Borrowing trickle-down and bottom-up economics to increase resource consumption


The trickle-down economic approach involves creating economic policies that advocate lowering taxes for large corporations and the rich. [Courtesy]

In recent years, trickle-down versus bottom-up economic approaches have become a political buzzword as the country heads for the 2022 elections.

This campaign was hyped by the slowdown in economic growth due to Covid-19, which resulted in job losses and business closings.

Despite the popularization of these economic approaches by the political class, Kenyans have little understanding of their importance, feasibility, and impact on wealth and job creation.

The trickle-down economic approach involves creating economic policies that advocate lowering taxes for large corporations and the rich.

It offers subsidies to lower the cost of production in the hope that the benefits in the form of jobs created by business expansion and the diversification of value added seep through to the masses.

A growing economy needs a balance between trickle-down and trickle-up economic approaches. [Reuters]

Although this strategy was used by the previous regime and macroeconomic measures such as access to stimulant packages have been attributed over the past 20 years, analysis shows that tax cuts for large corporations and the rich do not necessarily lead to wealth accumulation or a seepage of benefits to the masses.

They also do not attract foreign direct investment. Rather, it widens the gap between rich and poor.

In most cases, investors invest in areas where they are guaranteed more returns and security.

For example, even though Kenya had high economic growth figures before Covid-19, the gap between rich and poor has continued to widen, according to the World Bank, with less than one percent of the richest Kenyans amassing more wealth than the bottom 99 percent.

This means that this growth was only minimally carried over to the lower economic cadres.

Then the trickle-up, bottom-up or building-up approach involves the creation of an economic policy that advocates investing resources directly in the masses in order to build sustainable livelihoods and to increase their consumption. This drives demand, which can lead to economic growth and job creation.

This can be achieved through the introduction of the home industry, which uses the resources available to increase production through value creation and market creation.

Improved infrastructure development in the counties can also help increase production. [Courtesy]

The decentralization concept, in which the state allocates 15 percent of the national income to the counties in order to stimulate economic growth, is a simplified model of the trickle-up approach.

Counties should be manufacturing centers that develop systems that help make full use of available resources. Other examples of the trickle-up approach are government stimulus packages for the Youth and Women’s Fund, cash transfer systems, and procurement preferences for youth and women.

Improved infrastructure development in the counties can also help increase production, create more jobs and stimulate economic growth.

A growing economy needs a balance between trickle-down and trickle-up economic approaches.

We also need to develop a work structure to improve production at the base of the pyramid.

-The author teaches at Kirinyaga University. [email protected]

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