Supply side economics are driven by policies favouring the privileged and wealthy as a purported way of stimulating investment and production. As such, they have long been a favourite strategy of those most dedicated to fulfilling the vision of ‘father of the US Constitution’ James Madison that capitalist democracy should ‘protect the minority of the opulent from the majority.’ ‘Trickle-down’ economics, as this approach came to be known, was a noted characteristic of the Reagan administration; their primary outcomes were increasing wealth inequality produced through attacks on workers justified in the name of productivity and the general health of the economy.
A report released by the International Monetary Fund last year reports that this approach to economic management, now the basis for neoliberalism writ large, confirms that it was really just a big steaming pile of hokey. This would seem a development of some interest considering this same institution has been championing the very same for the last quarter century.
The researchers calculated that when the richest 20% of society increase their income by one percentage point, the annual rate of growth shrinks by nearly 0.1% within five years.
In other words, not only do supply side economics not ‘expand the pie’ as it were, the opposite in fact occurs. By the same token,
By contrast, when the lowest 20% of earners see their income grow by one percentage point, the rate of growth increases by nearly 0.4% over the same period.
This would appear to go not a small way towards explaining why, after being embraced by all sides of politics as facilitating a ‘rising tide that lifts all boats,’ neoliberal austerity policies enacted alongside colossal corporate welfare in the form of tax breaks for hundreds of large companies has produced ever-expanding wealth inequality in Australia.
Injustices of this kind have had extremely damaging effects on the fabric of Australian society, a fact that goes some way towards explaining why IMF researchers now admit neoliberal ideology has been oversold. Not only is there such a thing as society, as it turns out, but the economy is not greater than the individuals who comprise it. On the basis of such ideas, trickle down ideology has been used to justify inequality for decades; in the context of systemic crisis it may prove to be the acute stage and last gasp of a mentality that sees the service of class privilege as the primary function of economic life, rather than the wellbeing and individual freedom of each. One can only hope.