quinta-feira, dezembro 12, 2013

“Trickle Down” Economics

The “Trickle Down” Economics Straw Man por Thomas Sowell:
Those who imagine that profits first benefit business owners — and that benefits only belatedly trickle down to workers — have the sequence completely backward. When an investment is made, whether to build a railroad or to open a new restaurant, the first money is spent hiring people to do the work. Without that, nothing happens.

Money goes out first to pay expenses first and then comes back as profits later — if at all. The high rate of failure of new businesses makes painfully clear that there is nothing inevitable about the money coming back.

Even with successful businesses, years can elapse between the initial investment and the return of earnings. From the time when an oil company begins spending money to explore for petroleum to the time when the first gasoline resulting from that exploration comes out of a pump at a filling station, a decade may have passed. In the meantime, all sorts of employees have been paid — geologists, engineers, refinery workers, truck drivers.
It is not faith but empirical evidence that is overwhelming on the actual track record of tax cuts and free markets. By the 1980s, this mounting evidence convinced even left-wing governments in various parts of the world to cut back government operations and sell government-owned enterprises to private industry. Faith had nothing to do with it.

In India, in the decade since the 1991 economic reforms which were condemned as “blind faith,” the country’s economic growth rate has soared. It has been estimated that the real blind faith — in government planning — had cost the average Indian hundreds of dollars a year in income during the decades when socialist dogma ruled. In a poor country like India, this was income they could not afford to miss. Even in a prosperous country like the United States, there is no need to forego economic benefits for the sake of a political phrase.

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