How Bad is Trickle-Down Economics?

Trickle-what???

What the hell is that? It's a deceptive argument that the economy can grow a lot faster if we keep on reducing the top tax rates. It was first tried by Ronald Reagan in the 1980s and failed miserably. For example the national debt of the US increased from $1 trillion to $4 trillion over a 12-year period. This regressive taxation regime was reveresed as from 1993 when one William Jefferson Clinton won the Presidential elections. And what has been its impact on Mauritius?

It Has Screwed Up Our Economy

Well, you've seen what it has done to our country after Sithanen implemented a pretty barbaric version of it as from 2006 -- the flat tax -- with the blessing of one crypto-socialist. The bottom line is that we ended up with the smallest national cake baked over a five-year period as far back as we can remember and the cake-cutting was pretty bad too. At the end of 2012 there was already a cumulative GDP shortfall of about 275 billion rupees -- that's the GDP of Mauritius for 2008 by the way -- with respect to the promised 8% robust growth trajectory. If we make the very conservative assumption that government would have reduced its revenue collections to 15% of GDP this translates into a revenue shortfall of over 40 billion rupees -- you multiply the last two numbers. 54 billions if it kept its revenue share of GDP at 20%. 

That's a lot of money. For instance the 1,600 kms of leaking pipes that the CWA has to change will cost only 19 billion rupees. So there would have been more than enough money left over to beef up our public utilities and help our friends in Fond du Sac avoid losing everything twice. And do a million other mindful things to push Mauritius forward. PPS would not have been told repeatedly by the NDU or their Ministers of Finance that there is no money. For all these years. Call Services Limited would also have had a much easier time.

In Falafel We Trust

These numbers also put in a new perspective a claim made by Ali Mansoor back in 2008 that our water problem is mostly a systemic problem of management and implementation instead of one of lack of funds. Yeah, right. If you hadn't understood why people have said that the best thing that could happen to the headquarters of the World Bank and its toxic sister the IMF was that it was turned into a shopping mall where falafel -- a cousin of gato-pima -- could be sold now you know. Hopefully Mansoor or Sithanen will tell us their estimates of the GDP and revenue gaps that their toxic policies have generated.  

Doesn't This Sound Familiar?

I guess you've noticed that the claim made by Mansoor is quite similar to the rubbish that Collendavelloo -- probably the most unpopular guy in the country for the past several months -- has been blurting out for a long time now. Why is this guy still a Minister? Hasn't he made the country lose enough time? He seemed to have forgotten how to resign. Never mind, PJ can sack him and try Sangeet Fowdar instead. This should improve his approval ratings immediately. What will the ML MPs do, leave government? Not all of them will. Indeed initial results of a poll that's currently running on /kozelidir.blogspot.com suggests that Gayan might be the only one accompanying his leader into the opposition. This will obviously lead to the implosion of that party.

Tiny Progress For the Poorest 10%

The flat tax did a lot worse than generate the smallest national cake in decades. It also produced the smallest progress for the poorest 10% of us. For the five and half years ending in 2012 they saw their real disposable income increase by less than 7%. Compared to the 30% increase for the 10% richest. So it's not exactly been Robin des bois. This horrific increase in inequality, if left unchecked, spells trouble today and tomorrow. Any right-thinking person will agree. Here's what a guy who currently works in Europe had to say:

"54. In this context, some people continue to defend trickle-down theories which assume that economic growth, encouraged by a free market, will inevitably succeed in bringing about greater justice and inclusiveness in the world. This opinion, which has never been confirmed by the facts, expresses a crude and naïve trust in the goodness of those wielding economic power and in the sacralized workings of the prevailing economic system. Meanwhile, the excluded are still waiting. To sustain a lifestyle which excludes others, or to sustain enthusiasm for that selfish ideal, a globalization of indifference has developed. Almost without being aware of it, we end up being incapable of feeling compassion at the outcry of the poor, weeping for other people’s pain, and feeling a need to help them, as though all this were someone else’s responsibility and not our own. The culture of prosperity deadens us; we are thrilled if the market offers us something new to purchase. In the meantime all those lives stunted for lack of opportunity seem a mere spectacle; they fail to move us.

55. One cause of this situation is found in our relationship with money, since we calmly accept its dominion over ourselves and our societies. The current financial crisis can make us overlook the fact that it originated in a profound human crisis: the denial of the primacy of the human person! We have created new idols. The worship of the ancient golden calf (cf. Ex 32:1-35) has returned in a new and ruthless guise in the idolatry of money and the dictatorship of an impersonal economy lacking a truly human purpose. The worldwide crisis affecting finance and the economy lays bare their imbalances and, above all, their lack of real concern for human beings; man is reduced to one of his needs alone: consumption."

56. While the earnings of a minority are growing exponentially, so too is the gap separating the majority from the prosperity enjoyed by those happy few. This imbalance is the result of ideologies which defend the absolute autonomy of the marketplace and financial speculation. Consequently, they reject the right of states, charged with vigilance for the common good, to exercise any form of control. A new tyranny is thus born, invisible and often virtual, which unilaterally and relentlessly imposes its own laws and rules. Debt and the accumulation of interest also make it difficult for countries to realize the potential of their own economies and keep citizens from enjoying their real purchasing power. To all this we can add widespread corruption and self-serving tax evasion, which have taken on worldwide dimensions. The thirst for power and possessions knows no limits. In this system, which tends to devour everything which stands in the way of increased profits, whatever is fragile, like the environment, is defenseless before the interests of a deified market, which become the only rule."

Pope Francis, Apostolic Exhortation 2013.