One of the controversial things about neoliberalism that Ronald Reagan championed, and that NAFTA embraced is the debate that trickle down economics is a failure. The argument that trickle down economic doesn’t work is based on a misleading argument.
Trickle down economics do not work is the prevailing argument. The individuals who embrace this notion either argue that there is no such thing, or that trickle-down economics hurts the workers in the lower tiers.
But both arguments have been proved wrong by the Corona pandemic.
The stock market is down by all measurable metrics. It is the worst it has been in decades. Why?
Because of trickle down economics.
Consider the following.
Airlines and cruise ship stocks are down because people are not traveling. Entertainment venues are also hurting as well as other businesses. But the stores are so overloaded with customers that they must shut down early to restock merchandise. Even then, the shelves are empty.
But the economy is hurting on all sectors, including grocery stores, transportation – which brings in the toilet paper – and consumables and even the elective medical sectors. Why?
Because trickle down economy means that when the airlines stop transporting passengers, their revenue losses trickle down beyond the airline industry.
For example, as the cabin crews are furloughed or laid off the restaurants they frequent or the hotels that they stay at while working lose revenues. At home, the cabin crews cut back on groceries, entertainment and other expenses as their income goes down because they are not working. The hotels put workers on leave and their lost income do not continue to trickle down through their neighborhoods at the taco trucks or the local restaurants that they generally frequent.
Now take those examples and expand them through the Ubur drivers who are not getting passengers, or the dock workers who aren’t working the docks because the cruise ships aren’t docking. Take the example through the mom-and-pop restaurants that aren’t serving customers, and on down to the handymen that aren’t getting calls or the waiters and waitresses that aren’t making tips and it clearly lays out why trickle down economics is a real thing.
If trickle down economics did not exist, then the stock market would not be responding to the Corona Virus emergency in such a negative fashion.
Trickle down economics is an important element of the free market. The Corona Virus has proven this.