Supply Side Trickle down economics does it work

Supply-side (or trickle down) economics has for the past few decades been one of the discreet tenets of Western economy. Its the belief that giving financial benefits to the wealthiest of society (in the way of tax cuts/breaks, regulatory advantages given to big businesses) will inevitably benefit society as a whole, as the wealth will trickle down the economic ladder in the form of employment, pay rises or whatever else of the extra wealth the richest will generously share with the rest of the population.

Its been a policy the conservatives of America has held ever so close to their hearts, and one that has faced much opposition by the lower and middle classes of America.

So how did trickle-down begin?

A turning point was certainly in the 1980s, during the divisive periods when Ronald Reagan and Margaret Thatcher were in power in the USA and UK respectively.
Perhaps never have two leaders either side of the Atlantic been so harmonious- Reagan curiously dubbed Thatcher "the most important man in England", and Thatcher once described Reagan as "the second most important man in my life".
The harmony of the two certainly extended to economic policy; both leaders were strongly influenced by the Chicagoan and Austrian schools of economics, the proponents of which included notable anti-regulation, free-marketers Milton Friedman and Friedrich Hayek.

Trickle-down was one of their most prominent legacies. Thatcher and Reagan carried out drastic economic changes that were designed towards supply-side economics (another name for trickle-down). The most important relevant policy change was that of tax rate changes.
In the USA, the Tax Reform of 1986 saw the top tax rate for individuals drop from 50% to 28%, partly compensated for by an increase of the bottom rate of tax from 11% to 15%. This was the very first time in the history of the USA that the top rate of tax fell at the same time as the bottom rate rising.
In the UK, Thatcher followed suit by dropping the top rate of tax from 80% to 63%, meanwhile almost doubling VAT (Value-added tax) and the amount everyone had to pay to fund the National Health Service. However, she did indeed drop the common tax rate from 33% to 30%.

So what were effects of these trickle-down policies?
Lets remember, the motivation supposedly behind trickle-down economics was that the population as a whole would benefit from the wealthy being wealthier. The idea is that as the national wealth pie grows as a result of the richer getting richer, everyone elses pie would simultaneously grow as a result.
So has it worked?
Well, a certainly interesting effect is encapsulated well in the following graphic:

Comparison of wages of the top 1%, overall wages and productivity.
(Mother Jones) 

Note the real separation point on the graph, where the average income of the top 1% really lifts off- its after the turn of the decade, through the 1980s- conveniently the decade of Reagans presidency.

Note not just how the income of the top 1% rises incredibly, that as productivity increases the average overall wages of the population lags behind, barely increasing in relation to the other two factors in the chart.
The meaning of this is pretty unpleasant- the pie of wealth may have increased, but this chart suggests that more prominent has been a relocation of sorts of national wealth.
The wages of the overall population has suffered since the 1980s when it is considered that productivity has boosted- the overall population have not benefited in terms of wages from this increase. Instead the wages of the wealthiest have been boosted far more than before the 80s.
CEOs in 1965 made 24 times more than the average production worker- in 2009, this figure was 185.

It seems clear that wages of the middle and lower classes, contrary to the motives of supply-side economics, have suffered as a result of the policy- meanwhile clearly the wealthiest have benefited HUGELY.

So why havent most of the population benefited- a key belief of the theory is that its better for everyone if the wealthy are wealthier, right?

Buffett has been a prominent opponent
of trickle-down economics.

Here there is a great fault in the trickle-down ideology- reduction in the taxes enforced upon the wealth is itself no guarantee of further reinvestment into the economy.
This is because the benefits are being given to people who are not in need of it. Little is in the way of CEOs creating new jobs to further production- most already have the capital available to invest where they see fit.
Warren Buffett (pictured right), one of the wealthiest men in the world, and perhaps the most prolific investor claimed "People invest to make money, and potential taxes have never scared them off". Taxes are rarely a stumbling block for the wealthiest, who are willing to take risks to invest (most entrepreneurs are where they are now as a result of their calculated risks).
Therefore tax cuts to the wealthy rarely open the doors to new investments. Instead it leads to simply a further amassing of wealth by the wealthy. By no means will the wealthy invest everything they benefit from tax cuts, to the gain of the middle and lower classes as the theory suggests. A staggering example of this is how currently the top 1% of wealthiest people in the world control 39% of the worlds wealth. This is a clear sign of a broken global system, a large part of which is thanks to trickle-down.

Trickle-down, supply-side, Reaganomics, whatever name it is called, is a lie.

The solution lies not in blessing the wealthy with benefits and hoping that it will filter down to the rest of society, but the solution lies in the middle class. We need to make the middle the centre of our economic system, and see middle-out growth that will benefit everyone (yes, including the wealthy).

Middle-out. That is the solution we need.

