trickle down myth

This morning I read an interesting opinion piece by Paul Krugman that helps explain why trickle-down economics — so favored by conservatives as the recovery silver bullet — don’t work in the 21st-century market. Profits are no longer tied to production or employment, so companies — like huge financial institutions or, in his example, Apple Computer — aren’t reinvesting their profits by building more factories or hiring more workers. Giving tax benefits or exemptions to corporate “people” doesn’t necessarily help the real people in America. In addition, many of the companies that do still produce something (e.g., Apple) send many of their production dollars overseas. Yet those workers aren’t benefitting from the profit margins either.

I’ve observed over time that Reaganomics doesn’t work. No, I’m not an economist. But I’ve lived as a working adult through the 80s and beyond, and I’ve watched prices and rents rise without seeing those increases reflected in the minimum wage or other wages for the middle and working classes. This is not a scientific observation, but I don’t think we’d have people living in tents on the Wall Street if the system were functioning as idealized.

In future columns, Krugman promises to reflect on how this revelation affects policy. I’ll be reading…

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3 thoughts on “trickle down myth

  1. I totally agree! It doesn’t work. People who believe it are either naive or in denial.

    Let’s hope this revelation (that many of us have known for decades) actually DOES reflect policy, and stops being promoted as some sort of answer.

    • Thanks, Kim, for your reply. The economy is a complex organism that shouldn’t be motivated solely by efficiency and profit. Our humanity needs to enter into the picture somehow. See also Atkinson and Lind’s article on Salon: “Econ 101 is Killing America.”

  2. Very interesting article. Thanks. It makes me think about all those economics courses I took in college and grad school – really, they were talking about the market, not government and social service. Working in the nonprofit sector for the last 13 years, over and again I’ve heard well-meaning, intelligent people say, “Nonprofits should work more like businesses.” I always respond by saying, “So, are you saying that we should not provide services to those who cannot afford to purchase them?” I know that isn’t what they are saying, but the free market doesn’t apply to social service…maybe in some marketing techniques or such, but the foundation of charity (and government) cannot be based in a market-driven model.

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