The only economic theory more useless than socialism is trickle-down economics.
Commence soap-box opinion mode.
On paper, both can seem to have merit.
Socialism advocates governmental leveling of prosperity to ensure a kind of blanket equity for all, from those who are disadvantaged in the system to those who are not. This comes at a direct short-term cost (ie tax hikes) to those who are thriving in the system with the academic assumption that lifting the standard of living for all will fuel economic growth and have eventual long term benefits to everyone. Kumbaya.
Trickle-Down Theory strives to push all prosperity through those who are thriving most, and is done with the academic assumption that providing short-term benefit (ie tax cuts) to those who are in the best position to take risk and make investment will “trickle down” and spur economic growth. This comes at a direct short-term cost to those who are already disadvantaged but is justified by a model that suggests sustainable growth will partner with eventual long-term benefits to all.
Both theories suffer from the same delusion: that all people are inherently good and everyone in the system is working for the same positive mutual win-win state of economics for everyone. Both assume that no one ever lies, cheats, games, or robs from the system –or if they do that there are strong enough punitive consequences in place to limit the effects of these as mere outliers that don’t greatly affect the system.
In other words, socialism without meaningful and legal incentives tends to lead to players breaking the rules to provide personal payoff for any perceived risk, or results in those in a better position to take risks to avoid risk altogether (ie what’s in in for me to work hard syndrome.) Taken together, this often manifests from something as simple as hoarding to more complex forms of political corruption. In its extreme, this in turn leads to supply shortages and economic collapse.
Likewise, trickle-down economics without meaningful and legal boundaries, usually in form of binding regulation, tends to tempt players to ignore what might be defined as an intangible moral imperative to participate positively in society usually for the stated benefit of a more measurable system feedback (ie shareholder value or executive compensation.) In its extreme, this leads to a hoarding of capital in the hands of a small cadre of powerful people who are usually unable to fully divest that wealth in a meaningful or equitable way (as the theory intends) even if they wanted to (which history tells us they don’t always want to) leading to economic collapse.
I tend to think of myself as a centrist, in that moderate taxes support a fair society that provide a balance: the government can invest in projects that make society better but have little tangible short-term market value, investing publicly in things such education, transit, health, defense, or incubator or transitional technologies. On the other hand that same tax obligation is not so much a burden as to disincentivize the risk taken by business to provide goods and services that can be sold for profit (and employment opportunities) to those with the means to buy and also fair payoff to those who took the risk.
It’s a balancing act. Not an easy one either. It’s the economic equivalent of a jumbo jet control board with hundreds of sliders and knobs controlling the inputs and outputs of a multitude of instruments and systems and millions of passengers on the plane, all in an attempt to produce a smooth, safe flight that all can enjoy.
Of course, this has all been commentary on the kamikaze american tax bill of late 2017 where in an act of desperation to appeal to a small subset of donors riding in first class, the lawmakers have slap-grabbed the control board with both palms and dragged a bunch of the knobs and sliders into a cacophony of engine groans that looks a lot like a hasty attempt at course change towards trickle-down economics (and potentially a crash-landing on a small island in the pacific where the strong will hunt the weak for food and sport while the pilots stand atop their volcano lair and laugh at us all squabbling below.)
So… hold on folks, buckle your seat belts, secure your wallets and take a deep breath from that oxygen mask… no matter where you live, we’re all headed for some turbulence.