Now is the time for an income-led growth strategy. The trickle-down effect, also known as the "horse and sparrow" theory, assumes that giving more food to a horse will result in more food being dropped, allowing sparrows to eat. However, in reality, the benefits of growth have not been properly distributed to workers. To achieve sustainable growth, it is necessary to directly invest in people and social infrastructure, rather than relying on trickle-down effects. This requires an intelligently active state that can intervene in the economy to balance the power between large corporations and workers.
The income-led growth strategy is based on the principles of post-Keynesian and Kaleckian growth models, which emphasize the importance of wage-led growth. The core of this strategy is to restore the correlation between productivity growth and real wage growth, ensuring that workers receive a fair share of the benefits of growth. This approach aims to achieve sustainable growth by managing the distribution of income, creating quality jobs, and stimulating domestic demand.
The income-led growth strategy is not about simply increasing wages or ignoring the importance of exports. Rather, it seeks to balance exports and domestic demand, while also addressing the challenges of inequality and instability. By prioritizing wage-led growth, the strategy aims to achieve macroeconomic stability, balance, and equality.
In contrast to the traditional view that sees wages as only a cost, the income-led growth strategy recognizes that wages also play a crucial role in generating demand. By increasing wages, workers have more purchasing power, which can drive economic growth. This approach is supported by the International Labor Organization (ILO), which has argued that wage-led policies can help achieve a sustainable recovery.
The basic principles of the income-led growth strategy include increasing real wages, improving the distribution of income, and promoting domestic demand. This can be achieved through policies such as raising the minimum wage, strengthening labor unions, and increasing government spending on social welfare programs. Additionally, the strategy emphasizes the need to regulate financial markets, prevent excessive capital outflows, and promote investment in key sectors such as small and medium-sized enterprises.
Overall, the income-led growth strategy offers a alternative to the traditional trickle-down approach, one that prioritizes the needs of workers and promotes sustainable and equitable growth.
