The issue with “trickle-down” economics and why people need to stand up

First, I need to admit that proponents of economic policies that favor strengthening the supply side–by leaving more of corporate profits in the hands of the owners of production means–never use the term “trickle-down” (theory or economics) themselves. So, yes, you caught me in using a form of newspeak already. On the other hand, even trickle-down seems to be a euphemism at best, given that, over the past 40 or so years, virtually nothing of the gains in incomes–supposedly of those who own much if not most of the production means in the US–has reached ordinary “working people,” those who hold wage-earning jobs and typically do not share in corporate profits directly via held shares.

The problem that I see with the idea of supply side policies is the following hypothetical: imagine that you own a factory producing a good, and that the market is relatively saturated; that is to say, demand is at relatively high but more or less constant levels. Would you be motivated by any additional income to invest into your factories (or to build a new one)? Unless you thought that demand were to increase–which it seems would likely require additional income on the side of the workers to afford additional amounts of your good–my prediction is a clear no. And I have never fully comprehended the argument in the first place.

On the other hand, if you own a factory that produces a good for which the market suggests a growth potential–say, an additional production increase of 20 per cent would not see a large drop in price, meaning that an investment would probably increase profits–then you do not even need additional income. Instead, you are willing to take out a loan (and let’s add to that the fact that we are in a super-low-interest period in history, so you literally get the loan “for free”), make the investment, and pay off the loan from the additional profits.

Unfortunately, much of the corporate media–for understandable reasons–seems unwilling to even ask critical questions these days (which would be worth its own, unrelated blog post…). Instead, we are constantly reminded that to grow the economy–that is to create jobs–the best way would be to lower taxes, such that corporate profits are retained leading to… what exactly? The least problematic outcome, in my opinion at least, would be “luxury spending”: owners (and share holders alike) would use their additional income to stimulate the production of goods that, while not foremost used to improve the lives of the many, certainly could in the long run raise the bar. The reality looks, the way I see it at least, much more bleakly…

Instead of actual investment, that is putting the money to “use” by growing economic output, much of this additional liquidity is going where it has been going for the past decades: fueling bubbles–whether housing, internet, precious metals, futures and derivatives, or what-have-you-not. If you were indeed a factory owner who has already satisfied (almost) all immediate needs in life, what would you do with another billion dollars if not trying to look for “lucrative investment opportunities?”

Coming to the second part of the blog post title… Last night, I went to one of the Our Revolution launch live-stream parties–of which, by the way, I haven’t read a peep in any of the mainstream media I looked at this morning, despite the fact that many seemingly less important items were covered in quite some detail. The main message that Bernie had for those willing to keep up the fight is simple:

The system (not necessarily the individual lobbyists, politicians, and billionaires) will not reform itself from the top-down. The incentives are simply not set up that way. People at the top have no motivation to improve the quality of life for those at the bottom. And that being said, We, the People need to rise up and demand that any such ridiculous policies that have favored growth “at the top”–by giving whimsical, borderline frivolous arguments for those policies benefitting the average income earner; and mostly at the expense of low-income earner due to increased competition from extreme-low-income earners abroad–need to be reversed.

And Bernie also shared a reminder with people: the only true obstacle in the way of progress is the belief that it cannot be achieved in the first place. This is something the media has been adamant about: the system cannot be “reformed” in ways as progressive as Bernie’s platform during the Democratic primary season–and that despite the fact that now many candidates (including some in the GOP) have started to run on proposals that initially came from the progressive movement.

So, yes, if we want “our country back”, we need to get our asses out of our (still too) comfy chairs, forget about how supposedly nothing can be changed, and simply go out and demand change. The main areas of importance remain the same as before Hillary got the nomination: preventing further erosion of national control over trade and financial regulations and liabilities (if you haven’t heard about the investor-state dispute settlement, or ISDS for short, system, please read up on it!), reducing the debt burden, particularly of those who are supposed to build the wealth of the next generation (i.e. student loan forgiveness), and ensuring that after a long “trickle-up” wealth distribution, the balance tips the other way again.

The alternative is to accept a state in which ordinary people have lost and will keep losing perpetually. No-one at the top will stand up for “us”, we have to do it ourselves, and it’s about time, too!