Executive Pay: The Curious Case of Carlos Ghosn’s Arrest
February 12, 2025
Definition of Six Sigma Six Sigma is not a mere methodology or a quality tool. It is a philosophy i.e. a systematic way of thinking to solve quality problems. Six sigma involves use of statistics to convert raw data into facts about how the processes of the organization are being run. The thrust is on […]
The Reasons for the Push towards Solar in the Indian Renewable Sector Globally, there has been a push, and a movement towards renewable sources of energy given the fast depleting reserves of oil and coal as well as due to concerns over climate change and global warming brought about due to the burning of fossil […]
Total Quality management refers to a continuous effort of management along with the employees of a particular organization to improve the quality of products and services. Businesses need to emphasize on quality of their products rather than quantity to survive the fierce competition. Remember in today’s scenario, there is no dearth of competitors in the […]
American car companies are pursuing a very unique strategy to increase growth and profitability. Generally, when companies talk about increasing growth and profitability, they talk about exploring new markets and launching newer products. However, the American automotive industry is planning to do the exact opposite. Executives from Ford Motor Company have announced that within a […]
China has been the fastest growing economy in the world for the past few decades. The Chinese economy continued to grow even during the recession period. Many economists believe that a growing Chinese economy was a gift to other countries during the slowdown. Since the Chinese economy was growing, international trade was flourishing, and other […]
The underlying premise behind globalization is that the transfer of wealth from the developed countries to the developing countries would eventually result in a scenario where those at the bottom of the ladder in the developing countries would benefit from the wealth flowing into their economies. The theory behind this is that if a Billion Dollars were invested in a country X, it would result in setting up of a manufacturing plant or a service sector company, which in turn would create jobs for the locals. Even after assuming that the jobs would increase the opportunities for the locals, there would be trickle down effects wherein the new rise in incomes of these members of the workforce would be spent on consumer durables, houses, visits to hotels and malls, as well as employing those who are not part of the formal economy like launderers, security guards, domestic helps etc.
This is the trickle down theory, which posits the view that wealth created at the top trickles down to the bottom of the ladder. This is the theory that has been used to justify neoliberal policies and globalization and is the driving force for all entrepreneurial activities in countries like India.
For instance, the founders of the iconic Indian IT company, Infosys, believe that when jobs are created for the middle class or the educated, the process would also benefit the entire ecosystem of support services for these employees since they have to spend money on their basic necessities and everyday needs. Moreover, the creation of wealth would not be restricted to capital gains alone (which is anyway a good sign for a healthy economy) but would also benefit those who produce goods and services for consumption.
The effects of this trickle down theory can be seen in cities like Bangalore, Gurgaon, and Pune where the presence of multinationals and Indian service sector companies has led to a flourishing economy for the locals. However, this theory is now being questioned as the trickle down effects are now being held as negligible with those at the top earning more and more and those at the bottom earning less and less. Hence, there is now a tendency to question the basic tenet of globalization and neoliberalism and it remains to be seen as to which theory would ultimately stand to gain.
The point here is that the widening income inequality has led to protests from those at the bottom since they do not see any marked improvement in their lives even when they support the army of educated and skilled employees of the manufacturing and service sector companies.
However, the battle is not lost as the benefits to the local economy outside of those who actually work are huge and it is understood that trickle down economics might not have been very wrong. Instead, what is needed is a greater flow of wealth to the bottom and this can be done by equitable growth and democratic policies that strive for betterment of all. In conclusion, true growth manifests when all sections of the society benefit and not only those at the top.
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