27 May 2016

Trickle-down Economics

There’s a huge disparity in wealth in India. Not just in an academic sense but that some people are starving, while others like me are buying ₹22K Bose headphones.

But it’s not as bad as it seems. Some of the money trickles down to poorer people, like the salesman, or the workers in the factory, the driver of the truck that transported the headphones to the shop, the sweepers who clean the shop, and so on.

Not all of the money goes to poor people. Some of it goes towards the company’s profits, which are distributed to investors, who aren’t poor.

This leaves out the poorest of the poor, who are unemployed, usually because they have no skills that anyone will pay for. The money doesn’t trickle down to them. Which is sad because they are the ones most in need. Every additional rupee will help them more than it helps other people.

Another issue is economic policies like making it hard for a company to fire employees, or the minimum wage. Both these incent Indian companies to substitute automation for labor, which is unfortunate. Or the work gets done in countries with sensible labor laws. The would-be workers don’t get a job.

The government should re-evaluate policies that prevent wealth from trickling down. Perhaps disparity is not as bad as it seems at first glance if more of the wealth trickles down.

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