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craig hawkins

Certified Financial Planner, Certified Financial Planners Board of Standards, Inc.

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Trickle Down Economics - Where is it successfully practiced?

I work with many Conservatives and I've been asking the same question for over 20 years. Where is Supply Side Economics practiced and what are the conditions of that community? I was very disappointed with TED for not posting Nick Hanauers Talk - Income InEquality. We all know the corporate sponsors would have been upset, but restore the "Fairness Doctrine". "Ideas Worth Spreading", live up to the name and offer both sides. Have someone like Arthur Laffer come to TED and present the counter balance of this discussion. I know the talk boarders on line of Political speak but ideas worth discussing.

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    Aug 28 2012: The short answer is nowhere.

    Money doesn't trickle down, it trickles up. If money trickled down then rich people would be getting poorer and poor people would be getting richer. If you can find a country where that is happening then you will find the trickle down theory actually describing something happening in the real world.

    In general, supply side economic policies have been put in place all over the world since the days of Reagan, Thatcher and Mulroney. There hasn't been a whole lot of trickling down, but an genuine investigation into the consequences of of those policies couldn't hurt.
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      Aug 28 2012: it happened in many countries. just look at the income distribution of medieval times. there were peasants and there were the noble. income was separated by a gaping hole. then it was changed as cities developed. capitalism created the middle class in the 18th-19th century, hard to pinpoint the exact time.

      it does not happen today in the US. it is a good question why. why would the system that created the middle class suddenly destroy it? can we suspect something else?
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        Sep 2 2012: From the middle ages to the 19th century, thats a pretty big jump in history. Wars were fought, discovories were made, continents were colonized, empires were over turned.

        Did capitalism cause a trickle down effect in the 18th and 19th centuries? Assuming you are talking about America, there was a lot more going on than just capitalism. There was oppurtunity for poor people, but it was built on conquest more than capitalism. The government was giving away free land which was stolen from the indiginous people. There were resources that were unvalued by those people, and so were left in abundance to be taken by the european immigrants. The most obvious was gold, but also there was coal, iron, and the most astonishing lumber on the west coast the europeans had ever seen.

        Of course, rise of the american economy during that time was also built on slavery. How do they figure into the trickle down effect?

        By the beginning of the 20th century wealth had been centralized again to unsustainable levels and the economy collapsed. The middle class was almost non existant. It was only the post depression reforms that lead to the strengthening of the middle class and a prosperous post war period. Those very reforms have been undone using the "trickle down theory" as justification and now the middle class is in danger again. Inequality is as great as it was in the days just prior to the great depression.
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          Sep 2 2012: no jump there, but hundreds of years of increasingly capitalist economy. in free market capitalism, there is no up or down trickle, that was not my point. my point was that the poor got richer. that was the great achievement of capitalism. increased consumption for the masses.

          there are many attempts to attribute the success of capitalism to slavery or colonialism. however, neither of these can explain what happened. there was no slavery in europe in the 1800!s, and there was no colonialism in germany or the US at that time. this is nothing but a copout answer, so we don't have to answer to the question, how could the world develop the fastest under free market, if we want to blame bad things on the free market?
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        Sep 9 2012: A lot more happened between the middle ages and the 19th century than "hundreds of years of increasingly capitalist economy". That's a gross simplification of history. Economies are not simply driven by ideologies and economic systems. Economies result from many factors, including wars, plagues, famines, technology, religions, weather, and revolutions.

        Are you arguing that colonialism and slavery had no effect on the economy? Your ideology is blurring your vision of history. There is no single factor responsible for the rise of the economy in any time period. You may argue that capitalism allowed for the industrial revolution. It could be that Isaac Newton made a greater contribution with the invention of calculus and understanding of the behavior forces that allowed for the invention of the steam engine.

        Of course there is also democracy. Through democracy people in power actually have an incentive to try to benefit the poor. After all, capitalism did not benefit African Americans, Native Americans or even women in 19th century America, and neither did democracy. It was only in the 20th century when those populations gained the right to vote that they started to see some of the benefits.

        Finally, we have to remember that unfettered capitalism failed. It collapsed in the great depression. It was only after the great depression that it became clear that the invisible hand doesn't exist and it is possible for people pursuing mutual self interest can lead to mutual self destruction. Capitalism is useful, and beneficial, but it must be kept on a short leash by a strong democratic government.
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          Sep 9 2012: "wars, plagues, famines, technology, religions, weather, and revolutions"

          technology is a result of the free market economies. the other tried to stop us, but free market prevailed.

          " colonialism and slavery had no effect on the economy?"

          negligible. colonies were far away, no capital goods could be moved from there. gold and spices don't spin up the economy. in fact colonialism cost resources. the US north was more advanced than the US south. also many european countries developed fast without slaves. it is not a factor.

