About a month ago, on The Morning Brew talk-show, Prime Minister Dr. Keith Rowley defended his “we must allow the rich to get richer” comment.
When pressed by the host to expand on his comment he said “If people have to be employed, somebody has to employ them; they don’t employ themselves and pay themselves…if there are rich people, meaning people who have money, and they want to put that money out there to do something with it, that automatically creates opportunities for other people.” (link here)
What the Prime Minister outlined is a theory of economics known as Trickle-Down Economics. Trickle-down economic theory suggests that if the rich gets richer the country’s wealth would eventually flow down to benefit middle- to low- income earners.
The problem is that while the theory seems to make sense, it’s actually been proven to have the opposite impact.
A study published by the London School of Economics (LSE) which spans 50 years and 18 countries definitively proves that trickle-down economics doesn’t work. It’s actually shown to increase inequality. It also shows zero improvement in GDP per capita, unemployment rates and consumer spending.
What this means is that when governments allow the rich to get richer, they (the rich) hoard the country’s wealth. Trickle-down economics doesn’t make the rich hire more people or contribute to social services; it makes them invest in things which only benefits them.
The International Monetary Fund also rejects the trickle-down theory. In its report authored by five economists, it argues that “…increasing the income share of the poor and the middle class actually increases growth while a rising income share of the top 20 percent results in lower growth — that is, when the rich get richer, benefits do not trickle down.” The IMF’s fight against income inequality revolves around the fact that a healthy middle class is the main driver of the economy.
This makes sense if you think about it…
Let’s pretend you’re the owner of a chain of restaurants. What will incentivize you to higher more employees
1. if your taxes are lowered
2. If you have more customers in your restaurants
If your taxes are lowered but you have no customers, you have no real need to hire more employees so you will hold on to that extra income. But you will hire more employees if you have more customers.
Which is what the LSE study proves- social and economic incentives for the lower and middle class leads to a healthier economy.
Which brings us to the Alternative to Trickle-Down Economics…
It’s a theory which author Robert Reich refers to as Rise-Up economics. It shows that public investments in social services like hospitals, schools and infrastructure, and reducing taxes to the lower and middle classes are proven to grow the economy.
Rise-Up economics is also the theory on which Dr. Eric Williams and other leaders founded our country.
Although they referred to it as Pragmatic Socialism, it held the same emphasis on strengthening social services, reducing poverty and creating a strong middle class. As a reader of Eric Williams’ work, it’s been disappointing to see how far the party he founded has strayed from his ideals.
It is downright unconscionable that our Prime Minister would advocate for trickle-down economics right now. We all know that the Covid-19 pandemic and the accompanying economic recession has increased the wealth gap and pushed more people into poverty.
So why is the Prime Minister defending this debunked theory that the rich need to get richer?
Does he not know better?
I don’t think so.
He’s holding on to this belief because it’s a convenient hoax designed to further enrich his wealthy friends, financiers and their businesses.
By now every Trinbagonian is aware of the power of wealthy individuals to shape political policies in their favor through personal and campaign contributions. It’s called corruption. And although many of us in Trinidad and Tobago have resigned ourselves to government corruption, we still have a responsibility to call it out.
It should be clear by now that an upward transfer of wealth is the last thing we need. At some point we need to find the courage to fight for what we deserve. I’m not sure when the country will be ready but I know I am. I sincerely hope you’ll join me.