Within the context of the market economy supply side economists propose, low wages for working people, low taxes for corporations and the super rich, and a reduction in state expenditure in order to accommodate low taxes for the super rich and corporations – on the assumption that the additional funds available to the super rich and corporations will be reinvested in the economic cycle which will lead to economic growth.
Unfortunately this bankrupt solution being proposed as a one size fits all solution to countries as diverse as Britain, Italy, Greece and Spain to South Africa Uganda and Swaziland is based on a number of assumptions which do not hold true, or only applies to an economy in which there is no foreign ownership.
Firstly, higher profits and income for the super rich does not imply that they will productively reinvest – they could simply drain this additional income into luxury unproductive consumption – buying yachts, paintings, soccer clubs etc. These tax reductions for the super rich are made possible by a cutting back of services by the state to thye poor, the working people and even the middle classes.
Secondly, if the corporation is foreign owned it will simply repatriate the additional income as dividends to its foreign shareholders. In other words the finances simply drains out of the country.
Thirdly, lower paid workers receiving poor services from the state which reduced spending on education, health and public transport services simply become less productive because they operate in survival mode. They also feel alienated in their jobs and do everything to avoid doing it well being aware of the immense gap between their income and that of the super rich and the corporate senior managers.
Fourthly, cutbacks in services such as health and education and their privatization simply leads to the deskilling of the population and a deterioration of the national health profile causing a further decline in productivity. That is why low wage economies on the whole have low rates of productivity, and high wage economies such as Germany and Norway are very productive.
PLEASE NOTE that I have not suggested a high rate of taxation across the board but of corporations and the super rich. Norway, the most successful national economy in terms of citizen wellbeing, operates on an entirely nationalised oil industry, with high taxes, and shows where countries like Nigeria and Angola should be instead of where they are presently!
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