Sources for this article can be found linked within.

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Sorry Taylor Swift Youre Not Entirely Correct

Pop icon Taylor Swift has had a rocky time, to say the least, with the modern phenomenon of music streaming. Last July, she took a stand against streaming service Spotify, when she removed all of her music from the service and branded it as "undervaluing the art" that is music by offering free, ad-supported subscriptions. Swift cited in particular how underpaid artists putting their music onto the streaming service were, effectively making less than a cent per stream.

Many believed Swifts dramatic exodus from Spotify was simply a part of an exclusivity deal with Apple, and their recently announced service Apple Music. But it turns out this is far from the case, as a tumblr post just today from the 25 year old revealed. The post, titled "To Apple, Love Taylor", dealt to Apple what she had dealt to Spotify last year. In an unexpected move, Swift revealed she was not going to allow her music to be streamed on Apples service either.

Why? Unlike with Spotify, she does not discuss the lack of revenue an artist receives for each stream, rather the effect of the initial three month trial that Apple plans to grant users of the service. Swift called it "shocking, disappointing" that during these three months, Apple Music provides no revenue at all for the artists, as it receives no income from the user. And, according to herself, Taylor Swift is arguing not from her own position as a world-renowned star worth over $200m,  but from the position of "the new artist or band that has just released their first single and will not be paid for its success", "the young songwriter", "the producer who works tirelessly". Essentially, Swift is putting forward the argument that the free 3 month trial being proposed by Apple to customers is putting smaller artists at a loss, failing to reward their efforts.

However, there are areas where I quite disagree with Taylor Swift. Firstly, she is correct about the lack of lucrative music streaming opportunities. Its no secret that despite its massive growth, Spotify has been finding difficulty in creating sustainable and spreadable profits. But is revenue really the priority of an artist, big or small, when they put their content onto streaming services such as Apple Music or Spotify? Swifts own friend Ed Sheeran disagrees with the notion of doing so with income being the primary motive. "Im in the music industry to play live," he claimed last year. "Thats why I put things on Spotify". He highlights his enjoyment of playing live, and indeed playing live is the far superior source of income for the significant majority of musicians both small and large. Sheeran sees the real value of streaming services, in how they provide a platform for artists to promote not just their music, but themselves- their merchandise, their YouTube channels and most importantly their live shows.

Like most artists, Taylor Swift derives most of her income from live shows- six months on the Red Tour in 2013 bringing her an estimated $30m. Justin Timberlake provides another example of how tours bring in far more revenue. In 2013, 39 shows made him over $40m, compared with a paltry $5m from combined streaming and album sales.

For smaller artists, there is a little difference. Streaming services are arguably a little young in this respect, but free media has more than shown its worth for smaller musicians, notably YouTube, from which the likes of Justin Bieber and recently Charlie Puth have found their fame. Apple Music and Spotify, with their ability to feature smaller talent, certainly has the potential to do the same for many other artists, and in that sense provide far greater value than just revenue from streaming.

And lets have a look at the impact of the three month trial in particular. Everyone knows the allure of a free trial. There is no doubt that more people will sign up to Apple Music because of it, and whether or not they leave after the trial is up is not of as much significance as we may think. Three months is quite a lot of time to explore and discover new music, to find new favourites and to support them, whether its through merch, buying their content or a ticket to their show. Of course, users wont be able to discover everyone in this three month period, but one has to realise that artists will certainly receive more traffic and attention when there is a larger group of streamers available to them- three months of this is better than none.

And lets not forget the power of a free trial to retain customers. Apple has very deliberately set a rather long free trial of 3 months (Spotifys is just a third of this). It gives users time to get themselves hooked. Streaming music, whether from your phone, tablet or computer, becomes part of your routine and three months is ample time for the streaming habit to settle in. Therefore it is very likely that a sizeable portion of Apple Music free-triallers will continue their subscriptions and pay for the service after the trial is up, providing the paid support that Swift wishes for.

Its important to note that Taylor Swift is not totally anti-streaming. She notes in her open letter that everyone knows that Apple "has the money to pay artists... for this three month trial period", and indeed this is true. Apple should cough up for the artists in this three month period.

But even if it doesnt pay out, its not entirely correct to argue that musicians, big or small, will not benefit at all from streaming, whether its Apple Music or Spotify. For the value of all types of music streaming clearly lies not in its money making capacity, but rather its ability to promote, to introduce artists and their work to vast amounts of new audiences. These new audiences, and the money that they spend buying merchandise, albums and live tickets are the most substantial, long-term rewards that streaming, free or paid, brings to artists.

So Taylor, making massive amounts of money from Apple Music or Spotify, as you know well, is probably a futile effort for most artists. But that doesnt mean theres no value, nothing to offer to artists, in these services.

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