          "Of course there is also democracy"

          democracy is much newer. great progress already happened in the 1800's and before.

          " we have to remember that unfettered capitalism failed"

          despite it never existed? strange claim. all the good things came about as economic progress enabled them. one after the other. of course, governments and unions were always quick to claim the success for themselves.
      • Sep 9 2012: technological innovation is indeed the - conditio sine qua non - for material wellness and capitalism has had and still plays a role in this, BUT, technological innovation itself doesn't imply global and distributed improvement of peoples life conditions. the key concept that no capitalist likes to admit, is that individuals have a reason to exist only in a society, and that whatever great innovation might come up, it is always linked to something that surrounds both who makes the discover and who gives the capital (all your ideas and your money are totally worthless in a desert, and your ideas are always connected to things you've learnt somehow). the point i don't agree on with capitalist right wing conservatives is that they give the whole (i don't say they don't have merit and that they shouldn't be rewarded for that) merit of any innovation to the few who are more strictly involved with it (say the one who has the idea and the one who puts the money), thus any political intervention that tends to redistribute the effects of any innovation to the majority is often (read always) seen as loot 'n plunder. without great political battles in the '800 and '900 children of pour people would still be working, democracy would be a direct and full blown plutocracy (instead of a masked and softened one like it is today), education (high level education in europe), health-care would be exclusive prerogative of the rich. = > capitalism and free market themselves don't guarantee social progress as the only aim is to make more money and get more power. capitalism itself is not ethical.
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          Sep 9 2012: i tell you the recipe to get filthy rich. you have to find a way to give the masses something they want and they can't have now, as it is too expensive. bring down the price with some innovation, and keep doing that. that is it. that is the way to big buck. rockefeller did it, carnegie did it, ford did it, bill gates did it.

          for capitalists to get rich, they have to serve the masses. they have to make everyone's lives better.
      • Sep 9 2012: "for capitalists to get rich, they have to serve the masses. they have to make everyone's lives better." that must be the reason why everyone has improved so much his condition after 2008 financial crisis. if you still insist in seeing only the positive side of capitalism you're somewhat not intellectually honest in my opinion. i never denied the positive aspects of it, and i do agree that those who actually improve lives of everyone deserve indeed to be rewarded. unfortunately that's only one side of the coin, you always forget the other one made by capitalists with dirty hands and conscience who just exploit the need of survival of people and entire nations who are literally blackmailed without any negotiation power. the day capitalists will be made all of the stuff you're telling about, i'll become their first supporter, till then i'll keep myself critic and of the opinion that if you leave these people totally free and without rules (as it happens with finance nowadays) among those to thank there will be many to blame. again: capitalism and free market alone don't guarantee the best living conditions in our society. you might avoid to answer my points, but to pretend to sell fairytales about how good are all rich people pretending that they're in that condition because the've served the masses, is like the indian religious belief that you've earned your good/bad condition in present life because of what you did in your past life. regards.
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          Sep 9 2012: and here we go again. the loop just restarted. now comes the part when i tell you that 2008 was caused by government. boring.
      • Sep 9 2012: ouh, forgive me if i'm wasting your precious time with my trifles, you must be patient with the mass of ignorant progressives that infest this site and who really can't understand the true virtues of free market and how these can heal the problems that afflict this world. it must be frustrating to repeat every day that two plus two makes four to, intellectually speaking, dumb people. take patience great man.
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          Sep 9 2012: you in italy will be among the first to witness the failure of statism. find a good seat, and make sure you have enough popcorn. it will be hell of a show.
      • Sep 9 2012: that's the part i like best when one is short in arguments and starts desiring anything bad to those whose opinions they don't like extending them to the whole nation. thanks for wishing us all this good, though i'm afraid you'll be somewhat disappointed. have a nice day great man.
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        Sep 9 2012: "colonies were far away, no capital goods could be moved from there. gold and spices don't spin up the economy. in fact colonialism cost resources."

        Mercantalism was the basis of the European empires. Why do you think they bothered to colonize most of the globe if they didn't want the resources? Do you think there was no trade at that time?

        "technology is a result of the free market economies. the other tried to stop us, but free market prevailed."

        The Ancient Egyptions had some of the most advanced technology of their time, so did the medieval Chinese. Was that the result of the free market? What about ancient greece? Technology is the result of human ingenuity. It happens in all cultures.

        "now comes the part when i tell you that 2008 was caused by government."

