Trickle-down economics argues that giving money/tax breaks to the wealthy and corporations will benefit everyone as they invest and spend, creating jobs and economic growth that eventually “trickles down” to poorer people.
It’s nonsense, and chokes the economy. Money circulates more effectively when it starts by filling the bottom.
A direct cash transfer approach does the opposite of trickle-down and has recently posted incredible benefits. For every dollar directly given to poor families, the local GDP rose by $2.50, a remarkable economic multiplier.
A study published in August by the National Bureau of Economic Research which looked at the impact of unconditional cash transfers found that they reduced infant mortality by 48% and under-five mortality by 45% in rural Kenya – effects rivalling those of vaccines or antimalarial drugs. The study looked at the period between 2014 and 2017 when the NGO GiveDirectly sent payments of up to $1,000 (£740) to 10,500 households in more than 650 villages in Kenya.
“The problem with big aid organisations is that their approach is based on training and advice,” says Miriam Laker-Oketta, a Ugandan doctor and senior research adviser at GiveDirectly. “They tell people what to do and how to spend their money. But whether in Uganda, Yemen, India or the US, direct cash support has shown that when people living in poverty receive money, they know best what matters to them, and they invest in that.”
Rather than waiting for theoretical benefits to “trickle down” through multiple economic layers being centralized by a few elites, the effects of direct cash to the poor are direct and measurable. Nobody should argue with a 48% reduction in infant mortality, and doubled business revenues for local shopkeepers.
The economic logic is straightforward: poor families have a marginal propensity to consume near 100% – they spend almost everything they receive immediately in their local economy. Wealthy individuals and corporations, by contrast, have vastly more options to save, invest offshore, or hold assets that don’t circulate locally – exactly what we’ve observed in practice for decades.
What makes this particularly compelling is the comparison to medical interventions. When unconditional cash transfers rival vaccines and antimalarial drugs in reducing child mortality, it reveals something profound: poverty itself is often the underlying condition that makes other critical interventions less effective.
