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 Editorials | Opinions | September 2007 
Trickle-Down Theory Not So Seamless
 Savannah Wiseman - Daily Trojan
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Sitting on top of Mexico's poor is the richest man in the world, Carlos Slim.
The richest man in the world is not Bill Gates, but Mexican citizen Carlos Slim. Slim makes an average of $27 million dollars a day.
Republicans subscribe to an economic theory rooted in the aphorism, "a rising tide lifts all boats." The idea is that as the rich get richer, the poorest parts of society will benefit from the overflowing pot of gold. But this is only half the fairy tale.
The poorest parts of society cannot benefit from this overflowing pot of gold unless there is a redistribution of the extreme wealth that accumulates at the top. The Republicans expect this to happen through trickle-down economics, and if that worked, this story would have a happy ending.
But one doesn't have too look far to see that allowing the rich to get richer does not necessarily result in the trickle-down effect. Money does not flow down a hill as effortlessly as water. And the current situation in Mexico has demonstrated that there is an inherent danger in unfettered personal economic growth.
The irony is that the richest man in the world comes from a country where nearly half the population is living in poverty.
According to the New York Times, "[his] treasure is equivalent to slightly less than 7 percent of Mexico's total production of goods and services - one out of every 14 dollars' worth of stuff made by all the people in the country."
Anyone can see that there is something wrong with this picture: Slim's money and that of the minority Mexican elite aren't trickling down to the poor majority. The policies of the Mexican government have permitted a small number of Mexicans to accumulate extreme wealth. And the wealthy, in turn, were granted enormous power by the government.
Businessmen like Slim have power and influence in shaping government policies that keep taxes to a minimum and stifle competition, squashing any hope that others could gain a foothold in the Mexican economy.
In her recent lecture at USC, "Mexico's Dysfunctional Democracy: What's Wrong and How to Fix It," political scientist Denise Dresser discussed these problems with Mexico's economic structure and the resulting consequences it has on democracy. She argued that Mexico must alter its economic structure so that it favors an emerging middle class, not the rich, in order for Mexico to become a modern nation-state.
Ultimately, what Mexico needs is an economic plan that calls for the breakup of monopolies; higher taxes on the extremely wealthy and on the largest, most powerful businesses; and support for the development of small business and entrepreneurship.
Unfortunately, implementing new policies has proved extremely difficult for the Mexican government. The government finds itself caught between various competing factions, the most influential being the wealthy who want to maintain the status quo and support candidates who wish to do the same.
Carlos Slim has no interest in seeing the government break up his companies, even if it's in the best interest of his country's economy and the modernization of Mexico.
Dresser, however, believes newly elected Mexican President Felipe Calderón has taken a step in the right direction by proposing significant changes in the country's electoral laws.
One of these changes include placing heavy restrictions on paid political advertising, much to the dismay of the powerful Mexican media, which, according to Dresser, profit greatly from the lucrative market of paid political advertising. If this bill becomes law, it will be a victory for the Mexican government over influential businessmen who, up until this point, have been able to resist this type of legislation.
Although there are heated disagreements among economists about the best way to run a government, there is no doubt that a strong middle class and fair distribution of wealth are the necessary ingredients for a healthy economy and government.
Mexico cannot become a fully modern country until the growing gap between Mexico's rich and poor is addressed. If money flowed from top to bottom4 as water does down a hill, then rising tides and trickle-down economics could be the guiding principles for both fledgling and established governments hoping to raise the standard of living for all its citizens. But money is not water, and without the oversight of a good government, the rich get richer, and the poor continue to get poorer.
Savannah Wiseman is a sophomore majoring in international relations. |
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