Article Summary and Reflection

Article Summary and Reflection

Article Summary

In his article, ‘The wealth that failed to trickle down’, Ben Chu opines that whereas the rich have a tendency to get even richer, the poor have remained poor. The trickle-down effect hinges on the premise that giving a tax break to the rich will lead to increased entrepreneurship and spending, leading to additional jobs and investments (Lannister 2015). Consequently, the economy grows faster. However, Chu (2015) opines that the rich end up saving a huge chunk of the tax cut, which they then invest in tax havens and assets. Thus, the rich get even richer, resulting in greater inequality as the poor get into even more debt. This leads to slower economic growth and could trigger a possible financial crisis.

Reflection

Reading through this article was quite insightful in that I had not seen the idea of giving tax breaks to the rich as a strategy to stimulate economic growth. However, with the benefit of hindsight, I now believe that such an idea can only work in a capitalist economy where the rich own the means of production which the poor depend on for their livelihoods. That said, I have also been rather surprised that prior to the Thatcher and Reagan era, the rate of tax stood at 50 percent, something that must have obviously stifled the entrepreneurial spirit. Since the slashing of the tax by these governments, the rich seem to have grown even richer while the poor have remained poorer, thereby backing the claim that the trickle-down effect theory is only good on paper.  This is a problem that I can identify with in my own country where the rich invest in material possessions such as bigger houses and expensive vehicles from the proceeds of their business ventures instead of expanding the enterprise and raising wages.

References

Chu, B (2015). The wealth that that failed to trickle down: The rich do get richer while poor stay poor, report suggests. [Online].

Lannister, D (2015). How To Get To The Top. [Online].