TRICKLE - DOWN ECONOMICS NEVER WORKS
19 July 2016 | Local News
The belief that reducing tax burdens on the well-off is good to everyone is a dangerous kind of economic-success idea and should have no place in the hearts of those who wish to see their countries grow into successful nations whose success story can serve as a source of inspiration to every country. This ‘Trickle-Down’ economic belief that it is good to relatively give a greater and bigger pie to the top of the economic spectrum is dangerously naïve. The notion that the absolute sizes of the remaining share in the country will then grow has given some moral players, most notably the International Monetary Fund and the World Bank the reason to doubt the future of the African continent.
The idea that cutting taxes for the rich is a good way to both raise revenue for the governments and create jobs for the unemployed has been viciously discredited by the International Monetary Fund. And because of that, we now do not need the expert advice from the IMF to realize that those with more money need to pay more tax than those with less. The idea of reckless financial borrowing has also received its fair share of criticism from academics and scholars alike. Nonetheless, most African countries continue to borrow huge amounts of money from the western donors while being fully aware that donors do not and never will lend out money without any incentives attached to it. Some African countries have even gone as far as measuring their economic successes in the most dangerous of ways; the idea that economic success can be measured by the number of millionaires the country has instead of the number of opportunities provided to everyone who works hard to have a fair chance of succeeding.
Yes, through hard work and life sacrifices, each of us can achieve our individual dreams. But the realities of today’s struggles have led to many people being labeled as “complainers”. A label which should not exist in the minds of every human being who views everyday struggles as something which can be defeated. In many African countries, the gap between the rich and the poor continues to sky rocket at a very disheartening rate.
As Africans and more specifically those in the corridors of authority, we should get away with the idea that if a few people succeed, then everyone else benefits. That kind of belief is dangerous for our future; top-down economic growth never works, it never did and never will. Trickle-down economics may have been famously coined during the Ronald Reagan Administration in the United States, but we have seen it race through the streets of African countries too. That is something that has to change if we are really serious about defeating our struggles because the world is moving forward and we must move with it even if it means embarking on the chameleon walk.
According to the International Monetary Fund and the World Bank, “countries looking to boost economic growth should concentrate their efforts on lower segments of society rather than bolstering the so called “job creators” with tax breaks. Widening the income inequality is the defining challenge of our generation”. This message of these global financial institutions is clear, should be heard by everyone who listens and needs no layman’s language explanation to be fully understood. With the extreme inequality in many African countries, individuals have an incentive to divert their efforts toward securing a favoured treatment and protection, failure to which may result in resource misallocation, corruption and nepotism which can so easily cause catastrophic consequences. Should such happen, citizens can begin to lose confidence in governmental institutions and ultimately in their very own future if their pleas keep on failing on deaf ears. What’s chocking is that while the inequality gap has become a hot topic world over - from the world’s number one economies to the third world countries like Haiti. In Africa, it is still unclear whether large scale policy changes will be made or bills will be passed to address the problem which continues to steal the future of too many people who could be good economic growth contributors.
Joseph Kalimbwe is a final year student studying towards a Bachelor of Public Management at the University of Namibia.