Trickle Down theory

• Trickle Down theory ignores the impact of economic growth on income distribution
• The proponents of trickle-down economics, argues that rising incomes at the top end of the spectrum would lead to more jobs, more output, more income, and less poverty as the growth and higher incomes at the top end will move at the lower end and to the poor. According to this thesis, as long as an economy is growing, the benefits will eventually reach the poor and make their way through the system that will make everyone better off.
• The theory of Trickle Down represents an unhealthy obsession with GDP and Growth as the most reliable measure of economic success. The theory believes in the saying ‘One size fits all’. The theory argues that to eradicate poverty, the only thing that matters is growth. A growing economy will take care of everything. As growth happens, the fruits of growth will eventually flow to the poorest and the lower section of the society and ultimately lifting them up.
• The Critique of Trickle Down Economics: The IMF and the World Bank in their various reports has rejected the idea of trickle-down economics. They found out that the benefits of growth within an economy are rarely spread evenly, but also that an unequal rise in incomes can actually slow the rate of economic growth altogether

Source: ForumIAS