        Now you are really going off the deep end. The government did not force private companies to dish out bad loans and sell the debt as secure investments. The government did not force private companies to charge interest rates below prime, or give out loans with no money up front. Those companies did that because they knew they could sell the debt and not have to worry about the risk of the loan. The only thing the government is responsible for is not regulating them enough to prevent it from happening. The deed was done by Wall Street, that's why they bare the blame.

        You say unfettered capitalism has never existed, but how unfettered do you think it has to be? The lowest corporate tax rates in history aren't low enough? The ability to move money instantly to anywhere in the world and avoid taxation all together isn't free enough? Corporations that are larger than many countries are still too oppressed? Perhaps only if there is no government at all will you be satisfied. Of course there is no such thing functional anarchy, and if there was no government, then the corporations would become the government.
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          Sep 9 2012: colonies was an economic loss. that is a fact, and i have no intention to debate it.

          when ancient egypt led the world, there was no free markets around. when there was a race between free market and central planning, free market won.

          "caused by" and "did" are two different things. the government didn't do 2008. they merely caused it with misguided legislation, and crazy money creation by the fed.

          every government program has to be repealed that is harmful. there is no correct amount. each and every expenditure has to be scrutinized, and abandoned if it just hurts.

          "of course" is not an argument.
        • Sep 11 2012: "Now you are really going off the deep end. The government did not force private companies to dish out bad loans and sell the debt as secure investments. The government did not force private companies to charge interest rates below prime, or give out loans with no money up front. Those companies did that because they knew they could sell the debt and not have to worry about the risk of the loan. The only thing the government is responsible for is not regulating them enough to prevent it from happening. The deed was done by Wall Street, that's why they bare the blame."

          i would have spent the same words.
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        Sep 9 2012: I hear this kind of talk from neo-libertarians all over the place. Everything good about society comes from the free market and everything bad is because of government. Whenever deregulation and lower taxes fail to create the prosperity that was promised, they always say "it was not deregulated enough!" Government is the face of tyranny and private corporations are the face of freedom for all.

        Often neo-libertarians will talk as if they have the authority of the study of economics behind them. However, economists do not all agree with those ideas. Wikipedia refers to the austrian school of economics as heterodox because it is not popular among most economists. Many economists hold to the line of study that came from Keyens after the economic collapse of the great depression.

        The fundemental problem with neo-libertarianism is it views corporations as individuals, as if exxon mobile fundamentally similar to the guy selling me tomatoes at the farmers market. That is not the way governance functions. In reality state sized corporate actors share governance with geographically tied states. The take part in the negotiation of trade deals, sit on government boards in many countries, and lobby (sometimes bribe) for legislation that they want. They directly influence the law through strategic lawsuits to set precedence they desire, and complicated licensing of technology and intellectual property. They directly influence the media through direct ownership and have an impact on democracy as a result.

        The idea that the study of economics naturally leads to more deregulation, government austerity, lower taxes is one that is strong in the public eye. However, this is not because that's what economists agree on, it's because those ideas are pushed by powerful people who are simply trying to avoid taxes. Those ideas are pushed through public relations, privately funded "think tanks" and centralized media. Not from the consensus of economists.
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          Sep 9 2012: you need to stop making statistics. you need to stop counting how many people thinks what. you need to stop counting how many people said what.

          you need to start measuring claims on their validness. that requires understanding economic theory. and if you do that, you find out that what austrian economics says, stands. what other economists say, does not stand.
        • Sep 11 2012: "I hear this kind of talk from neo-libertarians all over the place. Everything good about society comes from the free market and everything bad is because of government. Whenever deregulation and lower taxes fail to create the prosperity that was promised, they always say "it was not deregulated enough!" Government is the face of tyranny and private corporations are the face of freedom for all."

          it's like a mantra they wish all of us to believe blindly (mustn't be casual that the base of the republican party is full of bigots who believe in the literal interpretation of the bible), as so far there isn't a single example where this perfect free market has eradicated poverty allowing the huge majority of a big society (little fiscal paradises who live robbing the taxes that belong to nations whose people sweated for that can not be considered an example) to live a decent life without having to struggle to reach the end of the month (common expression we use here in italy). the nations where the best living conditions are spread among the largest number of people are in nord europe and in scandinavia particularly, where there is free market indeed, but the intervention of government makes so that through the payment of taxes (amongst the highest rates in the world!!) nobody stays behind. a friend of mine is living in denmark since 5 years and will never come back to italy if not to visit his parents and relatives: he's happy despite the cold weather :). i do agree on every single point of your post, especially when you talk about the strength of lobbies with a huge economical power to push the laws who serve their selfish interests. so far, recognizing the positive aspects of free market, i do strongly oppose their nearly total lack of empathy, their hate for the weak and their pretense that any individual must struggle alone, thats the opposite of what makes us human: belonging to a social species.

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