Wednesday 31 December 2014

The Trickle Down Theory

 The present Indian government's economic policies seem to be based on a theory in economics called ' the Trickle Down Theory '.

 This theory states that for economic progress, benefits and concessions must be given only to big businessmen, which will then trickle down to the lowest level of society.

 The theory was known as ' the horse and sparrow theory ' in the 1890s in U.S.A. It said that 'if you feed the horse enough oats, some will pass through its droppings on to the road for the sparrows to eat ' ( the sparrows being obviously the poor people ). It is also described thus : when the lion makes a kill, he eats only part of it, and the rest is eaten by hyenas, jackals, vultures, etc.

 So everybody gets a share in this trickle down. even the poorest people.

 The theory was strongly implemented by U.S.President Ronald Reagan and British Prime Minister Margaret Thatcher.
  According to this theory, if benefits are given to the rich, they will use their increased wealth to invest in new enterprizes, which will generate new jobs, give contracts to suppliers of raw materials and small parts, etc Also, these new enterprizes will yield more taxes which can be used by the government for the people's welfare.Thus everybody will be benefited.
  A deeper analysis of the theory, however, reveals its fundamental flaws.
 If the rich get more wealth, they will not necessarily invest it in India in new enterprizes. Businessmen seek profit, and are not doing charity. So they will invest the extra wealth in new enterprizes in India only if they are reasonably sure of earning good profits from them, otherwise they will transfer this wealth to tax havens abroad ( in Mauritius, etc ), or invest it in enterprizes abroad, which will not increase jobs in India, nor benefit our economy in any way.
 And why should big businessmen invest this extra wealth in setting up new enterprizes  in India ? There is no market in India for the goods to be produced by these new enterprizes, because our people are mostly poor, and even the middle classes are losing much of their purchasing power due to inflation. Markets abroad are saturated with Chinese consumer goods, and moreover there is a worldwide economic recession. So this extra wealth will go either to tax havens abroad, or be invested in some foreign country where our businessmen can earn good profits.
  The new Land Acquisition Ordinance is also part of the government's trickle down policies. It is calculated to benefit big business, as it exempts certain categories from the requirement of consent of the farmer and impact assessment, and will thus harm the farmers who will be displaced. It will thus add to the woes of farmers, many of whom have committed suicide or are in a terrible plight as farming has become largely uneconomical
 The trickle down theory is a heartless theory,pursued only by heartless people


  1. Sir,I follow your blog..and i am big fan of you and your blog..i came to know about your blog few monts back through an article published in indian express (that too in front page..) about you,your blog...and so on...Sir,I want to know your views on christian missionaries...I feel they have a sinister agenda ...I belong to odisha which is perhaps as poor as africa..and i have observed that many tribals have christian names... (for ex-:Dilip tirkey who is the first tribal player to captain indian hockey team) I asked my parents about it...from what they said it become quite clear that these missionaries convert tribal people by duping them in the name of employment and education...My mother recollected her childhood experience when she when going to scool would notice areas where people usually in large nos used to stand in queue to wait for food given by christian missionaries...and moreover in rourkela where i completed my schooling... St pauls .. the best school of rkl is also a convent school. ...These organisations own very powerful colleges and instiutions also like xaviers and get funding from west...They not only are in odisha but also in many poor areas like north east,bihar,kerala, ...Sir,,please reply on this topic....I want to know your views...

  2. i want to make some points:
    dis was said by bill gates that the salaries in china is rising, so naturally india - due to its low salary hence low cost - shud replace china in manufacturing.
    We have seen that china grew despite recession, so i think we can take that much risk nd rely on external markets...slowly and steadily replacing china.