The trickle down myth

Lessons from the US experience

Australian Labor PM Julia Gillard and treasurer Wayne Swan are trying hard to sell their version of the Great Australian Dream. It was summarised by Gillard in her Whitlam Oration speech (where she attacked the Greens as not “sharing the values of every day Australians”) and expounded in greater detail in the recent federal budget.

Basically, it hangs on a dream of a new long economic prosperity in Australia based on the new mining boom and more generally on the industrialisation of Asia. Australian minerals will command high prices and a growing middle class in Asia will keep paying big bucks their children to study in Australian universities, which are now increasingly run like degree factories.

So, they argue, if we help “our” capitalists make billions of dollars of profits, the benefit will trickle down through society and everyone will gain.

That’s the dream they are selling. It’s basic premise is not much different to that of the “Great American Dream” and countless other national adaptations of the same.

The above chart (which I got from this post on the The Pennsylvania Progressive website) on the distribution of the income gains from the extended period of economic growth in the US economy between the 1975 world economic crisis and the GFC explodes the “trickle down” myth in that country. It shows that the richest 10% took 100% of the income gain from this growth while 90% shared 0%!

Does anyone believe that things will operate radically different in capitalist Australia, a country where the richest 20% own 61% of all wealth?

Egalitarian Australia? Graph from ACTU report on Inequality & the Minimum Wage.

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