This aquarium metaphor is very helpful in grasping the general concept of trickle-down economics. And I will extend the metaphor to introduce the idea of bubble-up economics.
For these diagrams:
- an aquarium represents America, though in diagram B there is a foreign aquarium also;
- the water depth represents wealth (high water mark = upper class, low water mark = lower class);
- oxygen bubbles represent money.
This first diagram shows that trickle-down can and should work in a closed environment. Basically the wealthy class keeps their capital at tax time, but spends their money on employees and goods such that their money successfully permeates the full class spectrum.
The goal with trickle-down was that the best money managers would be enabled to make strong innovative decisions with their annual holdings and that money would make it to the lower-class via normal market mechanisms.
The problem with diagram A is that it only works in a closed environment … but America is not a closed environment. Once the aquarium ( America ) is connected to another aquarium ( some other country ), trickle-down begins to fail as oxygen/money flows out. This can happen when a member of the wealthy class invests in a foreign company, outsources his labor pool, relocates his company, or when he buys an expensive foreign car.
Bubble-up on the other hand bypasses the wealthy completely, putting money directly into the hands of the lower-class via democratically chosen social programs such as job training, mom-and-pop-shop investment and consultant services, etc. It would be an error to regard these social programs as welfare.
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nice