The Left Wing Theory of Economic Growth
Economics is not a natural science. Instead, it is a social science. This means that there are no perfect and immutable laws of economics. Rather, there are opinions. Over time, these opinions have become categorized into two dominant streams of thinking. The right wing is known as the capitalist wing. The right wings view of the economy and the policies that they recommend are in favor of capitalists i.e., big businesses. On the other hand, the left-wing is more concerned about laborers, i.e., the poor people who form the bulk of the workforce. Their policies are supposed to uplift the poor and provide them with a better standard of living.
The policies of both these groups are constantly opposed to each other. The right-wing groups advocate policies such as reduction of tax rate, removal of regulations and increasing ease of business. On the other hand, the left wing politicians advocate policies such as increasing the minimum wage, strengthening the labor unions and so on.
Centuries of economic data have created enough empirical evidence to determine which policies work and which do not. The record of history is quite clear. Free markets and capitalism i.e. right-wing policies are what has led to the development and growth of every economic superpower in the history of the world. In this article, we will have a closer look at the reasoning of the left wing economists as well as the flaws in them.
The Left Wing Economists View on Economic Growth:
The typical chain of reasoning of a left-wing economist is as follows
- They believe that consumers are the reasons that markets exist. More than 70% of all economic activity in the United States can be attributed to consumers. The other 30% is driven by the government
- Consumers are people from the general population. Since there are more workers in the general population than there are capitalists, it can be said that workers are consumers
- Also, rich people tend to spend only a small portion of their income and stash away the majority for future use. On the other hand, people belonging to the middle and lower income categories tend to spend almost all of their incomes.
- Hence, if a bigger chunk of the income goes to the poor and middle class, they will consume more. This will lead to the demand for more goods and services and create economic growth.
- Hence, measures like minimum wages are advocated. This is because minimum wages ensure that the worker receives a bigger share of the produce. Also, other measures like tax credits for lower-income people financed by tax increments for high-income earners is often recommended by proponents of left-wing economics.
- The left-wing economists believe that the rich will actually be better off giving higher wages. This is because they will obtain a small share of a growing economy instead of a larger share of a stagnant one.
The Problem with the Left Wings Worldview
- These ideas are regressive and are likely to bring about a downfall in the economy. This is because left-wing economists believe that by raising wages they will enable the transfer of a larger share of money to the laborers. However, in reality, if wages are increased, it spurs the capitalists to develop machines that can replace labor. Now, if left-wing economists argue that mechanization should not be allowed, they end up advocating a regressive policy which will not cause any economic growth. The bottom line is that laborers will only get paid what their work is worth. If the prices of labor i.e. wages are artificially inflated, the result will not be the welfare of the lower and middle class. Instead, these classes will be under the grip of mass unemployment
- The policies suggested are contrary to basic economics. If the laborers are forcefully given a larger share and the capitalists are deprived of their share, they will slow down the production. The law of supply suggests that suppliers produce more when they earn more profit per unit. However, the also produce less when their profit is reduced. Hence, even though the wages of individual workers might increase, the number of workers employed might be reduced. As a result, the amount of money apportioned to the poor and middle class will remain the same.
- The left-wing economists always believe that the corporations are making too much money and paying their workers too little. However, they need to understand that profit is the main motive which drives the marketplace. The employment that workers receive is only incidental. Hence, if workers try to gain at the expense of profit, there would be no motivation for the entrepreneur to undertake risk and manage a business.
To sum it up, the left wings policies do not even pass the test of basic economics. These policies are part of a fake brand of economics whose real purpose is to obtain political mileage. Countries like Russia and China have seen the failure of left wings economic policies. The economies of these countries have shown signs of growth only after right-wing policies, i.e., capitalism and the free market, were implemented.
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