On Supply-side Economics

This post began as a reply to a Facebook comment which excoriated “supply-side economics.” I took my reply and expanded it a bit for this post.

Supply-side econmics has been much miligned by pudits and popes as being about tax cuts and trickle down. However, it is the opponents of supply theory that have tagged it as such.

Real supply-side theorists never talk in terms of “trickle down,” but in fact, recognize that is really about a trickle up — of the wealth and value created by the individual.

There is no doubt in my mind that supply creates demand, at least initially.

For if demand created supply, Jamaica and Singapore would have similar GDPs because they have roughly the same number of people, therefore their “demands” would be about equal.

Singapore has grown more wealthy because it has decided to be an active participant in the “supply side” whereas, Jamaica and its leaders have chosen to just “demand.”

“What can I do that is of value to others?” is the basic question behind the system of market tested innovation and supply. Those individuals and companies and nations that as that question, are better off then those that say “I want some for me/us.”

Singapore and Jamaica

In 1959, Singapore and Jamaica were economic and population equals. Over the next 40 years something incredible happened. Singapore has become an economic powerhouse while Jamaica has stagnated.

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In the above Gapminder graph, the yellow dots plot Jamaica’s course while the red dots chart Singapore’s. What could possible explain this?

I believe the answer is in supply side economics. While both nation have similar needs from a population and climate standpoint, only Singapore has focused on creating supply for others. Jamaica’s belief has been, “We need, so it should be given to us,” while Singapore’s has been, “We have created and provided, and it has been given to us.”