Friday, September 19, 2008

The Stockholm Syndrome and Trickle Down Theory

As a conservative, a blasphemous thought has encroached into my mind concening the benefits of the "trickle down" theory we often hear about during discussions of how to stimulate the economy. I wonder whether most of us might be subject to the Stockholm Syndrome in this regard.

The conservative's solution to economic woes is usually centered around "the trickle down" theory. The opposite solution embraced by most liberals and many moderates is "tax the rich and tax big business" because they can afford it.

In an article entitled "Trickle-Down Ignorance" by Thomas Sowell (April 2, 2005) he states:

"What is often confused with a trickle-down theory is supply-side economics, such as that advocated by Arthur Laffer. That theory is that tax cuts can generate more tax revenue for the government because it changes people's behavior, causing more economic activity to take place, leading to more taxable income, as well as a faster growing economy.

Sowell continues: "Whether it will happen in a given set of circumstances is what is controversial, but none of this has anything to do with money trickling down from the rich to the poor. It has to do with the creation of more wealth in the economy as a whole."

The question I am plagued with: Does "the creation of more wealth in the economy as a whole" necessarily mean that the middle and lower classes benefit? Or do we just hope we will benefit? Does this merely result in the rich just getting richer and the middle and poor getting poorer?

Turning to the "Stockholm syndrome" for a moment, as Wikipedia defines it, the

"Stockholm syndrome is a psychological response sometimes seen in an abducted hostage, in which the hostage shows signs of loyalty to the hostage-taker, regardless of the danger (or at least risk) in which they have been placed. The syndrome is named after the Norrmalmstorg robbery of Kreditbanken at Norrmalmstorg, Stockholm, Sweden, in which the bank robbers held bank employees hostage from August 23 to August 28 in 1973. In this case, the victims became emotionally attached to their victimizers, and even defended their captors after they were freed from their six-day ordeal."

The Stockholm Syndrome is "Loyalty to a more powerful abuser — in spite of the danger that this loyalty puts the victim in — is common among victims of domestic abuse, battered partners and child abuse (dependent children). In many instances the victims choose to remain loyal to their abuser, and choose not to leave him or her, even when they are offered a safe placement in foster homes or safe houses. This mental phenomenon is also known as Trauma-Bonding or Bonding-to-the-Perpetrator."

I wonder if the poor and middle classes who support the idea of the "trickle down theory" are subject to the Stockholm Syndrome?" Out of years of conditioning, are we being loyal to a more powerful abuser - in spite of the disadvantages we might reap from buying into the alleged benefits of trickle down theory espoused by the wealthy and big business (the "abuser")?

Before we buy into the alleged benefits of the trickle down theory with its' tax cuts for the wealthy and big business, let's understand whether or not there are any real economic benefits for the rest of us. Let's dare to step out of the shadow of the abuser and look at objective evidence. As Sowell wrote, all too often we take one side of an issue for granted and blindly accept it as fact without bothering to understand the other side.

It is way too easy for us to feel excessively dependent on the wealthy to make our economy work as the easy way to continue feeling comfortable and taken care of.

Let's not be intimidated by those who might be abusers who use us to further their quest for tax-free and often obscenely excessive wealth.


David Franklin Farkas said...

I saw the term 'trickle down stockholm syndrome' in another post today. Love your article. Well written and clear.

Do you know who coined the term? Can you give me links to more on the politics, economics and psychology?

I've been saying basicaly the same thing but without a tag line for it for years.

Let me know, thanx
David Franklin Farkas

Gerardo Moochie said...

I know how the "Stockholm Syndrome" term came about, but I think I cobbled together the two phrases "trickle down" and "stockholm syndrome" in that 2008 blog as a way to describe what Thomas Sowell was concerned about: blindly buying into tax policy that makes the rich richer out of dependence on the rich in ways the middle and lower classes would benefit.

However, I did err in that 2008blog by referring to "take cuts for the wealthy" inferring that the wealthy don't pay their "fair share", whatever that is. Since that three year old blog was written I have become more enlightened about the high proportion of total tax revenue paid by the wealthy and that a significant proportion of Americans pay no income tax at all.

I have become more aware that the reason so many American jobs are shipped overseas is because many other countries are more "producer friendly" than the US because of their lower taxes, lower wage rates, and fewer regulations.

I think a reduced tax and regulatory burden on all our citizens will enhance consumption, domestic production, and domestic prosperity. I dicuss this a bit more in a more recent blog titled "Laffer Curve Frowns at Reality"

The reality is that we DO depend on the wealthy for job creation to a great extent. But we also have the ability to bust out on our own, independently of the wealthy, but with greater risk and more perseverence and energy required for potentially greater reward - aka "entrepreneurialism." High taxes and excess regulation stifle entrepreneurial activity.