The Broken Promise of Trickle Down Economics Part 1

Trickle-down economics is a theory, that has roots in neo-liberalism, and argues for income and capital gains tax breaks or other financial benefits to large businesses, investors and entrepreneurs in order to stimulate economic growth. However, trickle down economics has been debunked in recent years. In fact, it has been argued that neoliberal economic globalization with its free market ideology failed to deliver the promise of “trickle-down” wealth. It’s important to note that the concept of “neo-liberalism” can be used to describe or refer to religious, political or economic ideas. For the sake of this article, the focus will be on neo-liberalism as a general economic ideology and more specifically how it relates to the policies of the so-called promise of trickle-down economics. 

Investopedia defines neo-liberalism as: “An approach to economics and social studies in which control of economic factors is shifted from the public sector to the private sector. Drawing upon principles of neoclassical economics; neo-liberalism suggests that governments reduce deficit spending, limit subsidies, reform tax law to broaden the tax base, remove fixed exchange rates, open up markets to trade by limiting protectionism, privatize state-run business, allow private property and back deregulation.”

Activists by Elizabeth Martinez and Arnoldo Garcia from Corporate Watch outline this definition of neoliberalism and include the following five core principles:

·      The rule of the market,

·      Reducing public expenditure for social services by the government,

·      Deregulation,

·      Privatization of public enterprise, and

·      Changing perceptions of public and community good to individualism and individual responsibility.

We can clearly see how the above definition of neo-liberalism as an ideology or perspective places the greatest importance on the “freeing up” of the economy. What this essentially means is that, the proponents of Neoliberal economic globalization argue, “The best way to help the poor is to make the economy grow. They believe in trickle-down economics. Eventually, it is asserted, the benefits of that growth trickle down even to the poor.” (Stiglitz)

In order to analyze how the core principles of neoliberal globalization failed to deliver on this promise of ‘trickle-down economics’. Economists Joseph Stiglitz and Michel Chossudovsky, both in their respective books “Globalization and its discontents” and “The Globalization of Poverty And New World Order” focus on the role of the global actors like the WTO, IMF, WB, and the effects of the free trade agreements like GATT and NAFTA and macroeconomic structural adjustment reforms on national and local communities to critique how the neoliberal economic globalization failed to deliver the promise of “trickle-down” wealth. After assessing the proposed failure(s) of the neoliberal economic globalization as argued by both Stiglitz and Chossudovsky, it is the intent of this article to state whether or not effects such as mass impoverishment of over hundred countries and the extreme poverty of over one billion of people worldwide, amount to a form of ‘economic genocide.’

The first core principle in neoliberal economic globalization is the supremacy of the rule of the market, wherein the market is allowed to behave without the imposition of governmental interference. (The other four principles will be expanded on in subsequent posts) The idea being that the market is the most efficient mechanism that increases economic growth and therefore benefits everyone. Martinez and Garcia state that this ultimately means liberation from the bonds imposed by the government no matter how much social damage this causes. This core principle proposes greater openness to international trade and investment, as in NAFTA. It also contends that wages be reduced by de-unionizing workers and eliminating workers' rights that had been won over many years of struggle. This suggests that price controls would also disappear. The end goal is one that highlights total freedom of movement for capital, goods and services.


Ronald Reagan, former US president was a huge proponent and the public face of trickle down economics. He often contended the importance of focusing on the supply side suggesting that an unregulated market is the best way to increase economic growth and benefit everyone. But a purely free market does not exist.


Kaha Haji-Mohamed

Works Cited

Chossudovsky, Michel. The Globalization of Poverty And New World Order. Shanty Bay, On: Global Outlook, 2003. Print.

Investopedia. Neoliberalism. Investopedia US: Web. 19 February 2015. This article is a definition located in the main website's "Dictionary" section

Martinez, Elizabeth & Arnoldo Garcia. What is Neoliberalism? CorpWatch 27 July 1997. Web. 21 Feb. 2015

Stiglitz, Joseph. Globalization and its discontents. New York: W.W. Norton, 2002. Print.

Picture titled, "Globalization", taken by Abadi Moustapha on December 30, 2006, obtained through Creative Commons (