Counterproductive trickle-down economic effect

The critique of Western universities and certain schools of thought advocating for economic models based on the trickle-down effect raises significant concerns about the philosophical underpinnings and real-world implications of such theories.

According to proponents of the trickle-down economics, wealth generated at the top of the economic pyramid will eventually make its way down to the lower echelons, ostensibly benefiting everyone.

This belief is encapsulated in the notion that “it’s not the business of the government to do the business,” emphasizing a free-market approach where minimal governmental intervention is deemed ideal.

Disciples of these institutions often prioritize macroeconomic indicators such as GDP growth, Tax-to-GDP ratio, foreign exchange reserves, exchange rates, and the balance of imports and exports. They also consider fiscal deficits, national debt, unemployment rates, and population growth rates.

While these indicators are essential for gauging the economic health of a country, reliance solely on these figures can obscure the underlying human realities—misery, hunger, disease, homelessness, poverty, and social humiliation—that a significant portion of the population continues to endure.

The philosophical indoctrination criticized here is that by focusing almost exclusively on economic growth and efficiency, these economic models fail to address the spiritual and ethical dimensions of societal wellbeing.

The disciples of such schools are often portrayed as spiritually contaminated and both physically and mentally blindfolded, unable to see or respond to the suffering of the common people.

This blindness suggests a deep-seated disconnection from the realities faced by the majority, who even after decades of political independence, remain marginalized and suffering.

Such a narrow focus on economic metrics can lead to policies that favour the affluent and ignore the needs of the absolute majority. The ethical critique posits that a truly equitable economic system should prioritize human dignity and social justice as much as it does economic efficiency and growth.

In this view, the government’s role isn’t just to foster a conducive business environment but also to ensure that the benefits of economic activities are broadly and fairly distributed.

This requires a reevaluation of economic philosophies taught in some Western institutions, arguing for a more holistic approach that integrates economic performance with social equity and human well-being.

Selfishness of private sector

The private sector, driven by the imperative of competition and profit maximization, typically invests only in those areas and fields where there is a substantial expectation of a favourable return on investment. This fundamental principle of private enterprise often leads to investment biases, favoring profitable urban centers and commercially viable industries over less economically attractive but equally important areas.

Consequently, vital sectors that may not promise immediate or substantial financial returns—such as public health, education in remote areas, and infrastructure in underprivileged regions—are often neglected.

In this context, the responsibility to uphold the basic human rights and dignity of all citizens, particularly those from marginalized communities in developing countries, falls primarily on the government.

Whether it’s providing access to essential services in remote rural areas or improving living conditions in urban slums, the role of the government is crucial in ensuring that every citizen leads a life of dignity, as enshrined in the constitution.

However, proponents of trickle-down economics, with their focus on economic growth and efficiency driven by private sector success, often overlook these responsibilities.

They may view the country primarily through the lens of business interests and the affluent, prioritizing policies that favour the wealthy and influential. This perspective can lead to a systemic disregard for those without wealth or influence, effectively sidelining a large portion of the population.

Critics argue that this economic philosophy, and the policies it inspires, not only exacerbate inequality but also undermine the social contract—that governments are elected to serve all citizens, not just those who are economically beneficial.

This criticism points to a profound confusion and moral blindness among some economic theorists and policymakers, who fail to recognize that the essence of a nation includes all its people, not just a privileged few.

Thus, there is a pressing need for a more inclusive and equitable economic approach that truly values every citizen’s fundamental rights and human dignity, ensuring that the benefits of economic activities are widely and fairly shared across the entire spectrum of society.

Downfall of Japan and others

The advocates of an economic system based on inequality need to critically reevaluate the underlying causes of the economic stagnation and crises that have plagued some of the world’s most developed economies, including Japan since the 2000s, as well as several Western European countries and the United States.

These challenges are not merely the result of cyclical economic downturns or isolated policy failures, but are deeply rooted in a global economic system characterized by profound inequalities and exploitative practices.

This system, which has historically prioritized the interests of developed capitalist countries, relies heavily on the exploitation of raw materials and labour from developing countries.

These nations extract resources and labour at minimal costs and subsequently sell finished products back to these same countries at premium prices, perpetuating a cycle of economic disparity.

Furthermore, the economies of developing countries have often been distorted through a variety of political and economic strategies, including trade barriers, skewed economic agreements, and direct political interference, which are designed to sustain the economic dominance of wealthier nations.

The consequences of these practices are now becoming increasingly evident, as the very distortions created over the last two centuries are beginning to “bite back.” The global economic slowdown, persistent in many developed economies, reflects the unsustainable nature of an economic model built on systemic inequality and exploitation.

The irony of this situation is stark: the former champions of globalization, who once advocated for an interconnected global market under terms that disproportionately benefited them, are now turning towards anti-globalization sentiments.

This shift is a response to the rising challenges within their own economies, which include job losses and industrial decline, exacerbated by the same global forces they helped to unleash and dominate.

For these economies to have a viable future, a fundamental shift is necessary. They must abandon their old methods and philosophies that have fostered inequality and exploitation.

Embracing a more equitable economic model involves recognizing the interdependence of global economies and the need for policies that foster fair trade, sustainable development, and respect for labour rights worldwide.

Only by committing to these principles can there be hope for a more balanced global economic order that benefits all, rather than a select few.

Imperatives of Gen AI

The emergence of generative artificial intelligence, marked notably by its significant public debut on November 30, 2022, has rapidly evolved throughout 2023, showcasing considerable enhancements in both quality and diversity.

This technological leap signals a transformative shift in the realms of software engineering and the broader coding market. The introduction of AI-driven platforms, such as those anticipated with the upcoming release of GPT-5 and further advances in the field of generative AI and potentially Artificial General Intelligence (AGI), promises to democratize and revolutionize access to technological capabilities.

The impact of these AI agents extends far beyond traditional software development; they are poised to radically alter the economic landscape by enabling individuals who previously had little to no opportunity to participate in the productive economic process.

This democratization stems from the ability of generative AI to simplify complex tasks, making technology development more accessible to a broader audience and reducing the barrier to entry for innovation and creation.

However, the rapid advancements in AI technology also demand a significant shift in both mindset and policy. Traditional concepts such as the ‘knowledge economy’ are being challenged and may soon seem outdated as we enter a new era where economic value is increasingly generated by digital and AI-driven processes rather than human expertise alone. This shift necessitates urgent and thoughtful policy responses to manage the transition effectively and ensure it benefits society broadly.

Policymakers, educators, and business leaders must urgently reassess their strategies to accommodate and leverage these technological advancements. Strategies need to include education reform to prepare the workforce for an AI-driven economy, regulation to manage ethical and economic impacts, and innovation policies to support a transition that promotes inclusivity and equity. The goal is to ensure that these powerful technologies contribute positively to economic and social outcomes, empowering even the most historically marginalized groups to participate fully in the future economy.

Wake-up call

The Prime Minister, Finance Minister, and other key leaders must urgently reconsider their reliance on the trickle-down effect mindset and embrace the unprecedented potential of General AI, AI agents, AI software engineering, and AGI. Failing to do so could result in significant harm to both the country and its citizens.

(The writer is Advocate of High Court and a former Civil servant)

Copyright Business Recorder, 2024