Over the last century, much of the political debate within the western world has been revolving around two opposing theories – or at least seemingly opposing – about the way the economy works. The first, and what much of the “right” side of the political spectrum believes, is in trickle down economics, or supply side economics. Trickle down economics supposes that any wealth generated by and for the upper echolons of our society will eventually trickle down to lesser classes, i.e. rich people pay for things that poor people sell, therefore the money ends up spreading around the whole economic spectrum, and people with the means to generate wealth have the power to continue to do so, either due to tax breaks, or deregulation, or a combination of the two. While there is almost certainly some truth to this, there is a lot of opposition among the “left” to this viewpoint, in that they believe basing the entire economic-political agenda on this principle ignores a lot of distress caused by such an unfettered system.
An arguably opposing theory, seeks to bring us away from supply side economics, by suggesting that from whom the wealth enters the economy is immaterial to the growth we witness as a result. This is the keynesian model, which supposes that, particularly within the short term, increasing economic output through massive investments by the government will increase overall economic output, and essentially restart a stalling economy.
There are examples of both failing, with the disastrous results of deregulating the financial industry, and with work programs run by the governments the world over, which essentially paid people to do things which had no more value than just giving people the money.
The current economic climate within the western world isn’t very condusive to either theory, with the keynesian model exacerbating an already existing problem with government debt, and supply side economic proponents calling for greater and greater deregulation and tax cuts, which could also have disastrous results. Most successful economic turnarounds have used a combination of tax cuts with increases in targetted government investment.
