Trickle down economics; economic lie number one…

The first of a little mini series about Capitalism that has been nagging at me for a while…

trickle down economics

There was an article in out local paper last week- Argyll and Bute council, like most of our councils, has to make significant cuts to the budget. Despite our large geographical area, Argyll has a low density of population and services are already stretched tight. The article listed the sordid detail of the cuts- older peoples care, youth rehab, road schemes, outsourcing services to the private sector who will do the support of our most vulnerable more cheaply etc etc.

And what is all this about? Why is money suddenly so tight? Why do we all buy into the collective idea that ‘times are hard’ and so ‘we all have to tighten our belts?’

The fact is that not all of us do tighten our belts. Many people are doing very well out of the crisis. This from the Guardian;

The super-rich – the top 1% of earners – now pocket 10p in every pound of income paid in Britain, while the poorest half of the population take home only 18p of every pound between them, according to a report published this week by the Resolution Foundation thinktank, which reveals the widening gap between those at the very top and the rest of society.

Inequality has grown sharply over the past 15 years, according to Resolution’s analysis: the top 1% of earners have seen their slice of the pie increase from 7% in the mid-1990s to 10% today, while the bottom half have seen their share drop from 19% to 18%.

And then there are those right at the bottom- the Strivers who are forced to become Scyvers, or the Skyvers who have lost hope, or those who never had a fair crack of the whip in the first place. Have you noticed that when the economy takes a dip, they always take a hit? They become the problem- the scapegoats.

So we see all these regressive punative policy decisions being pursued by our current government- lower benefits to fewer people, changes to housing benefit to force people to leave their homes if they have an extra bedroom. All this in the context of reductions in care provision, and less funding for voluntary bodies and charities. Our current government is doing things that even Thatcher at her most strident would have baulked at.

But again- why? Where does all this come from?

What the neo-liberal economists will tell us is that the problem is caused by natural adjustments made by a self regulating economic system. That the job of us all is to get out of the way and let it all sort itself out like some kind of higher intelligent life form. The problem, they would say, is an over inflated public sector, whose interference in the natural order of things by public spending, taxation and welfare provision means that the economy fails to self regulate.

This kind of economic thinking has become so pervasive, so wrapped up in the political system, so much in service of powerful self interests, that we all wriggle on its hook. We are compliant because we have bought in to some of the lies that the system has sold to us- perhaps the biggest one is this one- Trickle down theory.

In a nu­tshell, trickle-down theory is based on the premise that within an economy, giving tax cutsto the top earners makes them more likely to earn more. Top earners invest that extra money in productive economic activities or spend more of their time at the high-paying trade they do best (whether that be creating inventions or performing heart surgeries). Either way, these activities will be productive, reinvigorate economic growth and, in the end, generate more tax revenue from these earners and the people they’ve helped. According to the theory, this boost in growth will ultimately help those in lower income brackets as well.

So, the argument is, if we have lots of rich people, and they are encouraged to become super rich, then our country, and our economy, will benefit- right down to the roots.

This analysis does not regard the wealth of the few as contingent upon the poverty of many- in this country and even more crucially in the poor countries around the world whose raw materials and cheap labour we are entirely dependent upon.

It also does not conform with the facts, as the rich get richer, and the poor get poorer.

As the worlds resources are over consumed by the few and our environment continues to be damaged, perhaps beyond repair.

As austerity plans are still touted as ‘good housekeeping’, as if the UK economy could be compared to a household budget.

So, what is the alternative? Fairer, more progressive tax systems? This might be a start- but I think the problem is the system- and we are all part of the system aren’t we? It is really hard to get out of it- the mortgages, the gadgets, the foreign holidays and the dependency on technology to deliver distraction, entertainment and connection.

Where is the Kingdom of God in all of this? What are we, the agents of this Kingdom , to put our energy towards? I am convinced that we need to be engaged critics of injustice wherever we see it- particularly towards the poor and the marginalised.

And the beginning of how we can do this is to take a look at the system through a different set of lenses…

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