Vacuum up is an economic principle which works, whereas trickle down is no more than a hoax and a barefaced lie; a malicious manipulation of the economy by the wealthy one per cent, to weaken and exploit the majority.
Neoliberals fight for free markets — markets with limited, or no regulations. The less restricted a market, the greater shareholder profits, as social, community and environmental regulations no longer hinder them. They have a free hand to profit from them. This, together with the use of an inadequate and inappropriate measurement standard, helps shareholders generate profit at the expense of all others, enabling them to optimise profits and accumulate massive wealth. They tell us that this is good for the economy because when wealth is in the hands of the people who know what’s best for the economy, this leads to higher growth. They will take this money and reinvest it. This wealth will “trickle down,” and benefit all of us.
This is a hoax. “Trickle down” never worked, and never will. However, what makes this hoax even worse is that the wealthy one per cent who sold us this lie never believed it. They are not stupid, only us, the people who believed the hoax. The wealthy one per cent know that by stripping wealth and value from stakeholders (society and environment - their adversaries,) weakens them. A weakened adversary represents an opportunity to prey on; the weaker they become, the more vulnerable they are. The easier they are to exploit. This enables the wealthy to implement systems, practices and procedures to “vacuum-up” every morsel from the poor man’s table. This, in turn, makes them even wealthier, and the poor, poorer. Vacuum-up works, as this article will prove, while trickle down is a barefaced lie and a devious one at that.
This barefaced lie is bad enough, but how they implement vacuum-up makes the deed even more devious. They use their accumulated wealth, obtained through our inadequate and inappropriate measurement standard and free markets, to acquire rental assets, which they then use to vacuum-up further wealth. In other words, they do not reinvest their ill gotten gains back into the “active” economy, but rather into the “rentier” economy, which does not benefit the majority. It weakens our active economy and thus the majority of us. I will explain why shortly. This represents a further blow to the ninety-nine per cent of us and another devious manipulation of the economy.
A strong middle class is a good indication of a healthy economy as their income is recirculated quickly and almost in its entirety within what I call our “active economy.” In other words, their disposable income is negligible; it’s all consumed by living costs. Adam Smith (the “father” of modern economics) identified three forms of income - profit, wages and rent. Profit and wages are earned in our “active economy.” The owners of capital and labour have to do something to earn a profit and wage respectively (i.e. they are active participants in the economy making and selling things.) However, rental income does not involve active participation; it involves the transfer of money from one party to another based on one party’s ownership of a scarce resource. For example, the owners of property undertake no active role in the economy. They receive an income from their scarce resource. Therefore, it would be inaccurate to include their income with that of the active economy as it involves no productive output. Thus, we allocate it to what we refer to as the “rentier economy.”
As the rich only consume a small portion of their income (i.e. their disposable income is high,) they generally invest their disposable income in the rentier economy. This is because the risk is (often) lower and returns higher than the active economy (as they acquire scarce resources.) Money earned in the active economy but withdrawn from it weakens it. This is not good for most of us as a shrinking active economy ultimately affects all society. We depend on the active economy for our incomes. When we weaken our active economy (through fund withdrawal), investment returns decline, with a proportionate increase in risk. This, in turn, results in even more funds leaving the active economy and ending up in the rentier economy, thereby accelerating the downward cycle.
As a result, the rentier economy is big and expanding. It includes many things, not just property, but patents, copyright, money lending, gambling etc. The rich know that by controlling our measurement standard, which excludes stakeholder interests, they can profit from them. They use the weaknesses of our systems to profit from staff and then exploit the vulnerabilities they have created. They hold salary increases down below inflation over a long period, causing a decline in real incomes. To offset this they offer easy credit, to maintain consumption (so they are not adversely affected.) Interest rates are set high so they can profit from the adverse conditions they created. A huge market opens up for them. However, to push consumption even further they become predatory lenders in terms of who they lend to and the rates they charge, as there is little or no regulation (free markets prevail.) That’s the underlying story of the 2008 financial crisis. The above seriously weakens the majorities quality-of-life. This leads to many social problems, of which gambling is a notable one. In desperation many turn to gambling as the “only way out.” To make matters worse, gambling companies allow gamblers to use credit cards to fund their habit.
What I have mentioned here is only the tip of the iceberg of how the rich create and then exploit vulnerabilities, using the rentier economy as the vehicle to do so, with no concern for the common good. Credit abuse and gambling are just two obvious examples of the vacuum-up effect. There are many “opportunities” to capitalise on the vulnerable. Scarcity creates weakness, making it difficult for people to retain assets, which are often lost to the benefit of the rich (exploiter.) Consider how banks fleeced clients on overdraft fees. People, pushed into a corner and struggling, are exploited. This is the Vacuum Up effect, and it works well. It’s the complete opposite of trickle down. Obviously, the wealthy one per cent have to hide this nasty practice from the majority, so they dressed it up in sheep’s clothing and called it “trickle down” - our benefactor. They have carried on lying about trickle down while being fully aware the opposite is happening - with no regard to the damage it does to the common good.
Copyright © Adrian Mark Dore 2019.