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Can trickle-up economics work?
published: Saturday | October 1, 2005
THE DRAMATIC changes being required for economic restructuring in the twenty-first century have thrown up the question of what steps are required to achieve economic development. Note I said economic development, and not economic growth, as the latter is quite possible (given that Jamaica has had such growth, even if it's anaemic), but it can also result in widening income inequalities, and still leave many of a country's citizens no better off than they were before such growth.
It is plain that the current steps are either not working or will take decades to accomplish substantial change and, in the meanwhile there will be a continuation of mayhem and destruction by a violent minority. So, the question comes up, can 'trickle-up economics' work, as a development option?
What is trickle-up economics is a question that no doubt many of you are thinking. Most will have at least heard of 'trickle-down economics', where the rationale was that as the rich became wealthier, they would eventually turn this wealth into the creation of investments and lead to those income groups below them acquiring jobs and raising their own incomes.
Trickle-down economics was quite a popular slogan under "Reaganomics', with tax cuts for the wealthy. But it did not work out as well as it was supposed to. Oh, the rich got richer all right, but instead of the bulk of their extra money going into productive investments and creating more jobs, it led to a decade of the 'lifestyles of the rich and famous', with more palatial homes, yachts and planes, a booming stockmarket, but worsening unemployment rates.
GRASSROOTS
Trickle-up economics is trying to reverse that concept with 'development from below'. It seeks to push development from the grassroots up, rather than have development emanating from above. The problem is that on a macro-economic basis, it is much more difficult to work than on a micro-economic basis. By this I mean that while there can be individual success cases at the microeconomic level (with say co-operative successes), it is difficult to replicate that success across the board at the national level.
It is a slow, agonising process to restructure your health, education and other social sectors to achieve genuine development, much less to restructure your productive sector to achieve take-off, against a historical background of warped relations between the owners of capital and labour, as well as the Government. It is worse when that economy operates in a far more hostile world of slower global economic growth, high oil-prices, greater vulnerability to external shocks, a significant debt burden, and declining key export prices for major commodities such as sugar and bananas.
This is what trickle up economics will have to tackle in a manner that raises productivity so fast, that it can attract investment (especially internally), create a myriad of jobs, and boost output. The question of visionary leadership also comes up, as without an efficient and honest public administration, all the gains that are made can be easily frittered away.
So, we go back to the question, can trickle-up economics work? Can it produce a ground-swell of change that forces the current leaders to be caught up in its tide and facilitate the changes that are necessary for economic development, or will it be stymied by apathy?
Taken from the Financial Gleaner, Friday, September 30, 2005
published: Saturday | October 1, 2005
THE DRAMATIC changes being required for economic restructuring in the twenty-first century have thrown up the question of what steps are required to achieve economic development. Note I said economic development, and not economic growth, as the latter is quite possible (given that Jamaica has had such growth, even if it's anaemic), but it can also result in widening income inequalities, and still leave many of a country's citizens no better off than they were before such growth.
It is plain that the current steps are either not working or will take decades to accomplish substantial change and, in the meanwhile there will be a continuation of mayhem and destruction by a violent minority. So, the question comes up, can 'trickle-up economics' work, as a development option?
What is trickle-up economics is a question that no doubt many of you are thinking. Most will have at least heard of 'trickle-down economics', where the rationale was that as the rich became wealthier, they would eventually turn this wealth into the creation of investments and lead to those income groups below them acquiring jobs and raising their own incomes.
Trickle-down economics was quite a popular slogan under "Reaganomics', with tax cuts for the wealthy. But it did not work out as well as it was supposed to. Oh, the rich got richer all right, but instead of the bulk of their extra money going into productive investments and creating more jobs, it led to a decade of the 'lifestyles of the rich and famous', with more palatial homes, yachts and planes, a booming stockmarket, but worsening unemployment rates.
GRASSROOTS
Trickle-up economics is trying to reverse that concept with 'development from below'. It seeks to push development from the grassroots up, rather than have development emanating from above. The problem is that on a macro-economic basis, it is much more difficult to work than on a micro-economic basis. By this I mean that while there can be individual success cases at the microeconomic level (with say co-operative successes), it is difficult to replicate that success across the board at the national level.
It is a slow, agonising process to restructure your health, education and other social sectors to achieve genuine development, much less to restructure your productive sector to achieve take-off, against a historical background of warped relations between the owners of capital and labour, as well as the Government. It is worse when that economy operates in a far more hostile world of slower global economic growth, high oil-prices, greater vulnerability to external shocks, a significant debt burden, and declining key export prices for major commodities such as sugar and bananas.
This is what trickle up economics will have to tackle in a manner that raises productivity so fast, that it can attract investment (especially internally), create a myriad of jobs, and boost output. The question of visionary leadership also comes up, as without an efficient and honest public administration, all the gains that are made can be easily frittered away.
So, we go back to the question, can trickle-up economics work? Can it produce a ground-swell of change that forces the current leaders to be caught up in its tide and facilitate the changes that are necessary for economic development, or will it be stymied by apathy?
Taken from the Financial Gleaner, Friday, September 30, 2005
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