Top Down and Bottom Up Economics

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            We hear the terms ‘top down’ and ‘bottom up’ when people are referring to the economics of politics and quite a few people don’t have a clue what these terms mean.  Top Down refers to what the conservative side of politics espouses and Bottom Up is what the liberal politicians practice and each of these has arguments that go in their favor. There have been great leaders from both persuasions of this philosophy and each has been equally passionate that their way is the proper way.  Bottom Up or Top down, which is the way that a successful country should go?

            Firstly, ‘Bottom Up’ is a philosophy of starting at the bottom stratum of society and providing financial assistance to this group.  This is usually done by an arbitrary body which decides that wages should be raised to enable low paid workers to buy goods that they need.  If they have more money in the coffers they will be able to buy food, clothing, medical insurance, educational supplies, and generally look after their families in pursuit of happiness. If the worker is worth his keep then the wages for the worker should provide him with enough money to enable him to look after his family and to live comfortably.  Isn’t this what the Bible actually says about fair and equitable rewards for work done?  (Matthew 10:10) “…for the worker is worth his keep.” 

            Therefore this is clinching proof that employers should consider the workers in their charge and ensure that they are justly compensated for their labor.  Why then is the industrial world in so much turmoil over wages?  Why then are unionists so opposed to employers when it comes to the way companies are organized, and payrolls are meted out?  Could it be that employers are so bent on generating profits and looking after their bottom line under the watchful eye of their investors that they tend to ignore the humble workers who are the source of their wealth in the first place?

            But hold on, sure the workers supply the labor that gets things done, but if the employer didn’t supply the infrastructure in the outset, how would the worker in fact do anything?  If the boss didn’t say one day when he was an employee that he wanted to start his own business, then his company would not be there.  The worker would not have a job to go to.  The worker wouldn’t have any pay in the first place, because there’d be no company to work for.  It stands to reason therefore that the employer or boss of the business took the risks at the outset to get the company started so he should in fact reap the rewards.  If the boss keeps his costs down then his profit margins will be greater and he and his share holders will make more money. 

            Unfortunately for many workers the first cuts are in the real wages.  The cost of living goes up because of rising prices and demands for services but their wages remain the same because the employer wants to keep his advantages in the market. The worker in turn asks for a pay rise to compensate for inflation and in order to make the extra money then the boss will find that he’ll have to raise prices for goods and services to break even.  This in turn affects other areas if the economy and eventually the worker’s new wages are barely keeping abreast of the rate of inflation if not already below.  I have seen numerous strikes in Australia where the unions will negotiate a settlement and the pay raise out strips the rate of inflation without a corresponding rise in productivity.  In fact, productivity will often fall because employers can no longer get a full day’s work from their workers, because of Flexi-Time, or the 9 day fortnight, or a 35 hour work week for the same pay as a 40 hour week. 

            These considerations so far have all been from the ‘bottom up’ philosophy of economics and its results, that is, increasing funds to the lower paid strata of society as a equitable solution.  Let us now consider the results of a ‘top down’ approach to the economy in which the funds flow to the upper echelons of the society.  In this scenario the bosses or companies would receive relief with lower taxes on their goods and services and thus raising their profits.  This enables them to expand their businesses by producing more, which means hiring more workers who are going to spend more because of the increased earning capacity of the population.  Another perhaps better way of setting up a business is by profit sharing with the employees themselves.  That is to give the employees bonuses tied to increased productivity.  In this way the workers can see the direct result of their work over and above their normal wages. 

            There are many companies today that operate on this principal and they have clashed with the traditional unions because workers have been happy and felt no need to join a union. If workers are happy and not joining unions then unions cannot collect dues, and if they cannot collect dues, then they’d have no source of income, because they don’t actually produce anything, other than ‘strikes’ in the workplace.  The choice of a ‘bottom up’ or ‘top down’ approach to economic policy should be clear when one considers the analogy of an electric motor.  If more speed is desired then certainly increase the power input but if too much power fed in, then circuits will blow and armatures will over heat and the whole assembly will break down. A better way to increase the speed is to go to the source and install a larger capacity motor, one that can stand an increase in power input.  In a similar way if the workers are in need of higher remuneration then if they go to the source of the pay, that is, the company, and increase productivity, then the company can afford the pay increases, without having to raise prices to the end users.

            The key in this situation is equity, ‘A fair day’s pay for a fair day’s work’. We seem to have forgotten what a fair day’s work is.  Many people today are out for themselves, to get what they can without looking to the greater good.  We must realize that if we strive to do right by our fellow man then we are in fact doing the best thing for ourselves in the long run.  Jesus said, “Love your neighbor as you love yourself.” This is a Word which simply means doing right by them. In this case the worker’s neighbor is his boss and the boss’s neighbor is his worker.  As far as ‘top down’ or bottom up’ goes, I think that blessings flow down from up above.

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