This archive report was first published on 17 July 2021.
With the country's economic growth slowed by Covid-19, the debate on trickle-down and trickle-up economics has gained momentum. The trickle-down approach, which advocates for reducing taxes to big firms and the rich, has been popularized by the political class, but its effectiveness is a topic of discussion.
Proponents of the trickle-down approach argue that it offers subsidies to reduce the cost of production, leading to business expansion and job creation. However, analyses show that tax cuts to big firms and the rich do not necessarily lead to wealth creation or benefits trickling down to the masses.
On the other hand, the trickle-up or bottom-up approach involves investing resources directly in the masses to build sustainable livelihoods and increase their consumption. This approach has been shown to spur demand, leading to economic growth and job creation.
Examples of the trickle-up approach include the devolution concept, where the State allocates 15% of the national income to counties to spur economic growth, and State economic stimulant packages to the youth and women fund.
A growing economy needs a balance between the trickle-down and trickle-up economic approaches. Improved infrastructure development in counties can also help to increase production, create more jobs, and boost economic growth.
As Kenya looks to revitalize its economy, it is essential to understand the implications of these economic approaches and develop a working structure to improve production at the base of the pyramid.
The writer teaches at Kirinyaga University.
