For a summary of Trickle Down Economics and why it doesn’t work, see the previous post. Or just look it up on Google. The critical articles outnumber the pro articles by about ten to one.

Nobody ever talks about “Trickle Up Economics” (except for Rush Limbaugh, who naturally demonizes it and defines it basically as government handouts to the poor). In fact I may have made the term up. Well … no I don’t think so.  Googling it produces a handful of results, the critical of which tend to follow the “Nothing can be consumed until it is produced” line of thought, -which to me is just counter intuitive.  One might also call Trickle Up “Demand Side Economics”, because it begins with the consumer, -the grass roots, if you will-, and works upward from there.  (Again, the critics say that, no, it begins with the government, -but no more so than the Trickle Down model.  Government initiates action in both cases.)

In order for corporations to expand, they need to respond to an increased demand. No matter how many incentives you give businesses, if the demand is not there, it won’t work. In fact, if the demand is not there the incentives tend to be pocketed as increased profits. In Trickle Down, the idea is usually that incentives to corporations will produce more jobs, which will give the mass of consumers more spending power, which will in turn grow the economy. Except that the premise, that incentives turn into jobs, is very highly disputed.

Might the opposite approach hold more promise? Instead of giving wealthy corporations more incentives, give the incentives to he consumer. A tax incentive that encourages consumers to upgrade energy efficient appliances or make other purchases, directly stimulates the market and can unavoidably lead to more purchasing from corporations. You don’t need a PhD in Economics to see that this will immediately lead to increased production and probably jobs. And there you have it, economic growth.

While the original stimulus may not continue indefinitely, the increased employment rate will stimulate the economy by itself and be longer lasting. As a strategy, it seems to have fewer steps and be far more direct. Both strategies involve the government offering tax dollars to stimulate the economy, but in Trickle Up that money goes to consumers who are likely to utilize it rather than corporations that seem content with squirreling it away.

Plus you have the added bonus of giving consumers an incentive to aim their purchases towards worthy social goals and perhaps even lowering their debt load. The reason that green incentives to corporations don’t work very well is that there is often not the demand necessary to make start ups successful.

One other important form of Trickle Up Economics comes from the field of education. I strongly feel that education is the most important investment that our society can make. Not only is it an investment in the skills and innovation that future generations will have, but is also a positive social influence in things like crime rates. Personally, I think that school funding should be doubled. It is worth every penny. (Of course it needs to be done efficiently and effectively.) You need the best teachers and the best resources. The businesses and corporations will ultimately benefit from a more prepared work force, which will boost their productivity and profits. They should contribute more to education. In Europe they do.

Nothing could be more “Trickle Up” than Education. Investment at the grass roots, consumer level to insure the best possible education will trickle up to benefit the country economically, socially, not to mention personally. One can see the devastating implications of failure to do this just by looking around the world at places that have dropped the ball on this one. The places that are the most dictatorial and underdeveloped are also the places where education is suppressed or struggling.

Paying attention to the people who are on the “Demand” side of the Economics equation doesn’t put more money into the profits of big corporations. It doesn’t widen the wage/wealth disparity that seems to be growing. It doesn’t promote cutting away essential services at schools and other places. But it does seem to be a simple, direct way of growing the economy (rather than the corporate sphere).

There don’t seem to be any graphics or comics for “Trickle Up”.

  1. Eric Saunders says:

    The very poor have no choice but to enter into the economy immediately because they buy what is necessary like food, clothes, and shelter.

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