The Pope Doesn’t Know Much about Trickle Down Economics

The newspapers and news stories will be filled with reports of Nelson Mandela’s death, but aren’t telling the whole story, so I thought I would deal with the Pope’s comments on economics, in particular, his disdain for trickle down economics. In fact, Mandela and the Pope share similar economic views in this regard.

Trickle-down economics, the Pope wrote, “expresses a crude and naïve trust in the goodness of those wielding economic power.”

So what is the Pontiff’s solution? Some type of wealth redistribution, thus, “a crude and naïve trust in the goodness of those wielding political power.”

What’s the best way to get wealth in the hands of people? There are several methods. The most popular is for the wealthy to be taxed so their “excess” wealth can be redistributed to the less fortunate. This works for a time until productive people tire of working for other people at the behest of a third party – the State.

Another method is private charity. People with money are encouraged to help the less fortunate. There’s a lot of this going on in America. Americans are a charitable people. Of course, charity can also create the problems of dependency and entitlement. Years ago, my company published George Grant’s book Bringing in the Sheaves: Transforming Poverty into Productivity (free download). It was designed as a manual to show how charity work should be done. Accountability and a helping-hand end point are crucial for long-term success.

But even charity work has its limitations if the goal is not to get people out of poverty. It’s often hard to do when there are competing government programs that neutralize self-help poverty programs.

Charity programs are best designed for the hard cases.

The best way to help the poor and disenfranchised is through trickle-down economics which requires a free market unencumbered by government. The government’s role in economic transactions should be minimal. Adjudicating theft and fraud is the government’s role, not mandating fairness.

Let’s take ostentatious private home built by TV mogul Aaron Spelling. The Manor is a French chateau-style overbuilt monstrosity with 123 rooms and 56,000 square feet.Spelling Manor

It was put up for sale for $150 million and sold for $85 million in 2011. Let’s say The Manor cost $100 million to build. You and I and a lot of other people might say that the money spent on one house could have been better spent. You and I could be right, but we would be wrong if we took matters into our own hands and had used the power of government to stop the Spellings. If the Spellings could be stooped, so could everybody else, including you and me. Think of the scene in Dr. Zhivago where the Zhivago house has been taken over by the new equalizing Communists. Yes, everybody was equal, equally poor.

But think about the $100 million cost of The Manor. Those millions of dollars were paid to people who worked to build it. They didn’t do it for free. The money they were paid went to help them buy their own homes, food, clothing, and so much more while giving them self-respect, work experience, and an opportunity to build a better life for themselves.

While The Manor might be the poster child for conspicuous consumption, $100 million got into the pockets of hundreds, maybe thousands, of people and trickled down to people from whom they purchased goods and services without stealing from anybody. How is this worse than a government taking money from hard working people and giving it to people who could but don’t work because government programs have made it easy not to labor? Of course, it’s not worse. It’s much better. It’s the very definition of trickle down economics.