Imagine a snow-capped mountain and tree at its foothill. All of a sudden, the sun appears above, causing the snow to melt into a waterfall or a river that flows through across the land and reaches the roots of the tree located right at the bottom. The tree leaves now bask in the sun and the tree itself rejuvenates with a display of flowers and fruits. It’s a perfect scenario, wherein all factors converge and unite to follow a ‘natural’ course, designed to benefit all that surrounds the space of the mountain.
The adequately melted snow (into water) and a fully-rejuvenated tree could serve as an analogy for understanding ‘trickle-down economics’….
…an accumulation of resources (tax money) or policy-level decisions are designed at the top level of our socio-economic system. These should be collaboratively executed and implemented by institutions like governments, corporates, investors, etc., to benefit the entire society (at the ground-level).However, for the success of these policies, the above mentioned entities need to unite and work together, just like the natural rejuvenation system we mentioned above.
Take the example of, whether FDI should be allowed in India’s organized retail sector, or policy measures like changes in the interest rate by the central bank to curb inflation or AGMs by companies announcing profits made by companies. All of these are based on trickle-down economics, which begins with accumulating something in lump-sum from certain sections of the society (mostly rich), which gets indirectly redistributed to everyone equally. This could be through a cooperative involvement of many people like businesses, researchers, common people, legal entities, etc. This concept however, raises three questions:
Whether is it really possible that everything, that is accumulated, can be redistributed?
Can the redistribution be done equally?
Whether this benefits everyone at an individual level, specifically does it better an individual’s standard of living?
If we look at the world around us and our daily lives, we might find answers to the above questions. It makes us believe that trickle-down economics may not be working adequately and to its potential.
Huge structures fail to do so primarily due to lack of internal cooperation and greed for power causing rivalry within them. Lack of transparency and accountability are other deterrents to the success of the intent of ideas and policies. Rigid structures, made by people have become static like mountains that stubbornly refuse to move or explain their positions. That’s where the ideas fail and debates begin.
Only if nature worked in a similar fashion, mountains would be semi-barren and trees would be pale-green.
By Bhakti Joshi
Foreign Direct Investment
Annual General Meetings that involve disclosure of the companies’ fiscal performance