The True History of Trickle Down
As many have pointed out, it’s hard to understand how trickle-down economics continues to persist in the absence of any demonstrable success. Money is of course an answer, but actually there’s a genealogy to it.
I recently came across a book that helped make the point. It wasn’t an economics book, it was a novel—The Wooden Shepherdess by Richard Hughes. Hughes was a comfortably upper-class Oxford graduate who spent much of his life in his castle in Wales. The Wooden Shepherdess is a fictionalized account of the Prohibition era in the US and of England and Germany as Nazism was growing in the thirties. Interesting times.
What’s most striking about the book, though, is its attitude toward class. The author is perfectly clear about the grotesque inequality of the time and even sympathetic to the poor. But he has an out: that’s just the way it has to be. It’s either this or chaos, so you’ve got to have this. The speaking voice has no crisis of conscience, no concern about moral issues, no need to think much about it at all. It just has to be.
At first that attitude seems strange—until you realize that trickle-down is only a repackaging of the same thing. Sure there’s inequality, sure it’s growing, sure the minimum wage is ridiculous, sure 44% of the work force is in low-wage, dead-end jobs. It all doesn’t matter. We need the Gods at the top, or it all collapses. It just has to be.
I once wrote a piece called “Sacrifices to the Gods of Jobs”. There’s something in humans that wants to solve all problems by placating the heavenly or earthly powers that be. That’s why it’s so tough to fight trickle-down. And those Gods will ride it for all they can get.
Policy Issues for Iran Apply Also to China
Paul Krugman had a well-expressed comment about how we as a country often misunderstand the effects of foreign policy. As he put it, we frequently don’t want to acknowledge that “we’re not the only country whose citizens would rather pay a heavy price, in money and even in blood, than make what they see as humiliating concessions.” His piece was largely about Iran, but the blindness is even greater for China.
After Trump declared he was going to destroy their economy and there was nothing they could do about it, their behavior got worse. It was not surprising that hard liners advocating complete self-sufficiency were proven right, and that intellectual property theft became a national imperative. It’s precisely the blindness Krugman mentions to expect anything else.
Nonetheless, both the left-wing and the right-wing have signed onto the economic war with fervor. The press doesn’t dare talk about anything else. A weird aspect of it is that we seem to believe we’re defending the Chinese population against the totalitarian government—whereas the population has in fact reacted as Krugman described. That’s one reason we’ve lost essentially all leverage on Hong Kong and the Uighurs.
We are correct in defending our interests with China, but the point here is that an economic war is a poor way to do it. In actual results (IP theft and trade imbalance) we’re doing much worse than before Trump. What’s more, both countries need to be able to work together on areas of common interest—such as climate change, where things have gone badly backwards. Our economic crusade is about as useful as the Medieval ones.
Squandering the Future
Now that Iraqis have decided they’ve had enough of the American presence, it’s a good time to look at the legacy of the Iraq war and other ways we’ve squandered our national wealth. We’re not the first country to impoverish ourselves through war and other profligacy, but—by the silence of the press—we seem to be among the most thoroughly unaware.
In Iraq we fought a $3T war whose primary beneficiary was Iran. The war was financed off-budget, without any real supervision of financial consequences. Looking at the current state of the Middle East, it’s hard to see any US benefit but easy to find costs in bad will. For the Iraqis it was an ongoing disaster from which they are still trying to recover. For Iran it solidified, even institutionalized, their influence in Iraq.
Because of that war we ran huge deficits in good times. That, combined with the later Republican “balanced budget” hypocrisy, has left the country in a persistent state of public-sector poverty. Education and infrastructure funding are inadequate at all levels, and we just can’t come up with the money to fix it. Nonetheless, after delivering both the war and the 2008 crash, George W. Bush has been rehabilitated to the point of canonization, and the Republican party has succeeded in removing all trace of his failures from public memory.
That’s convenient, because they went and did it again. Trump’s tax cuts were a $1.5T ongoing present to businesses, who have chosen not to invest it in our future. Instead they effectively passed it through to their rich investors via stock buybacks. No investment in the businesses, and no money available for public infrastructure of any kind. The money is gone. And, as far as press coverage is concerned, without a trace.
That’s $4.5T in lost opportunities. It has consequences we see every day. The American Society of Civil Engineers keeps a web site with a breakdown of national infrastructure requirements. We currently rate a D+. We’ve got parents desperate to get their kids in top private colleges, because we won’t support enough first-class public institutions. And that’s not even talking about what’s necessary to combat climate change—which of course can’t be mentioned.
We don’t actually have a great economy. We’re living on credit off the achievements of the past—with more than a little help from the hated immigrants. We can talk about the evil Chinese all we want, but if we fall behind in that contest, it will be because we refuse to invest in the country and continue to give away the store.