Trickle up Vs. Trickle down Capitalism
Capitalism thus marched across the world gloriously with the
fond notion that if some individuals are allowed to grow exceptionally rich, it
is good for business and prosperity for all would trickle down, bit by bit, as
water does from a leaky jug. This gave birth to the notion of trickle down
capitalism.
How does one distinguish a trickle down version of
capitalism from the trickle up version? It is not all that difficult really. If
the average income and wealth of the few at the top keeps rising while that of others remains stagnant or falls (in real terms adjusted for inflation) then it is the case of a
trickle up economy. It happens when the income of those at the top keeps rising while average incomes do not, or in brief if inequalities are rising. They have been doing so ever since around 1980 in USA. (For precise data on this supported by figures and graphs see here)
Trickle up or Trickle down? |
http://someitemshave.blogspot.in/2012/11/inflation-stealing-from-poor-for-rich.html
How does one know if a government is printing more money
than necessary? Well is there inflation of more than one or two percent around
in your area? If it is then be sure that is what is happening although the guy
controller up there called it something exotic like quantitative easing,
something as glorious as happen when persistent constipation is suddenly
released in massive quantities :).
How can you find out if your country is into easing more than other countries of the world? Well! that is easily determined by checking if your currency is devaluing or appreciating with respect to other countries.
How can you find out if your country is into easing more than other countries of the world? Well! that is easily determined by checking if your currency is devaluing or appreciating with respect to other countries.
How can this trickle up phenomenon be prevented in
capitalistic economies? Well there are several methods to do it. Some are,
- Pass a bill to tax the rich more at a time when most conservative minions of the wealthy are on a holiday to the Bahamas sponsored by corporation club.
- Restrict the top earnings of corporate executives and prevent casinos buffs from managing your bank. A method to do this called the rule of ten, was introduced in this blog a long time ago (search older posts) and the Europeans led by the Swiss have taken a fancy to that notion. or see this older post
- Introduce regulation so that governments can confine themselves to constipative easing (when there is deflation for example) but not quantitative easing so that inflation is kept within a band of one percent.
- Introduce progressive taxation not just for individuals but also corporations that are raking in huge profits.
For more precise recommendations on how to fix inequalities see this
UPDATE January 29, 2014
Just a few minutes ago I heard Aaron Heslehurst on BBC describing
some aspects of the State of the Union address by President Obama. We are
friends and follow each other through twitter and emails. The address seemed to
echo the sentiment of this post – the trickle up nature of the American
Economy, a serious concern although discussed in the lighter vein in the post.
This is what President Obama had to say,
“Today, after four years of economic
growth, corporate profits and stock prices have rarely been higher, and those
at the top have never done better. But average wages have barely budged.
Inequality has deepened. Upward mobility has stalled. The cold, hard fact is
that even in the midst of recovery, too many Americans are working more than
ever just to get by; let alone to get ahead. And too many still aren't working
at all. So our job is to reverse these trends.”
And
“Today the federal minimum wage is
worth about twenty percent less than it was when Ronald Reagan first stood
here. And Tom Harkin and George Miller have a bill to fix that by lifting the
minimum wage to $10.10. It's easy to remember: 10.10. This will help families.”
Although the concern of President Obama in these statements is the same as
this blogger, this author has reservations. The raising of minimum wages can
backfire. It may discourage small businesses from hiring more people and may
help to shut down struggling one. The galloping horse of inequality has to be
tamed from the head too rather than just the tail. Cap the maximum salaries of
executives, raise taxes on the rich and consider a rule similar to the ‘Rule ofTen’ described in this blog.
In conclusion, the world does not need communism but it does need justice and a move away from unfair inequalities, because it is the latter that has led to such extreme responses through human history as communism or severing the head of the queen from her torso when she suggested that people could eat cake when they ran out of bread.
From the author of A brief Introduction to the Economics of Greed and Exploitation
Comments
With Regards
Vinod
The world does need a Bapu (reforming saint) to stir things but I do not know how far voluntary efforts can work with the majority. That would be much to idealistic for the world we live in. What we need is just and fair regulations and systems that also have a fair measure of compassion built into them.
With grateful Regards
Vinod
Heading to check your poem Vinod.