host, Stephen Colbert nailed this one succinctly referring to Trump’s proposed tax cuts as “the Koch Brothers All-American Up-Tricklin’ Cash-Grab-a-Rama”
https://www.theguardian.com/culture/2017/nov/02/late-night-hosts-trump-and-manafort-pillaged-our-democracy-for-nice-rugs
I was very amused by it
Nice link, Marco. Thanks.